Tax Insider Newsletter Bundle

HMRC Enquiry Dragging On? Can You Force It to Close?

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.

Insurance Claims and VAT: The Gap That Costs Businesses

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.

Art, Antiques, and Jewellery: Are Your Gains Taxable?

Chattels are tangible, movable personal property (e.g., art, antiques, jewellery and furniture). For capital gains tax (CGT) purposes, they are split into wasting chattels with a predictable life of 50 years or less, which are usually exempt and non-wasting chattels with a life of over 50 years, which are potentially taxable if sale proceeds exceed specific monetary thresholds. 
In legal and estate definitions, ‘plate’ (silverware, goldware, or solid metal utensils or ornaments) is explicitly listed alongside items like jewellery, linen, and furniture as a personal chattel. 

Jon Golding outlines capital gains tax asset exemptions that exist in respect of chattels and some of the quirks.

The Pension IHT Shelter Ends in April 2027: Time to Rethink

I once heard someone say: “My house is for my retirement; my pension is for the kids.” They were broadly saying that, as pensions are not included in an individual’s inheritance tax (IHT) estate, it makes sense to spend taxable assets first – particularly the equity they had built up in their house – and preserve the pension, largely untouched, to pass on free of IHT. 

This encapsulated the general logic of estate planning for many years. However, from April 2027, that logic changes.

Tristan Noyes suggests what should be considered when pensions lose their inheritance tax exemption from April 2027.

Section 144 Will Trusts: The IHT Lifeline Families Overlook

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.

HMRC Enquiries: A Practical Guide to Getting Through One

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.

Q&As with Arthur Weller

Dividends or bonuses? We can work it out!

Consider the following scenario:

'On a wintry sunny morning, Alan was reviewing his company’s January 2024 management accounts. Alan was the sole director and 100% shareholder of Llandudno Hotels Ltd, which operated two large hotels in Llandudno. The business was on course to healthy pre-tax profit of around £650,000 for the year ended 31 March 2024. Alan had been planning to pay himself a substantial ‘bonus’ before the year-end'. 

What does Alan do?

Peter Rayney examines an owner-manager’s cash extraction following the numerous tax and National Insurance contributions changes.

Use them or lose them: 2023/24 tax allowances

As the tax year draws to a close, it is prudent to review one’s 2023/24 tax allowances and consider whether there is scope for utilising any unused allowances so they are not lost. 

Sarah Bradford explores options for using 2023/24 tax allowances so they are not wasted.

Record-keeping in a digital age

Lee Sharpe looks at taxpayers’ record-keeping obligations in light of HMRC’s inexorable march to digital everything (almost).

Historically, HMRC has been quite relaxed about whether original records must be maintained or digital facsimiles (scans, etc.). 

Trap for business owners seeking CGT incorporation relief

HM Revenue and Customs (HMRC) recently commenced a ‘One to Many’ campaign, targeting taxpayers who incorporated property businesses in the tax year 2017/18 but reported no capital gains tax (CGT) liability in their tax returns on the basis that ‘incorporation relief’ applied in full. 

Mark McLaughlin highlights a potential trap for business owners seeking capital gains tax incorporation relief.

Q&As with Arthur Weller