Nichola's SME Tax Update 27 May 2021

Hello

Our highlights this week include new proposals for Capital Gains Tax (CGT), a Trusts and Estate update and tooth-aching statistics on snack bars.

I can see from our website statistics that our CGT guides are extremely popular, being viewed across the globe in countries ranging from the USA to India. Clearly CGT is a tricky topic for non-residents. The Office of Tax Simplification (OTS) in its new report on CGT, says that some 500,000 capital disposals are reported for tax in the UK each year and it makes suggestions for better guidance from HMRC. The report is worth a read. Another OTS suggestion is that HMRC should extend the 60-day reporting deadline for CGT.

I always like a VAT and confectionary case, but just reading the Morrisons' recent snack bar appeal gave me toothache. Judge Anne Redston bravely munched her way through various high-sugar bars in order to determine if they were cake or confectionary. Some of the bars have a 52% sugar content and even the ones for toddlers were 26%. It strikes me that it would be quite easy to simplify this area of VAT, the question as to whether something is food or confectionary could be resolved by sugar content alone. 

Finally, HMRC has produced statistics on investment reliefs, whilst the Enterprise Investment Scheme (EIS) and its Seed (SEIS) counterpart have secured billions in investment in their short lives, while the Social Investment Tax Relief (SITR) is clearly not very popular at all.

We have new CPD and more news, updates and case highlights below. 

Have a good bank holiday.

Back soon 

Nichola Ross Martin FCA CTA (Fellow)
Tax Director

www.rossmartin.co.uk

Your Virtual Tax Partner® online PRACTICAL support for accountants, tax advisers BY accountants and tax advisers.

Quick News

Statistics: EIS, SEIS and SITR
HMRC have released statistics showing the number and amount of investments made under the Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS) and Social Investment Tax Relief (SITR) scheme.

Trusts and Estates: What’s New? May 2021 
HMRC's latest Trusts and Estates newsletter contains some useful information. Here is our enhanced version with links to our guides.

OTS review of CGT: Simplifying practical, technical and administrative issues 
The Office for Tax Simplification (OTS) has published ‘Simplifying practical, technical and administrative issues’, its second report on Capital Gains Tax (CGT). It recommends extensions to certain reliefs and a new 60-day deadline for paying and reporting CGT on residential property sales.

Lump-sum retirement scheme for farmers: Consultation
The Department for Environment, Food and Rural Affairs (DEFRA) has published a consultation entitled 'Direct Payments to farmers: Lump sum exit scheme and delinked payments in England'.

Advisory fuel rates from 1 June 2021 
HMRC have published new advisory fuel rates for company car drivers which apply from 1 June 2021. Most rates have increased from the rates applicable for the previous three months.

ECJ rules that Amazon did not underpay tax by €250 million 
The European Court of Justice (ECJ) has upheld Amazon's appeal against the European Commission's (EC) ruling that an Amazon royalty pricing arrangement agreed with the Luxembourg tax authorities was overstated. The EC had held that the reduction in profits amounted to receiving the equivalent of €250 million of State Aid. 

Editor's Pick  

Groups: At a glance
Why form a group? What are the advantages of operating via a group? How to form a group?

Index to reorganisations and demergers
This series of super practical tax guides provide an outline of the tax treatment together with step guides and tax clearance templates.

 Finance Bill Tax Update and Rolling Planner 2021-22
UPDATE: new NICs measures included in the National Insurance bill 2021.

Carrier Bag Tax
UPDATE: A 5p single-use plastic carrier bag tax was introduced in England in October 2015. From 21 May 2021, it was increased to 10p and extended to all retailers, regardless of size. 

Guides and Updates (subscribers) 

EMI: Enterprise Management Incentives
What is the Enterprise Management Incentive (EMI) scheme? What's the difference between EMI and an unapproved share scheme? Our subscriber guide comes with a detailed checklist for setting up a scheme.

SDLT: Multiple Dwellings Relief for Annexes Tool
Our SDLT MDR & Annexes Tool is based on the legislation and current case law: this will takes you over the key conditions that you will need to meet to enable you to decide which rate of SDLT applies to your transaction. 

When can a company be reinstated?
When can a company be restored to the Register of Companies? Who can apply? What are the conditions?  

Scottish Income Tax: Trusts & Estates
Scottish Income Tax has applied since April 2016 and is payable by Scottish taxpayers on non-savings non-dividend income only. What does this mean for trusts, estates and their beneficiaries? 

Tax Cases 

No evidence of mileage: No deduction allowed
In Derek Storey v HMRC [2021] TC08090, the First Tier Tribunal (FTT) denied the taxpayer’s claims to deduct employment-related expenses owing to a lack of evidence to support them.

No ER for partnership preparing to trade  
In John Douglas Wardle v HMRC [2021] TC08105, the First Tier Tribunal (FTT) dismissed an appeal against HMRC closure notices denying Entrepreneurs’ Relief as pre-trading activities were insufficient to render the partnership disposal the disposal of a business.

Mixed-use rates of SDLT did not apply to property purchase with communal garden
In Nael Khatoun v HMRC [2021] TC08085, the First Tier Tribunal (FTT) found that the purchase of a residential property with access to a communal garden was subject to residential rates of Stamp Duty Land Tax (SDLT) and not mixed-use rates.

MDR unavailable on annexe as not a separate dwelling 
In Michael and Anthea Mullane v HMRC [2021] TC08100, the First Tier Tribunal (FTT) dismissed an appeal against HMRC closure notices denying Multiple Dwellings Relief (MDR) on the purchase of a property with an annexe. The cooking facilities were of insufficient quality to allow the annexe to be occupied as a separate dwelling.

VAT News & Cases 

Management services were taxable supplies 
In HMRC v Tower Resources PLC [2021] UKUT 0123, the Upper Tribunal (UT) rejected an appeal by HMRC against the First Tier Tribunal's (FTT) decision that a holding company adding the fees for management services provided to subsidiaries to inter-company loans constituted taxable supplies for VAT.

Morrison tastes £1m VAT defeat as snack bars are not cakes 
In WM Morrison Supermarkets Plc v HMRC [2021] UKFTT TC/2018/05518, the First Tier Tribunal (FTT) found that both Morrison bars were confectionery and not cakes for VAT purposes. Consequently, they were standard rated and not zero-rated.

R & C Brief 7 (2021): VAT liability of charging electric vehicles
HMRC have published Revenue & Customs Brief 7 (2021): 'VAT liability of charging electric vehicles’ which explains the VAT treatment of using charging points in public places, and when associated input VAT can be recovered by businesses.

VAT Updates

Food, catering, takeaways and exceptions
What is the VAT rate charged on food? How does this differ depending on hot or cold food and food consumed on or off the supplier's premises? What items for human consumption are not treated as food?

Management recharges (holding companies)
When are intercompany charges subject to VAT? What rate of VAT applies to an intercompany charge? Is an intercompany charge a supply for VAT? Is there VAT on an intercompany payment for group relief?

Land & Property: DIY Housebuilders scheme
It is possible to recover VAT on constructing a new residential dwelling, or dwellings, even where there is no planned sale of the property. This recovery can arise under the special refund scheme for DIY housebuilders. 

Tax Toolkits 

Tax Tools
Be a winner with our game-changing tax diagnostics tools for Business Asset Disposal Relief, SDLT & annexes/subsidiary properties, Company reorganisations, R & D Zone and TAAR on winding up. Sign up now!

Tax Queries?

Virtual Tax Partner© Support
Have a tax query? Need a second option? Open a ticket and ask a question. A team of tax experts with a very wide range of expertise: covering direct and indirect tax, as well as accounting, R&D claims, reorganisations and much more. 

CPD for lunch 

Byte-sized chunks of CPD for subscribers

More at CPD Index

Missed last time's Web-update?

Nichola's SME Tax W-update 20 May 2021 

 

SME Tax Monthly Summary April 2021

Links to all of March's newswires...More 

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