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Tax Insider

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  • FREE 3 Issues - The current January #157 and the previous two issues of December issue #156 and November issue #155.
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Here are just some of the strategies our tax experts are sharing with you this month:                                    
  • Private Residence Relief: Good News – If It Lasts!
    Private residence relief (PRR) for capital gains tax (CGT) purposes is a simple tax relief conceptually – if an individual sells a dwelling house which has been their only or main residence throughout their period of ownership (or throughout that period except for all or any part of the last 18 months), any gain is generally exempt from CGT. However, the tax system is not necessarily known for its fairness. Mark McLaughlin looks at a recent successful appeal by taxpayers in a private residence relief case, but questions whether the tribunal’s decision should be allowed to stand.              
  • Cash In On Tax-Free Savings!
    Whilst interest rates remain relatively low, bank and building societies are often unable to provide investors with a ‘wow’ factor, so any measures which incentivise savings will generally be welcomed. Sarah Laing provides an update on current opportunities to boost savings.                                
  • Reclaiming VAT After De-Registration  
    You might think that once a business has de-registered from VAT it would no longer be able to reclaim any VAT; but this is not the case. Andrew Needham looks at how businesses can reclaim VAT even after they have de-registered for VAT.                               
  • Capital Allowance Changes And Their Practical Impact
    There were several unexpected changes to the tax rules for capital expenditure announced by Philip Hammond on 29 October 2018. Kevin Read looks at changes announced in Budget 2018 to the tax rules for plant and buildings, as the government seeks to encourage investment during these uncertain economic times.                                
  • Estate Planning: Leaving The Business To Your Heirs
    This article outlines some options open to a business owner to successfully leave the business to others. Inheritance tax (IHT) is an important consideration on death; chargeable assets above the ‘nil rate band’ of £325,000 (for 2018/19) could be subject to IHT at 40%. Tony Granger looks at ways to pass on an owner-managed business.                               
  • The 2018 ER Update (Part 1)
    The basic entrepreneurs’ relief (ER) legislation has been fairly stable since it was first introduced in 2008, but it seems the Chancellor thought it was due a 10th anniversary revamp! In the first of his four-part article, Peter Rayney covers the latest Finance (No. 3) Bill 2018-19 changes to the entrepreneurs’ relief rules.        
  • Discretionary Trust Versus Direct Equity Ownership
    It is quite common for trustees of discretionary trusts to hold equities as part of a trust’s portfolio of investments. However, does this make sense? Malcolm Finney illustrates the impact of changes to dividend taxation pre and post-April 2016.                          
  • Tax Relief For Employment Expenses: But Don’t Get Too Excited!  
    Many employees need to use and maintain special clothing for work purposes. They may incur costs of (for example) having their protective work clothing cleaned regularly. It would, therefore, seem fair and reasonable that such costs should be deductible from their employment income. However, the tax system is not necessarily known for its fairness. Mark McLaughlin points out that tax relief for certain employment expenses is potentially miserly but can be higher in some cases.
  • Making The Most Of Your Spare Time 
    HMRC introduced two new allowances with effect from 2017-18 onwards; the trading allowance and the property allowance. The allowances are currently worth £1,000 each, for each tax year, and in broad terms mean that those with income from these sources below the annual threshold may not need to report it to HMRC. Sarah Laing looks at how the trading tax allowance can be used to give ‘hobby-style’ traders some tax-free income.                                    
  • VAT And Making Tax Digital 
    As part of the introduction of making tax digital (MTD), businesses registered for VAT with a taxable turnover above the VAT registration threshold of £85,000 will need to keep VAT records digitally and file their VAT returns using MTD compatible software. This will start from their first VAT period commencing on or after 1 April 2019.  Andrew Needham looks at the introduction of making tax digital from a VAT perspective.                                     
  • A New Penalty Regime For Businesses
    The government is proposing to introduce a new penalty regime for businesses, covering VAT, income tax and corporation tax: a reform of the way in which penalties are charged for late filing of returns. This is based on a points system similar to that which applies for driving offences; and a reform of the way penalties are charged for late payment. The system will be geared towards encouraging taxpayers to pay early rather than late. Satwaki Chanda discusses the proposed new penalty regime for businesses following July’s draft Finance Bill.                                      
  • Directors’ Loan Accounts And Partner Capital Accounts – Are They Inheritance Taxable? 
    Both directors’ loan accounts and partners’ capital accounts represent money put into the business by the director or partner. Yet their tax treatment for inheritance tax (IHT) purposes is completely different. Tony Granger examines what happens on death if an individual has a director’s loan account or a partner/LLP member’s capital account where inheritance tax is concerned.  
  • Not Very Assuring! New Advance Assurance Procedures For Venture Capital Investments 
    Changes to the procedures for applying for advance assurance (AA) for proposed enterprise investment scheme (EIS) and seed EIS (SEIS) investors are intended to deter ‘speculative’ applications but, along with the ‘risk to capital’ condition introduced by FA 2018, may also create a ‘Catch 22’ situation for some start-ups. Ken Moody points out some recent unhelpful changes affecting certain investors.                         
  • Residence Nil Rate Band: When Is A ‘Residence’ Inherited And What Constitutes ‘Closely Inherited’? 
    For deaths occurring on or after 6 April 2017, an extra nil rate band is available to reduce the inheritance tax (IHT) charge on the deceased’s estate. This extra nil rate band is referred to as the residence nil rate band (RNRB). The RNRB is in addition to the ordinary nil rate band (NRB). Malcolm Finney takes a look at two important terms in the inheritance tax residence nil rate band rules.     
  • Writing Off Directors’ Loans: Taxing Times!
    Director’s loan accounts (DLAs) are a common feature in the financial statements of family and owner-managed companies in particular. HM Revenue and Customs (HMRC) are keen to ensure that DLAs are treated correctly for tax and National Insurance contributions (NICs) purposes, and regard DLAs as a ‘risk’ in terms of potential errors. Mark McLaughlin notes that the tax treatment of family and owner-managed companies writing off loans to directors is not necessarily as straightforward as might first seem.                      
  • Speculate To Accumulate? Consider Topping Up Your Pension Pot! 
    There continues to be plenty of speculation concerning the availability of tax relief on pension contributions – not least because an unnamed senior government source recently quoted Chancellor Philip Hammond as saying that the £38 billion paid out every year in the form of pension tax relief is ‘one of the last remaining pots of gold we can raid. Sarah Laing looks at how tax relief on pension contributions may be optimised and highlights why it might be beneficial to top up pension plans sooner rather than later.                 
  • VAT: Buying And Selling A Second-hand Commercial Vehicle 
    When a business buys a new commercial vehicle, it will be charged VAT on the full selling price. Unlike motor cars, when the recovery of input tax is blocked unless there no private use of it at all, the VAT on a commercial vehicle can be reclaimed. Andrew Needham looks at the VAT consequences of buying and selling a second-hand commercial vehicle.     
  • EIS Reliefs – Traps That Can Catch The Unwary! 
    The enterprise investment scheme (EIS) and its sister scheme, seed EIS (SEIS), provide very generous tax breaks, which significantly reduce the effective cost of investing in high-risk, unquoted trading companies. Kevin Read discusses some recent cases that show how the valuable tax reliefs available under the enterprise investment scheme can be lost in seemingly innocuous situations. 
  • Ways To Reduce Inheritance Tax Legally 
    Inheritance tax (IHT) is seen by many as iniquitous, as it is a death tax payable on assets that have mostly been purchased from after-tax income. No matter what your income tax status is or was, IHT is normally 40% on taxable death estates. IHT is a tax on assets after exemptions and allowances. You may have been a basic rate taxpayer all your life, only to become a 40% one on death. Tony Granger outlines some strategies to reduce inheritance tax bills now and in the future – quite legally.
  • The ‘Indirect’ Close Company Loan Charge 
    We will probably be familiar with the close company loan to participator tax charge in CTA 2010, s 455. Broadly, where a loan is made to a shareholder – typically where an overdrawn director’s loan account arises – that has not been cleared or repaid within nine months of the company’s year-end, the company must pay a 32.5% tax charge on the amount that remains outstanding. Peter Rayney looks at the potential 32.5% tax charge that can arise on management buy-out deal structures.
  • ‘Gift And Loan’ Trusts 
    Despite the availability of an inheritance tax (IHT) nil rate band (currently worth £325,000) and the recently introduced residence nil rate band (worth £125,000 for the tax year 2018/19), IHT arising on death at 40% is somewhat penal; in particular, when it is appreciated that much of a person’s death estate has itself been subject to tax in one form or another, be it income tax and/or capital gains tax. Malcolm Finney takes a look at how the loan trust may mitigate inheritance tax on death.
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