A recent First Tier Tribunal ("FTT") has ruled that flapjacks cannot be classed as cakes for the purposes of UK Value Added Tax (VAT). This means that the supply/sale of such foods will be subject to VAT at the standard rate (currently 20% in 2022/23 tax year). The case echoes similarities to the 1991 VAT tribunal case concerning Jaffa Cakes: United Biscuits (LON/91/0160), which found that Jaffa Cakes were in facts cakes (rather than biscuits) for VAT purposes, and therefore the supply of such items was zero rated for VAT (VAT at 0%). VAT on Food Generally the supply of food for VAT is zero rated, meaning suppliers are not required to charge VAT on such items. However there are several exceptions to this rule, where the supply of f...

UK tax legislation is often complex and not always easy to interpret, and taxpayers typically want to know the tax considerations of a transaction in advance. To assist with this uncertainty, taxpayers can apply for clearance from HMRC on the tax treatment of certain transactions before the relevant transaction or event takes place. What is a Clearance?  Clearances are broadly defined as written confirmation of HMRC's view of the application of tax law to a specific transaction or event, where the taxpayer can rely on this verification in most circumstances. Our previous blog discusses where HMRC will not give clearance. Clearance applications to HMRC can come under: ‘Statutory clearances’ – the tax treatment of certain...

Plug-in electric vehicles offer a wider variety of ‘refuelling’ options for drivers, including charging at home, at work and at public charging stations. When reclaiming the cost of charging for business travel, there are some unique tax considerations for fully electric cars. The Advisory Electric Rate (AER) Electricity for a company car is not considered ‘fuel’ and therefore, no fuel benefit charge will arise. HMRC publish advisory rates for businesses to use for the re-imbursement of mileage in company cars. These rates will be used where a company is reimbursing its employees for business travel in company cars but also when employees are required to repay the cost of fuel for private travel (more discussed below). Furt...

In a recent appeal to the First Tier Tribunal (“FTT”) by well-known TV presenter Adrian Chiles, it was ruled that the Intermediaries Legislation (known as IR35) did not apply. This was a significant success for the taxpayer – indeed, just over £1.7m of PAYE and NICs were at stake. This blog will consider the deciding factors in this case and the relevance of these for future cases. The decision of the case can be read here. What is the Intermediaries Legislation (IR35)? In summary, the Intermediaries Legislation (found in ITEPA 2003 and known as “IR35”) is applicable where an individual provides services through a Personal Service Company (“PSC”) and thereby avoids PAYE and National Insurance. It is necessary to con...

A new plastic packaging tax (“PPT”) will be coming into force in the UK from 1 April 2022, after being introduced in the Finance Act 2021. The new tax aims to provide an economic incentive to businesses to use recycled material in plastic packaging. The PPT follows on from approaches taken by other European countries introducing plastic packaging levies. What is PPT and who is liable to pay it? The tax will apply to 'finished plastic packaging components' containing less than 30% recycled content produced in the UK by a person acting in the course of a business or imported into the UK (including packaging on goods which are imported) at a rate of £200 per tonne. Furthermore, registration is required for businesses who produce ...

The division of marital assets is a difficult time for most couples undergoing separation/divorce/dissolution, and little thought may be given to the potential tax implications that can arise. This article seeks to highlight some of these tax issues, and potential planning to help mitigate the potential tax charges and ensure that a larger pool of assets remains for apportionment between the parties. Capital Gains - Tax Year of Separation The transfer of assets between spouses/civil partners who are 'living together' in the tax year, is at no gain/no loss for capital gains tax. Individuals will be treated as living together unless they are separated under a Court Order or formal Deed of Separation, or they are separated in circumstanc...

During the 2020/21 tax year, many individuals and businesses received state grants in order to support them during the COVID-19 pandemic and associated lockdowns. HMRC has issued a reminder that taxpayers (including sole traders and partnerships) must remember to include grants or payments received from coronavirus support schemes in their self-assessment tax returns. This is particularly relevant given the pressing 31 January 2022 deadline. COVID-19 support grants and payments include: Self-Employment Income Support Scheme (SEISS) Coronavirus Job Retention Scheme (CJRS) Other COVID-19 grants and support payments, including self-isolation payments, local authority grants, and Eat Out to Help Out. Failure to include all t...

In our previous blog we discussed HMRC’s consultation on reforming Basis Periods for unincorporated businesses (e.g. sole traders and partnerships) and the changes to the rules being considered. In the Autumn Budget 2021, it was confirmed that the proposed changes to the rules will be introduced with effect from the 2024/25 tax year. In order to allow for this, the 2023/24 tax year will be a ‘transition year.’ In summary, the changes will mean that businesses will be taxed on profits arising in the tax year. Accordingly, businesses with a period of account that does not match the tax year will have to make an apportionment to identify the profit or loss arising in a specific year. For further details please see our previous blog...

On 27 October 2021, Chancellor of the Exchequer Rishi Sunak announced a number of key spending pledges and tax changes. We have set out some of the highlights below: Businesses From April 2023, the qualifying expenditure definition for R&D tax relief will be expanded to include data and cloud costs. It was stressed that R&D will be refocused to ensure that the relief benefits the UK, hinting towards relief being restricted for R&D activities performed overseas. Further details regarding the government's plans for R&D, including tackling abuse of the relief and improving compliance, will be set out later in the autumn. The increase in the main rate of corporation tax from 19% to 25% was confirmed, and will apply fr...

The UK Government provides tax reliefs to incentivise and encourage companies who are entrepreneurial and come up with innovative ways to progress and develop technological advancements, especially tax reliefs for Corporation Tax. This article discusses the Patent Box regime which benefits companies who exploit intellectual property (“IP”) rights, and will be particularly useful for companies with the rise of Corporation Tax to up to 25% from 01 April 2023. The Patent Box: A Brief Introduction The UK Patent Box tax regime operates by applying a deduction to the Corporation Tax bill, effectively reducing the tax rate on profits from the use of patents or other similar IP rights to 10%. This is compared to the current Corporation T...