Hello
This week we look at the 'tax gap', report on a rare victory for a taxpayer in a Stamp Duty Land Tax (SDLT) appeal, learn a little bit more on the unallowable purpose rule in loan relationships and have news on NICs refunds. All in all another interesting week in tax!
Can you and I do anything about the 'tax gap'? According to the statistics, we might be able to have quite an impact. HMRC says that 30% of the ‘tax gap’, that is £12 billion in estimated lost taxes, is caused by what is known as ‘failure to take reasonable care’. Broadly this failure is from being careless: i.e. not taking the time and effort to get something right. According to HMRC, small businesses are very good at getting their tax wrong. Of course, to get something right you do need a good understanding of the rules, but in the case of our legislation, some rules are better drafted than others. The cat is out of the bag: we need better-written rules and a rewrite of old confusing legislation. In our Editor's Choice this week, we have a couple of mini-guides that aim to explain some basics that can be misunderstood. We are going to look into this in a bit more detail next time.
We held an excellent webinar this week on Purchase of Own Shares, packed full of useful examples and case studies. This is now available to purchase.
As noted there was a victory for a taxpayer in a Stamp Duty Land Tax (SDLT) appeal: they had purchased a property with a wood which was something more than a communal woodland and potentially a financial burden for the property owner. The tax tribunal decided that this disqualified it from being grounds of the dwelling. It strikes me that a lot of taxpayers who lose these kinds of cases will now be arguing that as they are residential grounds for SDLT they are therefore their grounds and permitted area for Capital Gains Tax Private Residence Relief. Something to analyse another time!
News and cases below. Don't forget impending employment tax deadlines: P11Ds and ERS returns.
Back soon
Nichola & the Team
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Quick News (freeview)
Ignorance of tax rules bolsters the tax gap
HMRC has published it annual estimates of the 'tax gap'. Ignorance of tax law as in by 'failure to take reasonable care' by small business is blamed for a large percentage of tax gap which manifests itself in a lack of Income Tax and Corporation Tax receipts.
Remember to declare 'no Class 1A NICs to pay'
With the P11D deadline of 6 July fast approaching, HMRC have issued a reminder for employers needing to declare they have no Class 1A return of National Insurance contributions (NIC) to make.
Update on unexpected Class 2 NIC refunds
Last month we reported some self-employed taxpayers who made voluntary class 2 National Insurance Contributions (NICs) for 2022/23 and received an unexpected refund from HMRC, which may have been an error. HMRC has now provided an update regarding this issue.
Welsh LTT consultation outcome
The Welsh Government has published a summary of responses to its earlier Land Transaction Tax (LTT) consultation which considered extending the LTT higher rates three-year exception and refund period, in specific circumstances.
Tax Cases (freeview)
CoA rules loan had an unallowable purpose
In JTI Acquisition Company (2011) Limited v HMRC [2024] EWCA Civ 652, the Court of Appeal (CoA) agreed with the Upper Tribunal (UT) and the First Tier Tribunal (FTT) that while the appellant made a commercial acquisition using a group loan, the wider group strategy of securing a tax advantage meant the loan had an unallowable purpose.
HMRC raid led to valid discovery
In Joanne Lunn and Vanilla Monsoon Ltd v HMRC [2024] TC09197, clients of the discredited Christopher Lunn failed to make disclosures when invited by HMRC following the enforcement of a search warrant. It led to HMRC making Discovery Assessments with the addition of tax-geared penalties for failure to take reasonable care.
Woods non-residential for SDLT
In Marie Guerlain-Desai v HMRC [2024] TC9203, a taxpayer successfully persuaded the First Tier Tribunal that a 12-acre woodland behind a dwelling did not form part of its grounds for Stamp Duty Land Tax (SDLT) purposes. As such, the lower non-residential rate applied to the purchase.
Editor's Choice
Failure to take reasonable care
What is meant by taking reasonable care in relation to your tax affairs? What is a failure to take reasonable care? What can HMRC do if you do not take reasonable care over your tax affairs?
Failure to notify chargeability to tax
What is failure to notify chargeability to tax? What happens if you fail to notify HMRC about your taxes? What penalties apply for failing to notify HMRC that you have a tax liability?
VtaxP: Virtual Tax Partner Tax Workouts: June 2024
From Purchase of Own Shares to AML updates to Business structures and planning. This summer's six hours of CPD specials aim to keep you up-to-date with your tax know-how but also inspire you by introducing new topics. We combine detailed case studies with tax updates for advisers, business owners and start-ups.
Guides & Updates
Self-Employed
Tax risk review
This is a tax risk review checklist for unincorporated businesses. Agents should use this to build a risk profile of their clients.
Doctors and Dentists: Tax Overview
What expenses can doctors and dentists claim for tax purposes? How is income accounted for? Are there any special tax and accounting rules? What are the rules for VAT?
Partnerships
When does a partnership exist?
When does a partnership exist? Why does it matter? What are the implications for different taxes?
Partnerships: Losses
What loss reliefs are available to partners and what restrictions are there? What is the definition of capital contribution? How to calculate a partner's capital contribution? What are the anti-avoidance rules?
Directors & Companies
Tax-efficient extraction of profits: toolkit (2024/25)
This is a general guide and refresher which aims to help a company and its owner decide how company profits are to be extracted based on current tax, rates, reliefs and allowances.
Employers
P11D: Reporting benefits and expenses
It's that time of year. How do you report benefits and expenses? What is the P11D deadline?
Employment-Related Securities: Reporting
The annual return by 6 July following the tax year-end is coming due. 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 and file an annual return.
Land & Property
Different ways of taxing UK property
A handy reminder of the changes to property taxation in recent years
At a glance: Reporting CGT when & how?
How do you report your capital gains? What return do you use? There are different ways for individuals to report capital gains depending on whether you are resident or non-resident, and whether you are in or out of Self Assessment.
Capital Allowances
Full expensing & First Year Allowances
What is full expensing? When does it apply and what is the rate of allowance? How are disposals of full expensing assets dealt with? What assets qualify for the 50% First Year Allowance (FYA)? How do I deal with disposals of 50% FYA assets? How do I make a claim?
Penalties & Compliance
Grounds for Appeal: Reliance on an adviser or third party
When can a taxpayer appeal a penalty for late filing, late payment or for error or mistake? What are the grounds on which they can appeal?
Investigations: the presumption of continuity
What is the Presumption of Continuity? When does it apply?
Information powers
How does HMRC gather information? What information do they already hold? What rules should you be aware of?
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?
Acting for a trust? Start here…
UPDATE: This is an essential guide for advisers and trustees on how to manage the tax affairs of a UK trust and how to avoid common pitfalls.
Estates: Income Tax and Capital Gains Tax
UPDATE: How do executors deal with income and capital gains arising on the deceased’s estate? What allowances and reliefs are available?
VAT News & Cases
Cash accounting
What is cash accounting for VAT? What are the benefits? What are the conditions?
Energy-Saving Materials
The supply and fitting of energy-saving materials in residential accommodation attracts the zero rate of VAT. What does it apply to? What are the qualifying conditions? What case law is there on this topic?
Tax Tools & Calculators
Tax tools & calculators
UPDATE: 2024/25 versions available now. We have a suite of useful tax tools that help agents, business owners and sole traders calculate their taxes.
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.
CPD for Lunch
Byte-sized chunks of lunchtime CPD for subscribers
- NEW: CPD: Change of basis periods: Transitional rules 2023-24 Returns
- CPD: VAT Penalties Update
- CPD: CGT Reporting and payment deadlines
More at CPD Index
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 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 20 June 2024
- Joint statement supports mandatory registration of tax agents
- Notification of EMI options by 7 July warning
- Complex penalty rules trip up HMRC
- Assessment 15 years after failure to notify was valid
- KFC dip pots formed part of VAT single supply
- AML Tools: Identify the Beneficial Owner for AML
- Finance Acts 2024: Tax Update and Rolling Tracker
- Schedule 36 Information Notices ...More
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