Nichola's SME Tax W-update 1 September 2022

Hello,

This week we have news of a new tax campaign, some new tax consultations, a case update on family partnerships and new VAT guides.

It seems that many offshore companies with UK property interests have not managed to keep up to date with the recent changes to their tax reporting obligations in the UK. After checking data from the Land Registry, HMRC has informed a leading tax body that it is opening a new tax campaign this month targeting non-compliant companies and their owners. Issues for these non-residents extend further than just the non-reporting Capital Gains Tax (CGT) on their disposals as HMRC also notes that there may be potential Transfer of Assets Abroad issues for shareholders. Other typical compliance issues include failure to file Annual Tax On Enveloped Dwellings (ATED) returns and simply not keeping on top with reporting changes as corporate landlords move from Income Tax reporting to Corporation Tax.

High-income families are often set up with partnerships for investment purposes. These partnerships, which are taxed transparently, regularly appear to run into difficulty with HMRC over Income Tax. So much so, that I wonder if HMRC has a strategy in this area. The key problem areas are that they are not actually engaged in any trade, and, when they claim that they are and it follows that HMRC then denies them tax relief for deductions for expenses and interest. This is/can be a specialised area of tax, as you will note if you drill down into the decision in the case as reported below. Noting also the useful links in that article to our recent Partnership tax update.

As we draw to the end of what has seemed like a very long school holiday, we will soon know who is to be the new Prime Minister, and once their new cabinet is up and running we expect to be given the date of the impending budget. This is predicted to be held in the next two weeks.

News, cases and updates below.

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 (Freeview) 

Campaign: Offshore companies owning UK Property
HMRC are launching a new campaign to tackle non-compliance linked to offshore corporates owning UK property in September 2022, according to the Chartered Institute of Taxation (CIOT). 

Reporting rules for Digital Platforms: Consultation responses 
HMRC have published responses from their 2021 consultation ‘Reporting rules for Digital Platforms’ which considered the implementation of the new Organisation for Economic Co-operation and Development (OECD) Model Reporting Rules for Digital Platforms.

Sharp practice tax refund firms named to HMRC 
Moneymail has submitted a file to HMRC's consultation on protecting taxpayers from unscrupulous revenue repayment claims companies. The paper said it named nearly 20 companies for dubious behaviour based on examples from readers.

Leap in Scotland's tax deficit
The Scottish government's tax statistics reveal that while non-North Sea tax revenues increased by 13.6%, its actual percentage deficit was double the level of the rest of the UK.

Consultation on extending NHS pensions relief
The Department of Health and Social Care (DHSC) has opened a consultation, 'NHS Pension Scheme: proposed amendments to continue the suspension of restrictions on return to work'. It seeks views on extending the suspension of tax charges on pension income. 

Corporation Tax online service to be updated by 16 September
HMRC have confirmed that a number of current issues involving the filing of Corporation Tax returns will be solved on 16 September when an update to the Corporation Tax online service is rolled out. Issues ranging from claiming the extended AIA to R&D SME tax credits have meant some companies have been unable to file online as yet.

Editor's Pick (Freeview) 

Non-resident landlords and offshore investors index
What taxes are relevant for non-resident property investors?  What are the reporting requirements for non-resident investors? A freeview signpost to our non-resident landlords and offshore investor tax guides.

Woodlands: Overview
UPDATE: Woodlands and forestry ownership carry significant tax reliefs, including Income Tax, Capital Gains Tax (CGT) and Inheritance Tax (IHT). This is a guide to those reliefs. 

Guides & Updates (Subscribers) 

Self-employed

Subsistence (self-employed)
What is subsistence? Is subsistence allowable for tax? What are the considerations?

Travel (self-employed)
What journeys qualify for tax relief? Where is the base of operations? What is business travel? Can a home be a workplace? What case law is there?

Land & property  

Different ways of taxing UK property
This guide summarises the different ways of taxing income and gains in respect of the exploitation of UK property.

Restricting mortgage interest relief (subscriber guide)
Since April 2020, individual landlords' tax relief for finance costs on residential property has been limited to the basic rate of Income Tax. How is the relief calculated? How were the provisions introduced? 

Joint property: legal v beneficial ownership
What is the difference between legal and beneficial ownership? What are the tax consequences? Are the rules different for married couples?

Companies & Shareholders

Pension contributions: Personal or company?
UPDATE: Is it more tax efficient to pay pension contributions personally or via your own company?

Capital reduction: Distributing capital reserves
What is a capital reduction? How do you implement one? When should a capital reduction be undertaken?

R&D Tax Relief: Overview 
UPDATE: What is R&D Relief? How does it work? Why does the size of the company matter? What is sub-contracted R&D? How do I write an R&D Report?

Employers 

Assets made available without transfer
Special rules apply to calculate the taxable Benefit In Kind (BIK) when an asset is made available to a director or employee without transferring ownership to them.

Employee liabilities and indemnity insurance
What are allowable deductions for employee insurance? What can ex-employees claim? How should policies be structured for full tax relief?

Private Client & Estate Planning 

Deed of variation
UPDATE: What is a deed of variation? When can a deed of variation be used? What are the requirements for a valid deed of variation?

Divorce & Separation: Toolkit
UPDATED: A summary of the tax implications which can arise on divorce and separation. 

Capital allowances

What expenditure qualifies for plant & machinery allowances?
What is plant and machinery? What expenditure qualifies as plant and machinery? What is treated as part of a building? 

Tax Cases (Freeview)

Family partnership not trading  
In The Magnet Partnership v HMRC [2022] TC8570, the First Tier Tribunal (FTT) held that payments made from a trading partnership to ‘family partnerships’ to utilise the tax-free personal allowances of family members were not allowable deductions. The expenses were not incurred and even if they had been, they were not incurred wholly and exclusively for the trade.

Treaty advantage was not main purpose in £18 million WHT repayment 
In Burlington Loan Management DAC v HMRC [2022] TC08572, the First Tier Tribunal (FTT) found that whilst the ability to reclaim UK Income Tax withheld at source on interest payments dictated the price of a debt claim, taking advantage of the Treaty exemption was not the main purpose of the acquisition. 

VAT Cases & Guides 

No valid invoice or supply, no input VAT claim
In Star Services Oxford Limited v HMRC [2022] TC08573 the First Tier Tribunal (FTT) dismissed a claim for input tax on rents paid by a company where the lease agreement was in the name of the sole trader. There was no supply to the company and the invoices were in the name of the individual.

A beginner's guide to VAT
NEW: VAT: Where do I start? What is VAT? Who has to register for VAT? What rate should you charge? When are your VAT filing obligations?

Transfer of a going concern (TOGC)
UPDATE: What is a TOGC? What conditions must be met? What are the consequences of a TOGC? What case law is there? 

Tax Tools 

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!

Calendar of tax deadlines and new tax measures
UPDATE: This is a freeview 'At a glance' rolling calendar of common recurring tax deadlines, new tax measures and other tax significant events. 

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

• NEW: CPD: How to avoid the High-Income Child Benefit Charge (HICBC)
• NEW: CPD: MBOs: How should they be structured?
• NEW: CPD: Setting up a corporate group
• More at CPD Index

Missed last time's Web-update?

Nichola's SME Tax W-update 25 August 2022

• Agent Update: August 2022 
• Record numbers of CGT penalties forecast
• HMRC investigate one-in-twelve footballers
• Advisory fuel rates from 1 September 2022
• Penalties: Capital Gains Tax
• Prison healthcare services a single composite supply for VAT
• SIPP purchase of shares leads to pension surcharge  
• Higher rates of LTT due on adjoining property
• Sole trade business was not transferred to company 
• Compensation for loss of pension rights was not earnings 
• Losses, trade losses and sideways relief
• Cessation followed by incorporation
• Furnished Holiday Letting
• Setting up a share scheme
• Legal fees
• Trust Registration Service
• CGT: Loans to traders relief
• Divorce & Separation: Toolkit
• Offshore Income Tax Toolkit...More 

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