Nichola's SME Tax W-update 26 October 2023

Hello,

There is little in the way of tax news this week which is perhaps just as well following the disruption caused by Storm Babet last weekend. We do hope you are all safe and well and have not been badly affected by the floods.

There may not be much coming out of HMRC or HM Treasury at the moment but the tax tribunals have been busy! We have several interesting cases this week including the tricky matter of NICs on arrears of sick pay, whether a wedding barn qualified for Business Property Relief (it didn’t) and the long-awaited Supreme Court decision in Vermilion Holdings. This has confirmed, once and for all, that a director’s replacement share options were deemed Employment Related Securities (ERS), overturning the Court of Session’s view and bringing some much-needed clarity to the ERS deeming provisions.

Whilst this decision is by far the most significant of the week our favourite case is the United Biscuits VAT case. This considers whether McVities ‘Blissfuls’ biscuits are zero-rated as food, or standard-rated as confectionary, which requires a biscuit to be wholly or partly covered in chocolate. The question was, just how chocolatey does a biscuit have to be for a standard rating to apply? The First Tier Tribunal decided that a partial covering of chocolate is sufficient and that it didn’t matter that the top layer of a Blissful is a biscuit logo on top of a layer of chocolate. We were disappointed however that the tribunal judge did not insist on trying out a packet of Blissfuls to help him in making his decision!

In other VAT news, following a consultation in 2018, HMRC have commenced development on a proof of concept for a new split payment system which could see the VAT element of online sales being paid directly to HMRC. The final phase of this proof of concept is not due until 2025, meaning that it will be some time before retailers have to think about this somewhat radical change as the actual system is unlikely to be introduced for several years. One to watch given how many businesses could be affected by the proposed changes.

Finally this week we have our 2023 Capital Taxes update which covers all the latest in CGT and IHT, a really useful new guide to pre-trading expenditure, which is something we get asked about a lot via our Virtual Tax Partner service. As always, the HMRC Agent Update has some useful information.

More news, cases and updates below. Do check out the Editor's Choice.

Back soon

The Team

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

HMRC starts work on VAT Split Payments Proof of Concept
HMRC have commenced the outsourced development of a proof of concept for a new split payment system which could see the VAT element of online sales being paid directly to HMRC.

Government responds to tax reliefs reports 
The government has responded to two reports by the Treasury Committee, both of which focused on current tax reliefs. It believes a systematic review of all 1,180 plus tax reliefs is impractical and unwarranted, but did confirm its intention to extend the sunset clauses on the Venture Capital Trust (VCT) reliefs.

Tax Cases

SC finds director’s share options are Employment-Related Securities 
In HMRC v Vermilion Holdings Ltd [2023] UKSC 37, the Supreme Court (SC) found that share options issued to a director were made available by 'reason of his employment' despite the fact that these share options replaced earlier options given to his consultant company in lieu of fees for advisory services.

Sickness lump sum NICable in single year 
In Kirin Kalia v HMRC [2023] TC08952, the First Tier Tribunal (FTT) found that backdated sickness payments made under an employer’s group income protection plan were subject to National Insurance Contributions (NICs) in the tax year they were paid, not in the tax year they related to.

Taxpayer uses WhatsApp to prove enquiry notice is out of time 
In Richard Monks v HMRC [2022] TC8957 the First Tier Tribunal (FTT) held that a Schedule 36 information notice had been correctly issued by HMRC but the preceding tax return enquiry was out of time.

No BPR for ‘village hall’ wedding barn business
In Eva Mary Butler & Others v HMRC [2023] TC08949, the First Tier Tribunal (FTT) held that Business Property Relief (BPR) was not available for a business that rented out a barn for weddings. The level of services provided did not prevent the business from being wholly or mainly an investment business.  

Editor's Choice (subscribers)

Pre-trading expenses 
NEW: What are pre-trading expenses? What tax relief is available for pre-trading expenses? What are the restrictions to relief? What expenses will not qualify?

Capital taxes round-up: 2023
NEW: A round-up of developments in capital taxes for 2023 including some topical Capital Gains Tax (CGT) and Inheritance Tax (IHT) cases.

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  

Cash or accruals accounting toolkit
UPDATE: Unincorporated businesses can elect to use one of two different methods of accounting for tax: simpler accounting (cash basis) or accruals basis accounting.

Tax risk review
This is a tax risk review checklist for unincorporated businesses.

Motor expenses (self-employed)
What expenses can you claim for motor and travel if you are self-employed? Why are there different versions of the rules?  Which method is most beneficial for me?

Employers

Employment status & detailed checklist 
Why is it important to check my employment status? What tests should I use? What is the recent case law?

Employee Shares: Restricted Stock Units: tax reporting
How to report Restricted Stock Units for UK tax. I am an employee and my employer has granted me stock units or RSUs. How are they taxed? How do I complete my tax return?

Directors & Companies 

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. 

Loan relationships toolkit: Directors' loans 
When does a balance owed by a company fall within the loan relationship rules? What about directors' loans?

Private Client & Estate Planning

Top Slicing Relief: How you slice it
What is Top Slicing Relief? When does it apply?

Business Asset Disposal Relief (Entrepreneurs' Relief): Disposal of a business
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?  

Land & Property

Land: future consideration (overage)
A guide to the tax treatment of future consideration payable on the disposal of land. 

Overseas & Residence

SRT: Statutory Residence Test
What is the statutory residency test? Why is it important and how does it work?

VAT News & Cases

Blissful ignorance of the correct VAT rate for chocolate biscuits
In United Biscuits (UK) Ltd v HMRC [2023] TC8941, the First Tier Tribunal (FTT) agreed with HMRC that 'Blissfuls' biscuits were partly covered by chocolate making them standard-rated for VAT.

Correcting VAT errors
What are the VAT error correction time limits? Can you correct errors through the VAT return? Do you have to notify HMRC?

CPD for Lunch

Byte-sized chunks of lunchtime CPD for subscribers

• NEW: CPD: Corporation Tax Part 1: Rates and Challenges
• NEW:CPD: Corporation Tax Part 2 Associated Companies
• NEW:CPD: Corporation Tax Part 3 Augmented Profits & Marginal Relief
• CPD: Landlords Update 2023

More at CPD Index

CPD Workouts

Two hours of CPD: Unravelling the diverse tax rules over a range of topical subjects

• VtaxP Tax Workouts 2023: AML Essentials update & IHT and Family Investment Company case studies
• VtaxP Tax Workouts 2023: Tax Update for OMBs & Taxing the Digital Nomad

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 October 2023

• Employer Bulletin: October 2023 
• HMRC say that ISAs can't hold fractional shares
• New statistics show CGT up 27% on trusts 
• SA paper return available online as deadline looms 
• R&D CT600 glitch causing submission errors 
• Ramsay principle catches partnership tax planning
• No £30,000 exemption for payment for loss of share options
• VAT surcharges do not require assessment of VAT 
• Online filing exclusions for 2022-23 tax returns
• Foreign income and residency pages: FAQs
• Accountancy & tax fees
• PAYE Settlement Agreements UPDATE
• Stamp Duty: Share-for-share exchanges UPDATE
• Share-for-share exchanges UPDATE
• Named tax avoidance schemes, promoters, enablers UPDATE
• Vehicles (4 wheels): Allowances
• IHT: Main Residence Nil-Rate Band (RNRB)
• Staff, Bureaux or Agencies and VAT ...More

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