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Tax Insider

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  • FREE 3 Issues - The current September issue #165 and the previous two issues of August #164 and July #163.
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Here are just some of the strategies our tax experts are sharing with you this month: 
  • 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.
  • Overdrawn director’s loan accounts: A penalty problem
    There are statutory time limits for notifying chargeability to various taxes, including the tax charge that can arise when a company director shareholder’s loan account becomes overdrawn. Mark McLaughlin highlights a potential trap concerning the late notification of overdrawn director shareholders’ loan accounts to HMRC where the overdrawn balance was repaid.
  • 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.
  • A tax-free summer perk for employees?
    Although there is no specific allowance for a ‘Christmas party’ or ‘summer barbecue’ HMRC does allow limited tax relief against the cost of holding an ‘annual event’ for employees, providing certain conditions are met (ITEPA 2003, s 264). Sarah Laing reminds employers that a statutory exemption should allow them to meet the cost of certain staff social events without triggering a liability to tax or NICs.
  • Businesses: Claiming back VAT without an invoice
    The normal VAT recovery rules are that HMRC expects a business to obtain a purchase invoice from a supplier in order to recover the input tax it is charged.  If the purchase is for over £250 excluding VAT you will need a full tax invoice, but for purchases under £250 a less detailed invoice only is required – till receipts for fuel purchases, for example. Andrew Needham looks at circumstances in which input tax can be reclaimed without a VAT invoice.
  • What tax-saving business deductions are available to personal taxpayers?
    HMRC receipts from personal tax grew by nearly £29 billion last year, to £622 billion. This is just short of a 5% increase, when inflation in the UK in 2018 was only 2.48%. Meg Saksida highlights tax deductibles that are potentially available to businesses. 
  • Reducing inheritance tax for business owners
    It is common for shares in a family company to be passed down the Inheritance tax is paid on net taxable assets at the rate of 40%. Individuals have a standard nil rate band of £325,000 (for 2019/20), which can rise by another £150,000 if leaving the main residence to lineal descendants such as the children. Assets left to a spouse or civil partner are normally exempt from inheritance tax. Tony Granger seeks to tackle some of the challenges faced by business owners who are worried about inheritance tax on their business asset.
  • Company shareholders: Dealing with in specie distributions (Part 1)
    For companies incorporated in England and Wales, a distribution in specie (or in kind) generally entails a company distributing an asset to its shareholders. It may also arise where a company declares a dividend of a specified cash sum, which is then satisfied by the transfer of the relevant asset to its shareholders. Peter Rayney offers some practical guidance on dealing with in-specie distributions.
  • Unmarried couples and inheritance tax
    Inheritance tax is levied on gifts at rates of 20% or 40%; the former rate applying to lifetime gifts and the latter to gifts made on death. An individual is entitled to various reliefs and exemptions including a nil rate band (NRB) worth £325,000 and a residence nil rate band (RNRB) worth £150,000 (for the tax year 2019/20, rising to £175,000 for the tax year 2020/21. Malcolm Finney examines whether unmarried couples are at risk of increased exposure to inheritance tax compared to their married counterparts.
  • Tax Insider: Tax Tips
  • Tax Insider: Your Tax Questions Answered!
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