Nichola's SME Tax W-update 2 March 2023

Hello,

This week we consider how landlords can cheaply top up their entitlement to the State pension and we have new CPD covering the taxation of couples. We review HMRC's Stamp Duty Newsletter from HMRC and a couple of case reports which show what happens when professional advice goes wrong. We also have updates on capital gains reporting and the tax treatment of compensation received by postmasters.

This weeks Editor's Choice I explore Landlords' Class 2 National Insurance Contributions (NICs). Last week I mentioned topping up voluntary Class 3 NICs to ensure that you have a full State Pension. Recent updates to HMRC's NI Manual (NIM) have made us review the opportunites for landlords to make even cheaper qualifying contributions by making voluntary payment of Class 2 NICs. This is permitted as long as you are running a sufficiently active rental business to allow voluntary payment of Class 2 NICs. HMRC's NIM now suggests that landlords fall into three tiers when it comes to NICs. We think that this is an overly simplistic analysis, which is not based on case law, and we have made our own suggestions.

The Annual Tax on Enveloped Dwellings (ATED) is a curious tax, and it's been a difficult tax for HMRC to publicise, as so many potential payers are overseas. The ATED is payable when higher value UK residential property is owned by a company and is let out to a connected person. An ATED return is due every year, regardless of whether the ATED is payable, and relief from the charge must be claimed. Don't forget that ATED returns due by 30 April 2023 need to be based on a valuation as at 1 April 2022. 

If you are exchanging contracts to dispose of residential property in the next couple of months and within Self Assessment you may save yourself the burden of filing a UK Property Capital Gains Tax (CGT) return by filing a Self Assessment return promptly instead; this gives you the extra advantage that any CGT payable will then not be due until 31 January 2024.

Finally, don't forget to settle any outstanding Self Assessment tax liability for 2021/22 by 3 March to avoid a 5% late payment penalty surcharge.

More news and updates for you below.

That's all for now,

Back soon, 

Nichola Ross Martin CTA (Fellow) FCA
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)  

Pay Self Assessment tax by 3 March to avoid penalties
Self Assessment taxpayers who do not make their 2021-22 balancing payment by 3 March 2023, face a 5% late payment penalty. A penalty may be avoided by setting up a Time to Pay agreement before the penalty deadline.

How Post Office Horizon Compensation receipts are taxed
NEW: As part of the fallout of the Post Office Horizon scandal, many sub-postmasters and sub-postmistresses are receiving compensation. How are these receipts taxed?

Stamp Taxes Newsletter: February 2023   
HMRC have released a Stamp Taxes Newsletter in February 2023. Our enhanced version can be found here.

Economic Crime Levy
The Economic Crime Levy is a fixed fee paid by medium and large-sized entities that are subject to Money Laundering Regulations. This will include accountants, auditors and tax advisors. Registration, filing and payment is due by 30 September. 

Editor's Pick (Freeview) 

HMRC have landlords in tiers!
What sort of landlords pay Class 2 National Insurance Contributions (NICs)? HMRC have devised a simplistic approach to the problem: they place landlord activities as falling into three different 'tiers'. The only issue with such an approach is that neither tax legislation nor past case law reveals a three-tier test.   

Tax Tools 

Tax Calculators
Come and check out our innovative range of Virtual Tax Partner tax calculators: are available (mainly) to paid subscribers to this service.

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 

Badges of Trade: Are you trading or not?
Are you trading, running a business, or just buying and selling investments? The 'Badges of Trade' are a set of indicators, built up over time by the courts, to decide when an activity is a trading or investment activity.

New business: Company compliance checklist
A new company? What do you need to do for tax and general compliance. This guide takes you through the new responsibilities of complying with tax, pay and registration for companies.

Associate Dentists lose automatic trading status
HMRC have decided to remove, from 6 April 2023, the current concession that treats all Associate Dentists as self-employed. Instead, they will have to use the ordinary tests for employment to determine whether they are employed or self-employed.

Directors

Insurance: Deductions and receipts
This guide outlines when businesses can claim a trading deduction for insurance premiums and the taxation of any receipts. 

Contractor company tax planning: does it work?
In recent years the UK's tax scheme abuse/avoidance market has been severely curtailed by anti-abuse rules and harsh penalty regimes.

Land & Property

Annual Tax on Enveloped Dwellings (ATED): At a glance
REMINDER: ATED returns due by 30 April need to be based on a valuation as at 1 April 2022.

National Insurance for landlords 
NEW: When are National Insurance Contributions (NICs) payable by landlords? Can landlords pay Class 2 NICs voluntarily?

Companies

Valuation: Companies
When might a tax valuation be required? What are the main principles in valuing unquoted companies?

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

Groups
What qualifies as a group for tax? How do you form a group? Which definition of a group applies for different types of tax? What are the benefits of being in a group?

Capital Allowances

AIA & WDA: Rules where there is a change of rate
UPDATE: How do you apply hybrid rates when there are changes in the rate of allowances? How does this work for Writing-Down Allowances (WDA) or the Annual Investment Allowance (AIA)? 

Private Client & Estate Planning

IHT: Transferable Nil-Rate Band
UPDATE: What is the Transferable Nil-Rate Band? Who does it apply to? How do I claim it?

CGT: Reporting when & how?
UPDATE: Link added to download UK Property CGT Returns.

National Insurance: What's the maximum payable?
How are National Insurance Contributions (NICs) limited? What is the maximum payable? What different rules apply to employment and self-employment income? 

CPD for Lunch

Byte-sized chunks of lunchtime CPD for subscribers

• NEW: CPD: Taxation of couples in 2022-23
• CPD: Associated Companies
• CPD: Directors Tax Update 2022-23
• CPD: Land and Property Update 2022-23

More at CPD Index

Tax Cases 

Careless accountant enables discovery    
In Dr Syed Rizvi v HMRC [2023] TC08731, the First Tier Tribunal (FTT) found discovery assessments had been raised in time as while the taxpayer had not been careless in relying on his accountant, that accountant had acted carelessly.

13-year-old negligence claim allowed by High Court  
In Stephane Etroy & RBC Trust Company v Speechly Bircham LLP [2023] EWHC 386, the High Court (HC) found a claim arising from negligent advice was not time-barred despite it being brought 12 years after the advice was given.

VAT Cases & Guides  

Dinosaur exhibit was for a business and not just charity 
In Paradise Wildlife Park Limited v HMRC [2023] TC08729, the First Tier Tribunal (FTT) rejected the appellant's claim that the costs incurred in the building of its walk-through dinosaur exhibit and lion enclosure were zero-rated as the exhibit was not a building and neither was intended solely for use for a charitable purpose. 

VAT fraud backfires to provide UK fixed establishment 
In Fulfillment Logistics UK Limited v HMRC [2023] TC08736, the First Tier Tribunal (FTT) found that the Kittel principle did apply to deny input VAT repayment but the customer also had a fixed place of business in the UK for supply purposes, meaning output VAT was due.

Online Marketplaces: Selling goods in the UK
When do you have to register for UK VAT? When is UK VAT payable? What amount is VAT payable on? What information do you have to give the marketplace provider? What will it do with that information?

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 23 February 2022 

• Employer Bulletin: February 2023
• Agent Update: February 2023 
• Advisory fuel rates from 1 March 2023
• Pension: Review National Insurance records by 5 April 2023
• HMRC advise longer lead times for PAYE direct debits 
• Scottish Deposit Return Scheme
• Employer-Financed Retirement Benefits Scheme (EFRBS) (Freeview)
• Supreme Court confirm e-newspapers were standard rated  
• Extracting profits as salary or salary plus dividend combinations calc 2023-24 
• Brewers: Tax Overview
• Doctors and Dentists: Tax Overview
• Land & Property VAT (Subscriber guide)
• R&D: Staff costs, subcontractors & reimbursed expenses
• Greenhouses & polytunnels: Capital allowances
• IHT: Estate planning checklist
• CPD: Associated Companies ...More

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