Nichola's SME Tax W-update 15 December 2022

Hello,

There was a Welsh Budget earlier this week and later today a Scottish one too, there are more calls to postpone Making Tax Digital for Income Tax Self Assessment (MTD ITSA) for another year, and HMRC change their guidance on employer Group Income Protection medical cover.

The Welsh parliament made no changes to either the Welsh rate of Income Tax or to Land Transaction Tax. We will have to wait and see what Scotland decides (we will provide an update on the website later). We are expecting some changes, as the Scottish parliament have been quite bold in making changes to Income Tax in the past.

The Court of Appeal has passed judgment in the long-awaited appeal against HMRC's use of the Discovery provisions to assess unpaid High-Income Child Benefit Charges (HICBC). It confirms that no Discovery was ever possible as the HICBC is not accessible as income. The judgment is good news for anyone who had made an appeal against such an assessment up to June 2021, the case related to the years 2015-2017. The government changed the law in the 2022 Finance Act, with retrospective effect. This means that HMRC will be able to use these provisions in later years. Practically speaking, HMRC are still in time to assess 2021 and 2022 under normal assessment rules and therefore we do not expect to see any more cases on this issue for at least another two years. If you have never reviewed our note on Discovery assessments, I would thoroughly recommend it.

A survey commissioned by the two leading tax charities reveals that tax agents are unclear of possible benefits of digital record keeping under MTD ITSA. The charities join the Administrative Burdens Advisory Board (ABAB) in suggesting that mandatory participation in MTD ITSA is postponed for one year. 

Do have a go at our Christmas Quiz. There are some great prizes. I need to apologise to many entrants to our Christmas Quiz as one of the questions was set to a 'subscriber only access' and this meant that we accidently blocked you mid-way through the trail. This has now been corrected and you should now be able to fully participate in the fun! 

More news, updates and cases below, and don't miss our new range of tax calculators and tools.

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)  

Christmas Quest 2022
This year's seasonal fun from here at rossmartin.co.uk comes in the form of a Christmas Quest. Collect all 10 answers from our website, using our magical elf help should you need, and win our mystery prizes. You do not need to be a subscriber to enter.

CIOT survey supports postponing MTD ITSA 
The CIOT and ATT have published the results of a survey canvassing the views of tax professionals on Making Tax Digital for Income Tax Self Assessment (MTD ITSA). Most respondents did not believe that the rollout could be a success.

Draft Welsh Budget 2023 to 2024   
The Welsh Government released their Draft Budget 2023 to 2024 on 13 December 2022.

Double taxation for Group Income Protection cover
HMRC have recently revised their guidance on the treatment of Group Income Protection payments. In reversing their previous advice, they now confirm that there will be double taxation of employees where policies were taken out through salary sacrifice.

Editor's Pick 

Discovery Assessments
UPDATE: When can HMRC issue an assessment outside of the normal statutory time limits? What conditions must be met? What are your rights of appeal and defences? What are the changes affecting High Income Child Benefit Charges (HICBC).

Tax Tools 

TAAR: Targeted Anti-Avoidance Rule Tool
TOOL OF THE WEEK: Use this cost-saving tool to see if the Targeted Anti-Avoidance Rule (TAAR) applies to your liquidation dividends. The TAAR tool takes you through the different conditions set by the legislation and will assist you in deciding whether the distributions paid on liquidation should be self-assessed as income instead of under the Capital Gains Tax regime.

Tax Tools
FREE add-on for subscribers, or available separately

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.  

Guides & Updates

Self-Employed 

Basis Period reform
UPDATE: HMRC have confirmed that provisional figures can be amended in line with the normal time limits for amendment and that they will provide overlap relief figures should they have them.

Actors: Tax overview
NEW: Our new and improved guide for Actors, expanded into a full tax overview. What expenses can Actors can claim for tax purposes? What are the VAT rules? How should actors account for their income?

Directors and Companies

Demergers: What are your options?
UPDATE: What are the different types of demergers that are available when you want to reorganise your business? What are the situations where they are typically used? 

Striking off a company: Step-by-step
UPDATE: What are the steps required to strike off a company? What are the tax implications? 

TAAR: Distributions on winding up (anti-phoenixing rules)
UPDATE: When does the TAAR apply? Who does it affect? Can you apply for tax clearance? Do the rules affect striking off?

Employers 

Salary sacrifice & optional remuneration schemes (OPRA)
What is a salary sacrifice or optional remuneration arrangement? How is it taxed? 

Private client & estate planning

Trusts & Estates: Exit charge reporting requirements
UPDATE: What is an exit charge, or proportionate charge and when does it apply?

Overseas & Residence

Domicile and the remittance basis: At a glance
What is domicile? What is the remittance basis and when does it apply? 

SRT: Day Counting Toolkit
Our day counting help guide for completion of the Statutory Residence Test.

Land & Property

Restricting mortgage interest relief (subscriber guide)
UPDATE: 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? 

Partnerships

Partnerships: What's new 2022-23?
What's new for partnerships in 2022-2023? How are they taxed? What reliefs might apply?

Salaried members: When is a partner taxed as an employee?
In some circumstances, LLP members are taxed as employees under PAYE. When does this apply? 

CPD for Lunch

Byte-sized chunks of lunchtime CPD for subscribers

• NEW: CPD: The Targeted Anti-Avoidance Rule (TAAR)
• CPD: Sole trader update: 2022-23
• CPD: Double tax treaties: where do I start?
• CPD: Making Tax Digital

More at CPD Index

Tax Cases (Freeview) 

HMRC wrong to back-date High-Income Child Benefit Charge assessments
In HMRC v Jason Wilkes [2022] EWCA Civ 1612 the Court of Appeal (CoA) found that HMRC was unable to use the Discovery Assessment provisions to back-date assessments for unpaid High-Income Child Benefit Charges in past years. The charge is not 'income' for tax purposes.

No refund of loan charge voluntary settlement payments 
In Douglas Lambourne v HMRC [2022] TC08666, the First Tier Tribunal (FTT) reluctantly struck out an appeal against HMRC’s refusal to repay amounts voluntarily paid to settle a disguised remuneration scheme following the 2019 loan charge review. The tribunal did not have jurisdiction as the legislation did not allow for such an appeal.

No best judgement for chippy VAT assessment
In Chrisovalandis Georgiou and others v HMRC [2022] TC 08660, the First Tier Tribunal found that HMRC had based VAT assessments on a flawed methodology and so they were not made by applying 'best judgement', as required by the VAT rules. The knock-on effect of these errors was that  Corporation Tax discovery assessments were not validated either.

VAT Cases & Guides 

Agency fails to claim VAT exempt supply of medical services
In Mainpay v HMRC [2022] EWCA Civ 1620, the Court of Appeal found that the supply of temporary medical staff by an umbrella company was a standard-rated supply of staff and was not exempt as a supply of medical services. 

CIS: Construction Industry reverse charge
UPDATE: What is the CIS VAT reverse charge? How do you account for VAT? Can you still cash account for VAT? What administrative changes do I need in order to operate the reverse charge? 

Tax Queries?

UK Agent for registration of Overseas Entities
Announcing the launch of a new service to provide assistance in the registration and verification of an overseas entity that owns UK land or property?

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.  

Missed last time's Web-update?

Nichola's SME Tax W-update 8 December 2022

• Christmas Quest 2022
• Employer Bulletin: December 2022 
• PAYE direct debit's interest charge anomaly confirmed by HMRC
• Van benefit and fuel benefit charges 2023-24 confirmed 
• HMRC's App, not just for Christmas 
• Consultation response to 'Making Flexible Working the Default' 
• Calendar of tax deadlines and new tax measures
• Compare software for Making Tax Digital for Income Tax
• Dividends: Index (freeview)
• GAAR Opinion: Loan-like transaction abusive  
• Interim dividends taxed when paid  
• Late payment not allowed for Class 3 NICs
• Accountant 'not credible', director liable for PLN  
• UT erred on nuclear site capital allowances  
• Use of losses can be a tax advantage
• Gifts (to staff, customers & charities)
• Offshore Income Tax Toolkit
• Foreign and residency pages: FAQs ...More

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