Nichola's SME Tax W-update 6 April 2023

Hello,

Happy New Tax Year. It's certainly set to be an exciting one. Manchester is celebrating with the introduction a new tourist tax, set at just £1 per night. It's very good value compared to the cost of parking and substantially cheaper than any of the tourist taxes already in force in many foreign cities.

Wales has already made plans for its tourist tax, and it's just a matter of time before more cities and regions consider similar measures. Local authorities can already raise taxes via business rates and council tax, and we can expect to hear more about the government's plans for rates reform in the year ahead as it links rates records with HMRC's records.

Great question for a quiz: which tax is paid by just 18 taxpayers? You can find the answer below. 

HMRC has started raising assessments in two areas. An example of unjoined up government is that the Department of Work and Pensions (DWP) has been paying out state pension arreas without heed to taxation. This has left HMRC to chase up some unfortunate pensioners and raise tax assessments where the arreas have brought about new tax liabilties. Also, HMRC is raising assessments under the Discovery provisions in respect of unpaid loan charges. This will affect taxpayers who took part in disguised remuneration schemes and have not yet settled, and who are also potenially exposed to 10-year Inheritance Tax (IHT) charges.

On the topic of Discovery assessments, the Upper Tribunal (UT) has just allowed an appeal by a doctor. The UT had to totally remake a decision of the First Tier Tribunal (FTT) after finding that it had erroneously accused him and his accountants of carelessness and his accountants of making deliberate inaccuracies. 

Finally, we have another IR35 appeal, this time in HMRC's favour: Eamonn Holmes was effectively employed by ITV.

Have a good Easter break. 

That's all for now, more cases, news and guides 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)  

Loan charge warnings: new assessments & disproportionate IHT charges
We understand that HMRC are currently sending out further assessments to Income tax and National Insurance in respect of the loan charge to taxpayers with employment-related disguised remuneration loans. In addition, some taxpayers looking to settle are facing significant and disproportionate IHT charges.

Tourist tax first for Manchester
From 1 April 2023, visitors to city centre Manchester hotels or apartments will pay an extra £1 a night, per room. It makes Manchester the first UK city to bring in the tax.

Digitalising Business Rates Consultation response
HMRC have published a response to their consultation 'Digitalising Business Rates: connecting business rates and tax data’.

Are your state pension arrears taxable?
HMRC are currently undertaking checks to see if income tax is due on state pensions arrears that have been paid over the last couple of years to individuals who are in Self Assessment. Those affected should expect to receive a letter in the coming weeks.

Just 18 taxpayers pay Digital Services Tax 
The Public Accounts Committee (PAC) has published its report into the Digital Services Tax (DST). Whilst HMRC has raised 30% more tax revenues than expected, the tax still only accounts for one-twentieth of total tax revenues and was paid by only 18 taxpayers.

Editor's Pick 

Tax Data Card 2023-24
NEW: A summary of key tax rates and allowances for 2023-24 and 2022-23.

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. 

Salary or salary plus dividend combinations calc
Calculator of the week: This week's calculator works out whether to pay a small salary with a dividend or not. What is the optimal salary to pay in 2022-23  or 2023-24? What is the advantage of claiming the Employers' NICs allowance? Compare payment of a salary to payment of a dividend, compare payment of dividend to payment of a dividend with also a small salary.

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 

Taxing different trades and professions
From Accountants to Woodlands: how are different trades, professions and vocations taxed? Are there special rules, what expenses can you claim, what about VAT 

Land & Property

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

Employees 

IR35: Kay Adams v Lorraine Kelly v Christa Ackroyd v Eamonn Holmes
UPDATE: What was the difference between the facts and circumstances of the recent IR35 decisions on radio and TV hosts, Kay Adams, Lorraine Kelly, Christa Ackroyd and Eamonn Holmes?

P11D forms
UPDATE: From 6 April 2023, reporting employee benefits and expenses must be filed online. What forms need to be completed? What is form P11D? What is form P11D(b)? 

Directors & Companies

Tax-efficient extraction of profits: toolkit (2022/23)
Salary, dividend, interest, rent, pension, tax-free benefits, distributions, capital reductions, family companies, loans, non-UK-domiciles, non-UK residents and more.

Dividends: Index
How are dividends taxed? What are the rules for non-UK residents? How do you vote a dividend? When is a dividend paid? When can a dividend be unlawful?

Directors' loan accounts: Toolkit 
A checklist that details the main tax issues surrounding directors' loans.

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?

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?

Business Asset Disposal Relief (Entrepreneurs' Relief): Disposal of a business
UPDATE: Entrepreneurs' Relief (ER) was renamed Business Asset Disposal Relief (BADR) by Finance Act 2020. When does BADR apply? What is the rate of BADR? How do you claim BADR? What BADR case law is there?  

Overseas & Residents

Non-resident CGT: UK property
UPDATE: How and when does Capital Gains Tax apply to non-residents owning UK property?

Penalties & Compliance

Special Relief
UPDATE: What is Special Relief? When does it apply?

Penalties: Deliberate Behaviour
Enhanced Tax penalties for error apply in cases where a taxpayer's deliberate behaviour results in a potential loss of tax revenue. What penalties apply to deliberate behaviour? What is deliberate behaviour?

CPD for Lunch

Byte-sized chunks of lunchtime CPD for subscribers

• CPD: Company cars: 2019 (updated April 2023)
• CPD: Acting for a UK trust: Start here...
• CPD: CGT Reporting and payment deadlines
• CPD: Taxation of couples in 2022-23

More at CPD Index

Tax Cases (Freeview) 

Upper Tribunal confirms Eamonn Holmes was an employee 
In Red, White and Green v HMRC [2023] UKUT83, the Upper Tribunal (UT) concluded that the First Tier Tribunal (FTT) had acted properly in its approach to its decision that Eamonn Holmes was effectively employed by ITV. Without any error in law, the decision stood.

Woodlands was residential grounds for SDLT
In The How Development 1 Ltd v The Commissioners for HMRC [2023] UKUT 84, the Upper Tribunal reviewed arguments as to whether an inhospitable woodland was residential grounds for Stamp Duty Land Tax (SDLT) purposes: based on recent rulings of the Court of Appeal and Upper Tribunal. It decided that it was.

Reuters business restructuring documents subject to legal privilege
In Refinitiv UK Holdings Ltd & Thomson Reuters Group Ltd v HMRC [2023] TC08743, the First Tier Tribunal (FTT) found that information requested by a Schedule 36 notice was subject to Legal Professional Privilege.

Group relief rules were proportionate as well as justified
In Volkerrail Plant Limited & Ors v HMRC [2023] EWCA Civ 210, the Court of Appeal (CoA) held that the group relief rules were justified in restricting the Freedom of Establishment and the way that it was achieved was, in contrast to the Upper Tribunal's (UT) view, proportionate.

FTT made significant errors of law 
In Ramasamy Danapal v HMRC [2023] UKUT 00086, the Upper Tribunal (UT) found that the First Tier Tribunal (FTT) had made significant errors of law in concluding that a taxpayer and his accountant had acted carelessly and deliberately. This meant that HMRC’s discovery assessments were in fact out of time. 

VAT Cases & Guides 

Kids' driving experiences not like a funfair for VAT
In The Young Driver Training Limited v HMRC [2023] TC08748, the First Tier Tribunal (FTT) found that the appellant was not making supplies that included the right to admission and so was unable to take advantage of the temporary reduced VAT rate introduced during the pandemic.

Consultation: Draft regulations - VAT provisions for drink deposit return scheme 
As part of the Spring Finance Bill 2023, the government has introduced legislation as to how VAT will be accounted for on deposits charged for drink deposit return schemes. Following the introduction, a consultation has been published: 'Draft regulations: VAT provisions for drink deposit return schemes', seeking views on the regulations.

Place Of Supply: Mini One Stop Shop (MOSS)
The place of supply of B2C digital services is where the customer is based. Where supplies are made to the EU, this can mean multiple VAT registrations are required. How does MOSS assist with this? What is the position post-1 January 2021? 

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 30 March 2022

• Keir Starmer's Income Tax returns explained
• Say ‘bye-bye’ to paper tax returns
• Agent Update: March 2023
• Employment Related Securities Bulletin 49
• Consultation response on Income Tax on low-income trusts and estates
• Consultation: Tax administration framework
• HMRC increases interest rates
• Energy Bill Relief Scheme for business
• HMRC fails to score: Lineker outside IR35
• Partnership planning subject to Income Tax  
• Directors' loan written off at date repayment agreement not date of repayment 
• Share losses not trading 
• Bad debts: VAT recovery
• Non-resident directors: earnings, expenses and reporting requirements
• A tax guide to investment bonds
• Directors’ loan accounts: Toolkit 
• P11D: Reporting benefits and expenses UPDATED
• Buy-to-let ownership: personal v. company?
• Influencers: Tax Overview NEW
• Training and course fees (self-employed)  ...More

Come and join our Cloud

Subscribe (and UNLOCK the whole site) A single-user annual subscription is £425 (+ VAT).

What do you get?

• We keep YOU up to date in SME tax.
• FULL access to www.rossmartin.co.uk: your firm's favourite TAX INTRANET containing over 3,500 actively maintained tax guides, briefings, toolkits and checklists.
• Want to know more? Commission your own articles and checklists.
• Structured CPD our detailed SME tax updates "for Advisers Only" provide topical summaries and planning notes our webcasts provide you with structured CPD at your desk.
• Regular client tax briefings: these cover the latest business and employment tax issues and are designed to assist you plan meetings and improve your client services.