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Tax Insider

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  • FREE 3 Issues - The current October issue #166 and the previous two issues of September #165 and August #164.
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Here are just some of the strategies our tax experts are sharing with you this month: 
  • Employment allowance changes: Plan ahead
    From April 2020, the employment allowance (EA) is changing, restricting it to smaller businesses with a National Insurance contributions (NICs) bill of less than £100,000 in the previous tax year. Sarah Laing highlights forthcoming changes to the employment allowance.
  • VAT: Joining or leaving the flat rate scheme – points to watch  
    When a business joins the flat rate scheme (FRS), it need only account for the relevant flat rate percentage applicable to its trade category on its sales; however, it cannot normally recover VAT on its purchases. Andrew Needham looks at some tips and traps when joining or leaving the flat rate scheme.
  • IHT: All change?
    In January 2018, The Chancellor of the Exchequer tasked the Office of Tax Simplification (OTS) to review inheritance tax (IHT), and they responded with a two-part critique. Part one was published in late 2018, and the second (summarised below) in July 2019.  Meg Saksida looks at the Office of Tax Simplification’s review of UK inheritance tax.
  • Dealing with in specie distributions (Part 2)
    Where a company makes an in-specie distribution – in effect makes a dividend consisting of an asset, the actual market value of that asset is generally treated as a taxable distribution in the hands of an individual shareholder. Unless the distribution is being made in the course of a winding-up (or some other form of relief applies, e.g. under the statutory demerger legislation), the market value of the relevant asset (less any consideration paid by the recipient) is taxed as income in the shareholder’s hands at the relevant dividend rate(s). Peter Rayney examines the tax consequences of in-specie distribution.
  • Will trusts and their IHT treatment
    A will trust is simply a trust set up under someone’s will. Such trusts may be set up for family reasons (allowing trustee decisions to be taken in the future in the light of a beneficiary’s circumstances at that time), and also with a view to the mitigation of any inheritance tax (IHT) charge arising on the testator’s estate. Malcolm Finney gives an overview of the types of will trust available to a testator..
  • Caught in the ‘spotlight’?
    HMRC released number 47 in its ‘Spotlight’ series of guidance notes in February this year, which suggests that a company sale may be ‘caught’ by the targeted anti-avoidance rule (TAAR) designed to deter ‘phoenixism’ when a company is wound up. Ken Moody highlights a ‘Spotlight’ published by HMRC on the anti-avoidance rules aimed at combatting ‘phoenixism’.
  • Entrepreneurs’ relief: A ‘personal’ issue
    Most trading company owners wishing to claim capital gains tax entrepreneurs’ relief (ER) on an eventual sale of their shares need to satisfy certain conditions throughout a two-year period ending with the disposal. Mark McLaughlin highlights two cases on the entrepreneurs’ relief ‘personal company’ condition for most share disposals.
  • Be investment savvy with ‘CGT exempt’ assets! 
    Not a day seemingly passes in the UK without a recommendation in the media for the latest way to escape capital gains tax (CGT) on the sale of investments. Meg Saksida uncovers some traps for the unwary with exempt capital gains tax investment assets.
  • Private residence relief: What lies ahead? 
    HMRC issued their promised consultation document (CD) on private residence relief for capital gains tax (CGT) purposes entitled ‘Capital Gains Tax: Private Residence Relief: changes to the ancillary reliefs’ on 1 April 2019. The consultation period closed on 1 June 2019. Malcolm Finney takes a look at the possible future changes to private residence relief for capital gains tax purposes.
  • Dividend allowance cut hits home
    The dividend allowance, which was originally introduced from 6 April 2016, was cut from £5,000 a year to £2,000 from 6 April 2018. The cut is likely to have a significant impact on director and employee shareholders of small businesses who receive both salary and dividend payments. Sarah Laing looks at a recent adverse tax change affecting company shareholders.
  • VAT and discounts 
    There are a number of different discounts commonly offered by businesses. The most common B2B discounts are prompt payment discounts (PPDs) and volume or turnover-based discounts, and retailers will offer money off discounts or participate in manufacturer-based promotion schemes. Andrew Needham looks at what impact different types of discounts can have on the VAT due, and how and when the VAT is accounted for.
  • Comparing pensions and lifetime ISAs 
    Pensions and lifetime ISAs (LISAs) can be used for retirement saving. A combination of both might sometimes be considered. Tony Granger looks at the differences and similarities between saving for pensions or lifetime ISAs.
  • Child’s income – Or is it? 
    Parents sometimes wish to gift income-bearing assets (e.g. company shares) directly to their unmarried minor children, to take advantage of the child’s personal allowance (and dividend allowance) and possibly also their basic rate income tax band, to reduce the family’s overall tax burden on dividend payments. Mark McLaughlin looks at anti-avoidance provisions relating to income paid to a parent’s unmarried minor child from assets transferred.
  • Not so entertaining! 
    From 6 April 2020, the government intends IR35 to become a dead issue for those operating via personal service companies (PSCs), unless the PSC is contracting with a private sector ‘small’ client (as defined in Companies Act 2006). Kevin Read reviews recent cases involving entertainers as the death knell sounds for IR35.
  • Goodwill: New tax rules explained
    For companies, the tax treatment of goodwill falls under the ‘intangibles’ regime which has applied since 1 April 2002. Under these rules, profits and gains are recognised in accordance with the accounting treatment and taxed on revenue account. Satwaki Chanda discusses the new corporate tax rules for goodwill relief, which apply from 1 April 2019.
  • Don’t let HMRC ‘spread’ out!
    HM Revenue and Customs (HMRC) can open an enquiry into any self-assessment return.  A tax return enquiry for one period could extend to other periods, such as where HMRC considers that a self-employed individual’s income for one tax year has also been understated in other tax years. Mark McLaughlin looks at the ‘presumption of continuity’ and HMRC’s practice of ‘spreading’ understatements of income in some tax return enquiries. 
  • The cost of homeworking 
    If certain conditions are met, no tax liability arises where an employer makes payments to an employee for reasonable additional household expenses, which the employee incurs in carrying out duties of their employment at home under ‘homeworking arrangements’. Sarah Laing examines flat rate and tax-free expenses available for people who work from home.
  • VAT and insurance claims
    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 will pay the claim net of 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. Andrew Needham looks at the issues surrounding the reclaiming of VAT on insurance claims.
  • Giving it away…
    In the last few months, many of the UK’s media publications have been commenting about IHT. “The rich are avoiding IHT by using ‘loopholes’ and advisers with ‘a kitbag of tricks’, and ‘IHT is a voluntary tax’” are but a few of the examples. Meg Saksida explores the inheritance tax exemptions available for lifetime gifts.
  • Funding and taking a pension: How old?
    The two main categories of pension schemes are defined benefit (DB) (such as a final salary pension scheme, where the employer makes contributions and the employee can also contribute, depending on the type of scheme; the value for the retiree is determined by a set formula) and defined contribution (DC) pension schemes, where a set contribution is made within tax limits – here the value of the pension scheme is determined by the value of its investments. Tony Granger highlights the maximum age to fund a pension plan, and the maximum age at which a pension can be taken.
  • A holding company: Worth a thought?
    Corporate structures are often more complex than they need be, which may therefore involve additional administrative and accounting costs, which could be avoided. Ken Moody explains why a holding company can sometimes be useful.
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