8092526f 66b0 4d71 a452 e93715885ebd 800x380 - A reminder – HMRC’s badges of trade

A reminder – HMRC’s badges of trade

The 'badges of trade' tests whilst not conclusive are used by HMRC to help determine whether an activity is a proper economic trade / business activity or merely a money-making by-product of a hobby.

The approach by the courts in using the badges of trade has been to decide questions of trade on the basis of the overall impression gained from a review of all the badges.

HMRC will consider the following nine badges of trade as part of their overall investigation as to whether a hobby is actually a trade:

  • Profit-seeking motive
  • The number of transactions
  • The nature of the asset
  • Existence of similar trading transactions or interests
  • Changes to the asset
  • The way the sale was carried out
  • The source of finance
  • Interval of time between purchase and sale
  • Method of acquisition

Even if HMRC consider that the activities in question are a trade, taxpayers can make up to £1,000 per year tax-free by claiming the trading allowance.

Source: HM Revenue & Customs Tue, 21 Dec 2021 00:00:00 +0100
000a8646 4090 4619 8281 9448c178e977 800x380 - BOE advises government on inflation hike to 5.1%

BOE advises government on inflation hike to 5.1%

The current Governor of the Bank of England, Andrew Bailey, has written to the Chancellor of the Exchequer, Rishi Sunak. The letter was dated 16 December 2021 and has been uploaded to GOV.UK. The correspondence related to the recently published figures from the Office for National Statistics (ONS) showing a significant increase in inflation to 5.1%.

The letter addresses the following:

  • the reasons why inflation has moved away from the 2% target, and the outlook for inflation;
  • the policy action that the MPC is taking in response;
  • the horizon over which the MPC judges it is appropriate to return inflation to the target;
  • the trade-off that has been made by the MPC with regard to inflation and output variability in determining the scale and duration of any expected deviation of inflation from the target; and
  • how this approach meets the Government’s monetary policy objectives.

CPI inflation is expected to remain around 5% through the majority of the winter period, and peak at around 6% in April 2022. 

Source: HM Treasury Tue, 21 Dec 2021 00:00:00 +0100
e30ca542 508b 448f afa9 67a2c564ff69 800x380 - Pay your tax bill by instalments

Pay your tax bill by instalments

Businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time To Pay service.

An online payment plan for Self-Assessment tax bills can be used to set up instalment arrangements for paying tax liabilities up to £30,000. Taxpayers that qualify for a Time to Pay arrangement using the self-serve Time to Pay facility online, can do so without speaking to an HMRC adviser. The service will create a bespoke monthly payment plan based on how much tax is owed and the length of time needed to pay. The service was used by over 123,000 taxpayers for the 2019-20 tax year to spread the cost of over £460m in tax.

Taxpayers that want to use the online option for their 2020-21 tax return must meet the following requirements:

  • have filed their tax return for the 2020-21 tax year
  • owe less than £30,000
  • be within 60 days of the payment deadline of 31 January 2022
  • plan to pay their debt off within the next 12 months or less

Taxpayers with Self-Assessment tax payments that do not meet the above requirements need to contact HMRC to request a Time To Pay arrangement. These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities.

HMRC will usually offer taxpayers the option of extra time to pay if they think they genuinely cannot pay in full but will be able to pay in the near future. If HMRC do not think that more time will help, then they can require immediate payment of a tax bill and start enforcement action if payment is not forthcoming.

Source: HM Revenue & Customs Tue, 21 Dec 2021 00:00:00 +0100
dd36075a 0443 4c65 a59e 74c4eb8df637 800x380 - Plug-in grants for electric vehicles

Plug-in grants for electric vehicles

The government has announced significant changes to the low-emission vehicles plug-in grant scheme. The changes became effective on 15 December 2021. The changes have been introduced in response to soaring demand for electric vehicles and to help target those buying the most affordable zero emission cars. More than 10% of cars sold in 2021 were electric.

Under the previous rules a grant of up to £2,500 was available for qualifying cars with an 'on the road' price cap of up to £35,000. From 15 December 2021, the government will provide grants of up to £1,500 for electric cars priced under £32,000. There are currently estimated to be 20 models on the market that would qualify. The support for wheelchair accessible vehicles is being prioritised, these will retain the £2,500 grant and a higher £35,000 price cap although there are a limited number of grants available.

There are also grants available for specified motorcycles, mopeds, small vans, large vans, taxis and trucks. Grant rates for the plug-in van grant are now £5,000 for large vans and £2,500 for small vans, with a limit of 1,000 per customer per year. Motorcycle and moped grants have also changed, with the government now providing £500 off the cost of a motorcycle, and £150 for mopeds, with a price cap on vehicles of £10,000.

The plug-in grant scheme was first launched in 2011 and is available across the UK with dealers using the grant towards the price of eligible new cars. The paperwork for the grant application is handled by the dealer selling the vehicle.

The scheme is open to qualifying purchases by private individuals and businesses.

Source: HM Revenue & Customs Tue, 21 Dec 2021 00:00:00 +0100
5d763146 e8f4 4e92 a599 f753a716e3d8 800x380 - Tax Diary January/February 2022

Tax Diary January/February 2022

1 January 2022 – Due date for Corporation Tax due for the year ended 31 March 2021.

19 January 2022 – PAYE and NIC deductions due for month ended 5 January 2022. (If you pay your tax electronically the due date is 22 January 2022).

19 January 2022 – Filing deadline for the CIS300 monthly return for the month ended 5 January 2022. 

19 January 2022 – CIS tax deducted for the month ended 5 January 2022 is payable by today.

31 January 2022 – Last day to file 2020-21 self-assessment tax returns online.

31 January 2022 – Balance of self-assessment tax owing for 2020-21 due to be settled on or before today unless you have elected to extend this deadline by formal agreement with HMRC. Also due is any first payment on account for 2021-22.

1 February 2022 – Due date for Corporation Tax payable for the year ended 30 April 2021.

19 February 2022 – PAYE and NIC deductions due for month ended 5 February 2022. (If you pay your tax electronically the due date is 22 February 2022)

19 February 2022 – Filing deadline for the CIS300 monthly return for the month ended 5 February 2022. 

19 February 2022 – CIS tax deducted for the month ended 5 February 2022 is payable by today.

Source: HM Revenue & Customs Thu, 16 Dec 2021 00:00:00 +0100
7209ca51 2734 40d2 b45f 35df992a68c4 800x380 - BADR associated disposals

BADR associated disposals

Business Asset Rollover Relief (BADR) is the renamed Entrepreneurs’ Relief. The name change does not affect the operation of the relief. BADR applies to the sale of a business, shares in a trading company or an individual’s interest in a trading partnership. Where this relief is available CGT of 10% is payable in place of the standard rate. There are a number of qualifying conditions that must be met in order to qualify for the relief.

You can currently claim a total of £1 million in BADR over your lifetime. The £1m lifetime limit means you can qualify for the relief more than once. The lifetime limit may be higher if you sold assets before 11 March 2020.

One of the categories for claiming BADR concerns assets owned by the seller personally but that are used in a business carried on by either:

  1. a partnership of which they are a member, or
  2. by their personal trading company in which the seller is an officer or employee.

The disposal will only qualify as long as it’s associated with a qualifying disposal of either the sellers’ interest in the partnership or of shares or securities in the company.

BADR on the sale of an associated asset where say a property owner received full market rent from his company for use of the property, may restrict entitlement to BADR. Directors with commercial property often pay themselves a full market rent for use of the property as there is no NIC charge, but they may not have considered the loss of BADR when the property is subsequently sold. 

Claims for BADR are made either through the taxpayers Self-Assessment tax return or by filling in Section A of the Business Asset Disposal Relief help sheet. The deadline for claiming relief for the 2020-21 tax year is 31 January 2023.

Source: HM Revenue & Customs Tue, 14 Dec 2021 00:00:00 +0100
3cb0c635 313e 4fcd a9e2 a6713c5e4933 800x380 - Gifts to spouse or charity

Gifts to spouse or charity

In most cases, there is no Capital Gains Tax (CGT) to be paid on the transfer of assets to a spouse or civil partner. There is, however, still a disposal that has taken place for CGT purposes effectively at no gain or loss on the date of the transfer. When the asset ultimately comes to be sold, the gain or loss will be calculated from when the asset was first owned by the original spouse or civil partner.

There are a few exceptions that couples should be aware of where the relief does not apply. This mainly relates to the use of goods which are sold on by the transferee’s business and for couples that were separated and not living together for the entire tax year when the assets were transferred. Spouses or civil partners that lived together at any point in the tax year when the assets were transferred can still benefit from these rules. If a transfer did not qualify then the asset must be retrospectively valued at the date of the transfer and the transferor is liable for any gain or loss.

There are similar rules for assets that are gifted to charities. However, CGT may be due where an asset is sold to a charity for more than was paid for it and less than the market value. The gain in this case would be calculated based on what the charity paid rather than the market value of the asset.

Source: HM Revenue & Customs Tue, 14 Dec 2021 00:00:00 +0100
7002f221 33df 4444 8c32 127807bbc1aa 800x380 - The judgement in HMRC v Tooth

The judgement in HMRC v Tooth

A recent Supreme Court decision examined in some detail HMRC’s powers in relation to issuing a discovery assessment. HMRC generally use discovery assessments where the statutory time limit for looking into a return has expired.

If certain conditions are satisfied, then HMRC can make a discovery assessment:

  • 4 years from the end of the year of assessment in which the further liability to tax arises where the loss of tax is not due to careless or deliberate behaviour
  • 6 years from the end of the year of assessment in which the further liability to tax arises where the loss of tax is due to careless behaviour of the relevant person.
  • 20 years from the end of the year of assessment in which the further liability to tax arises where the loss of tax is due to deliberate behaviour of the relevant person.

The case in question centred on two main issues. Firstly, whether there had been a deliberate inaccuracy in a 2007-8 tax return enabling HMRC to issue a discovery assessment within the extended 20-year limit and secondly, whether HMRC had made a valid discovery.

The First-tier Tribunal (FTT), the Upper Tribunal (UT) and the Court of Appeal all decided that HMRC could not assess the taxpayer. The Supreme Court held that the interpretation of the tax return by HMRC did not properly consider the whole document and that there was no inaccuracy. Commenting further, the Judges opined that even if there was, they would not have been satisfied that such an inaccuracy was deliberate. The Supreme Court also rejected the notion of 'staleness' in respect of the discovery assessments.

Source: Other Tue, 14 Dec 2021 00:00:00 +0100
1fd7b755 3765 4c1e 85c6 f78bebd6f7b7 800x380 - Rent-a-room relief

Rent-a-room relief

The rent-a-room scheme is a set of special rules designed to help homeowners who rent-a-room in their home. If you are using this scheme, you should ensure that rents received from lodgers during the current tax year do no exceed £7,500. The tax exemption is automatic if you earn less than £7,500 and there are no specific tax reporting requirements.

The relief only applies to the letting of furnished accommodation and is used when a bedroom is rented out to a lodger by homeowners. The relief also simplifies the tax and administrative burden for those with rent-a-room income up to £7,500. The limit is reduced by half if the income from letting accommodation in the same property is shared by a joint owner of the property.

The rent-a-room limit includes any amounts received for meals, goods and services provided, such as cleaning or laundry. If gross receipts are more than the limit, taxpayers can choose between paying tax on the actual profit (gross rents minus actual expenses and capital allowances) or the gross receipts (and any balancing charges) minus the allowance – with no deduction for expenses or capital allowances.

Source: HM Revenue & Customs Tue, 14 Dec 2021 00:00:00 +0100
56ec2d50 6d08 4f5a b5a4 0904e476c4a1 800x380 - Postponed VAT accounting

Postponed VAT accounting

Since 1 January 2021, businesses registered for VAT have been able to account for import VAT on their VAT return, often referred to as postponed VAT accounting. For most businesses, this means that they can declare and recover import VAT on the same VAT return. The normal VAT recovery rules regarding any VAT that can be reclaimed apply. 

This applies to all customs declarations that require businesses to account for import VAT, including supplementary declarations, except when HMRC have notified a business otherwise. 

These rules save businesses from having to pay import VAT (at the port of entry) and to recover at a later date. This offers cashflow benefits for affected businesses. HMRC has confirmed that the postponed VAT accounting rules are to remain in place permanently.

Businesses are able to account for import VAT on imports into Great Britain (England, Scotland and Wales) from anywhere outside the UK. Businesses in Northern Ireland can use the postponed VAT accounting for goods imported from outside the UK and EU. The VAT rules for the movement of goods between Northern Ireland and the EU have not changed and remain subject to the Northern Ireland Protocol.

VAT registered businesses do not need any specific approval from HMRC in order to account for import VAT on their VAT return.

Source: HM Revenue & Customs Tue, 14 Dec 2021 00:00:00 +0100