Nichola's SME Tax W-update 26 January 2023

Hello,

With so much news coverage on the former Chancellor of the Exchequer Nadhim Zahawi's tax settlement, we have created a case study, based loosely on the known facts of his tax penalty, to illustrate how tax-geared penalties are calculated and what might count as a 'reasonable excuse' for making an error on a tax return. We have also included some suggestions as to how, with the benefit of hindsight, penalties could be avoided.

IR35 is rarely out of the tax news and a spate of recent IR35 tax appeals all feature Sky TV personalities. The cases have variable outcomes and as another Sky IR35 decision has just been published we thought that it might be useful to analyse the results and compare them with other recent cases involving Sky presenters. Our findings show that the outcome of any appeal on this topic is always uncertain.

With less than a week to go before the deadline for Self Assessment filing and tax payment, do not forget to remind clients who have cash flow problems that they need to arrange a 'time to pay' agreement with HMRC before the due date of payment. Another point to watch is that if you are late in filing a return, you can avoid a tax penalty if you have a reasonable excuse for your failure. If so, it is up to you to retain sufficient evidence to back up that excuse. If in doubt, write a note.

On the theme of penalties and appeals, we have some more topical case summaries and also a new CPD for directors.

Our Virtual Tax Partner service has been extremely busy with last-minute tax queries; keep them coming in. 

That's all for now,

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)  

ERS Bulletin 47
HMRC have released Employment Related Securities Bulletin 47 which confirms the year-end reporting templates will change from 6 April 2023 and changes to the CSOP-approved share scheme.

Register of Overseas Entities
Existing overseas owners of UK land and property have until 31 January 2023 to register their details with Companies House.

Editor's Pick 

Offshore tax penalties: case study
Former Chancellor of the Exchequer, Nadhim Zahawi, has made a large tax settlement involving tax penalties with HMRC, according to the press. It may well relate to the undeclared capital gains on the sale of shares in one of his business interests. How did HMRC calculate his penalties? With the benefit of hindsight, what might he have done to mitigate the penalties?

NEW: CPD: Directors Tax Update 2022-23 

Grounds for Appeal: Reasonable excuse
What is considered to be a 'reasonable excuse' when a taxpayer makes an appeal against a tax compliance failure?

Tax Tools 

Full details of our tax calculators
We have a suite of useful tax tools that help agents, business owners and sole traders calculate their taxes. 

Adjusted Net Income Calculator
Calculator of the week: This week's calculator helps you work out your 'Adjusted Net Income' to check if you are a higher rate taxpayer for the purposes of various different allowances and charges including the High-Income Child Benefit charge and the Personal savings allowance.

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 

NHS Pensions: Scheme pays election
UPDATE: What is an NHS scheme pays election? What is the deadline? What if complete information is not available by the election deadline? Can elections be amended?

Employees 

IR35: The Sky contracts 
NEW: The First Tier Tribunal's (FTT) recent decision to uphold Stuart Barnes' appeal against HMRC's IR35 assessment of his contract as a rugby pundit for Sky TV, is in contrast to the previous three cases brought against TV personalities working for Sky. So what was different about this case?

Employee Shares: setting up share classes with different rights for directors & employees
Can you set up different classes of shares? How do you create Alphabet or ABC shares? What are the rules in giving different classes of shares to directors and employees? 

Directors & Companies

Employment-Related Securities: Reporting    
UPDATE: Updated for ERS Bulletin 47. If an employer gives shares to an employee or sets up a tax-advantaged share or share option scheme, the benefit is taxed within the Employment-Related Securities (ERS) regime.

Shifting your income to save tax
This guide explains the planning points and pitfalls of sharing or splitting your income with your spouse or other family members. 

Capital reduction: Tax treatment
The repayment of capital on a company capital reduction can be treated in different ways for a shareholder. This guide reviews the tax treatment of a capital reduction.

Private Client & Estate Planning

Trust Registration Service
UPDATE: What is the Trust Registration Service? What trusts does it apply to? What are the requirements and deadlines?

Gift Aid: How it works
UPDATE: What is Gift Aid? How does it work? What are the rules? 

Overseas & Residents

Remittances: what is a remittance for the remittance basis rules?
What is a remittance in terms of the remittance basis of taxation, with practical examples. 

Tax Planning for Non-Domiciled individuals
Who is non-UK domiciled? What does this mean for UK Income Tax, Capital Gains Tax and Inheritance Tax? What reliefs are available to non-doms?

Land & Property

SDLT: Residential property & dwellings
What is a residential property for Stamp Duty Land Tax (SDLT)? What tax rate applies? What garden and grounds are subject to higher rates of SDLT?

CPD for Lunch

Byte-sized chunks of lunchtime CPD for subscribers

• NEW: CPD: Directors Tax Update 2022-23
• CPD: Land and Property Update 2022-23
• CPD: Employers' tax update: 2022-2023
• CPD: The Targeted Anti-Avoidance Rule (TAAR)

More at CPD Index

Tax Cases (Freeview) 

No reasonable excuse for delay in appeals
In Martin Clarke West v HMRC [2023] TC08705, the First Tier Tribunal (FTT) found that a late appeal against HMRC assessments, closure notices and penalties should not be allowed. There was no good reason for the serious and significant delays, which exceeded 1,000 days. 

Tax penalties notices were 'sent' & 'received'
In Nicholas Burley v HMRC [2022] TC08701, the First Tier Tribunal (FTT)  found that self-assessment penalties totalling some £280k had been validly served. The taxpayer's argument that the letters had not been received was dismissed.

No interest in possession for IHT
In Nicholas John Hall and Christopher Valentine Lopez as Trustees of the Carolina Raboni Estate v HMRC [2022] TC08691 the First Tier Tribunal (FTT) agreed that there was no Interest In Possession (IIP) in a house where the estate assets, apart from the house, were insufficient to pay the Inheritance Tax (IHT).

The 'Voice of Rugby' not a Sky IR35 employee 
 In S&L Barnes Limited v HMRC [2023] TC08697, the First Tier Tribunal (FTT) applied the tests from Ready Mixed Concrete and found that Stuart Barnes provided his rugby punditry services to Sky as part of his own business not as an employee.

VAT Cases & Guides 

Penalties (VAT)
UPDATE: When do penalties apply for VAT? What penalties are charged and how can they be mitigated?

Tax Queries?

UK Agent for registration of Overseas Entities
Do you require 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 19 January 2022

• Consultation on R&D Tax Reliefs as a single scheme 
• HMRC targets online sellers and content creators
• Agent Update: January 2023
• Top tips for agents with last-minute tax returns
• No excuse for late filing of Soft Drinks Industry Levy return
• No EIS relief due to subcontractor relationship
• Up in smoke: a smuggler's tale
• Spotlighted Gold Bullion scheme fail
• Spotlight 58: Unfunded pension arrangements
• Artists: Tax Overview
• Working from home (employees)
• Loss relief (Income Tax) disposal of shares
• Acting for a trust? Start here….
• CPD: Land and Property Update 2022-23 ...More

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