Tax Insider: The Monthly UK Tax Newsletter

Individuals who file self-assessment returns are generally open to enquiries into their tax returns by HM Revenue and Customs (HMRC). 

In addition to those tax returns which are selected by HMRC for a particular reason (e.g., unexplained, significant decreases in self-employment income), a ‘very small proportion’ of tax returns are randomly selected for an enquiry (see HMRC’s Enquiry Manual at EM0093). 

It is therefore useful to know how tax return enquiries normally operate, including the rules around how and when HMRC may open and close an enquiry.

Mark McLaughlin looks at HMRC tax return enquiries and applications by taxpayers to the tax tribunal for a direction that HMRC must close an enquiry.

Certainly since COVID, it has become increasingly common for employees to work from home – either permanently or as part of flexible working for employees; however, the self-employed will often use their homes as offices too. 
 
Chris Thorpe considers the income tax rules on working from home.

When a business suffers a loss and makes an insurance claim, the insurance company will ask if the business is VAT registered. The normal position is that if the business is VAT registered, the insurance company pays net of the VAT. The business then claims the VAT element from HMRC on its next VAT return. If the business is not VAT registered, the insurance company pays the full amount of the claim, including the VAT.

Andrew Needham looks at the VAT position of insurance claims and what happens when a business cannot recover all its VAT.

HM Courts & Tribunals Service statistics show that from approximately 580,000 deaths a year in England and Wales, 125 probate cases were formally contested in the High Court in 2024. Many more would be heard but for inheritance tax (IHT) provisions in IHTA 1984, s 144.
Whatever the reasons for any contest, a section 144 discretionary will trust is one of the most relied upon provisions available to families and their advisers should an individual’s will not turn out to be practical or tax-efficient or if, when the will is drawn up, the testator is unsure whether to bequeath certain assets to particular beneficiaries. 

Jennifer Adams considers the benefit of a discretionary will trust under specific inheritance tax legislation and circumstances in which such a trust could be used.

A letter from HM Revenue and Customs (HMRC) to check your tax affairs can be worrying. The word ‘enquiry’ suggests that something has gone wrong, but this is a way for HMRC to ensure that all income and gains have been declared, the correct reliefs claimed and the proper amount of tax paid. 

However, enquiries into such matters by HMRC should not be ignored or treated casually. HMRC has formal powers to ask questions, request records and, in some cases, charge penalties if information is not provided. The best approach is to be calm, organised and prompt. A well-handled enquiry is often resolved more quickly and with less stress.

Richard Curtis outlines the basic considerations when dealing with an HMRC enquiry.

A sole trader looking to expand their business might be weighing up the ‘pros’ and ‘cons’ of a partnership or a limited company. They are very different, with not only very different tax consequences, but functions as well. 

Chris Thorpe looks at partnerships and companies and considers which business model might be best.  

Under the loan relationships rules for companies, debits on loan arrangements are not deductible for corporation tax purposes in some circumstances.

Kevin Read highlights a recent case concerning the loan relationship rules for companies. 

Despite the reduction in National Insurance contributions (NICs) in Spring Budget 2024, more employees are paying tax at higher rates on their earnings due to the freezing of tax thresholds. Some may find that any pay rise or bonus attracts additional tax and NICs such that the net pay increase is minimal.  

Jennifer Adams looks at some alternatives to rewarding an employee with a pay rise or a bonus.