Nichola's SME Tax W-update 22 June 2023

Hello

We are focusing on tax and interest costs this week, we have another HMRC Agent update and HMRC is taking down several key services for essential IT migration this weekend. Mysteriously, many other services are also down over the period, which by co-incidence coincides with the Glastonbury festival weekend.

Interest on commercial borrowing is allowable as an expense for most businesses provided that a loan is incurred wholly and necessarily for the purposes of the business. There are special rules for unincorporated businesses which mean that they can easily be set up in a non-tax advantaged way if you are not careful. This may lead to a loss of tax relief on interest costs. For example, if you opt to use the Cash Basis of assessment you are restricted to claiming tax relief only on £500 of interest paid per year. If you are running a property business, you are also subject to special rules which restrict Income Tax relief at higher rates. This may cause a lot of pain if your fixed mortgage interest product ends.

You may do better as a landlord to structure your business through a company. Company owners may both lend to and borrow from their own companies. We note that many owners do not charge their companies interest because of the administrative burdens of reporting interest paid. Perhaps it’s time to revisit lending arrangements too.

We see changes to HMRC’s guidance on Plastic Packaging Tax almost on a weekly basis, yet I for one can see barely any changes to the use of plastic in the high street. I love a take-way, yet so many still arrive in plastic containers. We desperately need to have more tax incentives to ensure that businesses and consumers re-use this kind of packaging. There is no point in re-cycling it as we are putting it through another carbon emitting process to do that.

Finally, thank you to those of you who have purchased tickets to the forthcoming Tax Planning for Digital Nomads and OMB Tax Update workshop (27th June). Emails have been set to everyone who has signed up to ensure that we have the correct contact email for the workshop link, which will be sent on the morning of the event. If you haven't received a contact email this morning (22nd June) please check your spam folders. If you still can't see an email, please contact Steve with 'Digital Nomad' in the subject line. It's not too late to join this workshop, so please follow the link above.

More news, updates 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)  

Agent Update: June 2023
HMRC have issued their Agent Update for June 2023. We have summarised the key content for you with links to our detailed guidance on the topics covered.

Complex tax system obstacle to economic dynamism 
In a new report the Treasury Committee says the tax system is overcomplicated and is an obstacle to economic dynamism, creating compliance burdens, confusion and disincentives to work or grow a business. It also criticised the closure of the Office of Tax Simplification (OTS).

Key HMRC services are out of action over Glastonbury weekend
HMRC have announced downtime in their online systems for PAYE and National Insurance between Friday 23 June and Monday 26 June 2023. Many other online and telephone HMRC services will also be affected. The whole period of 'maintenance' spans the Glastonbury festival.

COVID-19: Tax Appeals
Government financial support to businesses affected by COVID-19 was made on a 'pay now, check later' basis after the start of 'lockdown' in March 2020. Appeals against decisions by HMRC which claw back support payments are now reaching the tax tribunals. Here we track tax appeals involving the employee Coronavirus Job Retention Scheme (CJRS), the Self Employment Income Support Scheme (SEISS),  and also VAT.

Tax Cases (Freeview)

Reasonable excuse claim fails due to unreasonable payment delays
In William Archer v HMRC [2022] EWCA Civ 626 the Court of Appeal dismissed an appeal against penalties for late payment of tax following a judicial review of closure notices. The judicial review was a reasonable excuse for late payment but not throughout the period of non-payment and the delay in making payment once the excuse ended was unreasonable.

Software issue invalidated CJRS claim
In Raystra Healthcare Limited v HMRC [2023] TC08838, the First Tier Tribunal (FTT) found that a failure to file Real-Time Information (RTI) returns on or before 19 March 2020 due to a software issue, meant that a claim under the Coronavirus Job Retention Scheme (CJRS) was invalid. 

Ceased trading: No SEISS
In David Hamill v HMRC [2023] TC08827, the First Tier Tribunal (FTT) found that an individual who had ceased to trade in the 2018-19 tax year was not eligible for support under the Self-Employment Income Support Scheme (SEISS). HMRC's assessments were valid.

Editor's Pick: Focus on Tax on Interest Costs

Cash or accruals accounting toolkit
Unincorporated businesses (sole traders and partnerships) using the 'cash basis' are restricted in the amount of interest relief that they can claim. Is it time to switch back to accruals accounting?

Charging your company interest
Many company owners don't bother to charge commercial rates of interest when they lend their company's cash. Its time consuming to account for and report for tax purposes. Is it time for a re-think? Every penny counts these days.

Close company loans toolkit (loans to participators)
Has your company surplus cash? What are the costs v. benefits for directors considering borrowing from a company's cash reserves?

Interest on rental property
How do I claim mortgage interest relief? How do the restrictions now work? 

Tax Tools 

Tax calculators
FREE for subscribers: We have a suite of useful tax tools that help agents, business owners and sole traders calculate their taxes. 

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 (subscription content)

Self Employed

Working from Home
What expenses qualify for tax relief? We work through all your expense queries.

Converting part of a home into an office
What tax relief is available? What taxes need to be considered when converting part of a home to an office? 

Employers

PAYE Settlement Agreements
What are PAYE Settlement Agreements? How do they work? What can be included?

Employment-Related Securities: Reporting
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. The employer will then have a requirement to register a share scheme with HMRC and file an annual return by 6 July following the tax year-end.

Directors & Companies

Family Investment Companies
What is a Family Investment Company? Why use a Family Investment Company? What is the tax treatment of a Family Investment Company?

Land & Property

SDLT: Residential property & dwellings
UPDATE: 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?

Rent-a-room Relief
What is rent-a-room relief? When does it apply? What are the limits and restrictions?

New Taxes

Plastic Packaging Tax: At a glance
FREEVIEW: What is Plastic Packaging Tax? Who does it apply to? Are your products within the scope of the Plastic Packaging Tax? When do you need to pay the Plastic Packaging Tax? When do I register for the Plastic Packaging Tax?

Private Client & Estate Planning

IHT Agricultural Property Relief 
What is Agricultural Property Relief (APR)? When does it apply? What are the conditions and restrictions of the relief?

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

Partnerships

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

When does a partnership exist?
When does a partnership exist? Why does it matter? What are the implications for different taxes? 

CPD for Lunch

Byte-sized chunks of lunchtime CPD for subscribers

• NEW: CPD: Purchase of Own Shares (POS)
• UPDATE: CPD: Non-Resident CGT: UK Property  
• UPDATE: CPD: Dividend Taxation
• CPD: Stamp Duty Land Tax

More at CPD Index

VAT Cases & Guides

Free Covid PPE in part a 'business activity' for Input VAT
In 3D Crowd CIC v HMRC [2023] TC08837, the First Tier Tribunal (FTT) partially upheld the appeal of a business established during the pandemic to provide free PPE to the NHS. The claim for input VAT was denied by HMRC on the basis that the free supplies were not taxable supplies.

Starting in business: VAT
UPDATE: One of the first decisions to make when starting in business is whether or not you should register for VAT.  Am I running a business for VAT purposes and if so, when do I register?

Annual accounting
UPDATE: What is the VAT annual accounting scheme? How does it work? Who can use it? What are the conditions? 

Assessments: Best judgement & time limits
UPDATE: What is a 'best judgement' assessment for VAT? When can HMRC raise one? What are your rights of appeal? How do you displace a best judgement assessment? What are the time limits for a VAT assessment?

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 15 June 2022

• Oops! MTD costs 400% more than HMRC estimated
• Survey shows limited impacts of the Off-Payroll Working rules
• HMRC drops SA helpline bombshell
• HMRC acts on Pandora Papers leak
• Scottish Deposit Return Scheme
• NI devolution of tax powers condoc responses
• Pension: Check National Insurance records by 5 April 2025
• Accountant's CJRS claim documents edited
• VAT direct debit does not change VAT due date  
• R&C Brief 6 (2023): VAT liability of digital publications
• Employer’s What’s On: 2023/24
• Sole Trader v Limited Company 2023-24
• Employer Bulletin: June 2023
• Purchase (repurchase) of Own Shares UPDATE
• Furnished Holiday Letting UPDATE
• Welsh Land Transaction Tax (LTT) UPDATE
• LBTT: Land and Buildings Transaction Tax UPDATE
• Full expensing & First Year Allowances UPDATE ...More

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