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Tax Insider

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  • FREE 3 Issues - The current May issue #161 and the previous two issues of April #160 and March #159.
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Here are just some of the strategies our tax experts are sharing with you this month:  
  • Waive goodbye to dividends, say ‘hello’ to potential tax problems!
    If used correctly by a director/shareholder, dividend waivers can be a very effective planning tool; but there are several points that need careful consideration. Kevin Read outlines some of the problems and practicalities associated with dividend waivers.
  • Tax-free cash from renting out a spare room
    HMRC’s rent-a-room scheme is an optional exemption scheme, which allows individuals to receive up to £7,500 of tax-free gross income (income before expenses) from renting out spare rooms in their only or main home. The exemption is halved where the income is shared with a partner or someone else.  Sarah Laing reminds readers how the rent-a-room scheme can be used to obtain tax-free income. 
  • VAT: When can HMRC impose market value? 
    Many businesses offer discounts on goods or services that they provide to the customer. It is common for supermarkets to offer price reductions and ‘buy-one-get-one-free’ type deals which reduce the price paid and, therefore, the amount of VAT payable to HMRC. Andrew Needham looks at when HMRC can impose an open market value on a transaction for VAT purposes.
  • Income protection for working directors
    For the business, an incapacitated working director will still have salary and employee benefit costs, whilst not contributing to revenues. The question then arises – for how long can the business support the director financially? Tony Granger examines the impact on a business and on working directors themselves if they become seriously ill or injured so that they cannot work.
  • Entrepreneurs’ relief update (Part 4)
    The following is a fully-worked example explaining the mechanics of the new entrepreneurs’ relief (ER) ‘shareholder dilution’ election. Peter Rayney concludes his series on the latest entrepreneurs’ relief changes.
  • What constitutes a dwelling for stamp duty land tax higher rate purposes?
    The recent case of P N Bewley Ltd v HMRC [2019] UKFTT 65 (TC) before the First-tier Tribunal (FTT) examined what is meant by the term ‘dwelling’ in ascertaining whether the higher rates of stamp duty land tax (SDLT) applied on the purchase of a residential property by a company. The property was a bungalow in Weston-super-Mare and the purchase was made by P N Bewley Ltd, a company. Malcolm Finney looks at a recent case on the meaning of the term ‘dwelling’ for the purpose of the higher rates of stamp duly land tax. 
  • Is HMRC too late? 
    HM Revenue and Customs (HMRC) may make a ‘discovery’ assessment outside the normal ‘window’ for opening an enquiry into an individual’s self-assessment return if certain conditions are satisfied (TMA 1970, s 29; similar rules apply to companies). Mark McLaughlin highlights a case on whether a ‘discovery’ by HMRC may become ‘stale’ if it delays taking action.
  • Entrepreneurs’ relief – nothing personal
    Mark McLaughlin highlights a case which underlines the importance of forward planning for tax purposes and ensuring that decisions are properly documented. A tightening of conditions for capital gains tax (CGT) entrepreneurs’ relief (ER) in Finance Act 2019 may have resulted in some taxpayers no longer qualifying for the relief. 
  • Mileage allowances for employees – how much can be claimed?
    It is not uncommon for employers and employees to be confused about the rules for claiming mileage and fuel costs for business travel, and the amount of tax relief which may be claimed. Sarah Laing outlines the tax advantages of approved mileage allowance payment rates for employee business travel in their own vehicles.
  • What VAT is due on the sale of goods over the internet 
    Many small and medium-sized businesses sell their goods through internet marketing platforms such as Amazon and eBay. Once their turnover exceeds the VAT registration threshold, they have to account for VAT on their sales; but how much VAT do they have to account for? Andrew Needham looks at the VAT implications of selling goods over the internet.
  • That’s a relief! Substantial shareholdings exemption
    Where the substantial shareholdings exemption (SSE) applies on a sale by a company of its investment in another company, the SSE provides exemption from corporation tax – not just on the sale itself but also from any ‘degrouping charge’, except where the subject of the ‘degrouping’ charge is an intangible asset. Until FA 2019, that is. Ken Moody points out a recent helpful relaxation in the substantial shareholdings exemption rules for companies.
  • Building and measuring shareholder value: Business valuation
    Measuring business value is important when considering a business for sale, or to evaluate the impact of advisers and consultants on the business. Tony Granger describes a formula that might be considered for the purpose of measuring business value. 
  • The 2018 ER update (Part 3)
    This month, we turn to the welcome assistance for shareholders whose holdings are adversely diluted as a result of a commercial share issue. In the third of his four-part article, Peter Rayney outlines further Finance Act 2019 changes to the entrepreneurs’ relief rules.
  • Inheritance tax: When is a ‘residence’ inherited and what constitutes ‘closely inherited’?
    Inheritance tax (IHT) is levied on death at the penal rate of 40%. Any reliefs and exemptions available to reduce the amount on which this 40% charge is levied should be utilised to the full. Malcolm Finney takes a look at some important features of the inheritance tax residence nil rate band.
  • Information notices: ‘Fishing’ allowed? 
    Taxpayers understandably do not generally relish contact with HM Revenue and Customs (HMRC), such as receiving requests for information and/or documents in respect of an individual’s tax affairs. The natural instinct of some taxpayers is to resist such requests, or alternatively to provide only the details that the taxpayer considers HMRC should be entitled to see. Mark McLaughlin highlights a case in which HM Revenue and Customs was not given its own way when requesting information to check a taxpayer’s tax position.   
  • Help charities - and save tax! 
    As many charities continue to struggle to raise funds, highlighting the prospects of tax reliefs on donations is one way to encourage gifts. This article looks at how the gift aid scheme can be used to save tax. Sarah Laing highlights potential tax savings from charitable giving under gift aid. 
  • VAT: Belated notification of the option to tax 
    When a business ‘opts to tax’ it decides to charge VAT on the rental or sale of commercial property in order to recover the VAT on its purchase, construction or refurbishment. Andrew Needham looks at what happens when a business fails to notify HMRC of its option to tax at the correct time.           
  • The new structures and buildings allowance – some practical issues 
    In Tax Insider for January 2019, I wrote about the changes to capital allowances announced in Budget 2018, including the new structures and buildings allowance (SBA). This article provides more detail on the SBA, which gives a writing down allowance of 2% per annum (straight-line basis) of qualifying costs incurred on or after 29 October 2018. Kevin Read provides further detail on the structures and buildings allowance, including who can claim on leased properties. 
  • Calculating ‘key person’ life assurance to cover the business against loss 
    Whilst most businesses are aware of ‘key person’ assurance, 93% of businesses have no cover in place to protect the business against financial loss on the death or serious illness of a key person (source: Swiss Re survey). This is possibly because businesses are unaware of the extent of financial loss caused to the business if the key person dies or becomes seriously ill or disabled and cannot work. Tony Granger outlines different ways to provide a value to insure for when a key person dies or becomes disabled.             
  • The 2018 ER update (part 2) 
    Last month, we looked at the new 5% economic ownership tests that must now generally be satisfied by shareholders to secure entrepreneurs’ relief (ER) on the sale of their shares. In the second of his four-part article, Peter Rayney covers the latest Finance (No. 3) Bill 2018-19 changes to the entrepreneurs’ relief rules.   
  • The sorry tale of the personal representative and Barbados beneficiary  
    On death, as in life, one cannot escape taxation. On death, an individual’s estate (broadly, assets less liabilities) is subject to inheritance tax (IHT) at the rate of 40% on the amount of the estate over the current nil rate band of £325,000. Malcolm Finney highlights a potential trap for the personal representatives of deceased individuals.   
  • Tax Insider: Tax Tips
  • Tax Insider: Your Tax Questions Answered!
Tax Insider