In these uncertain times, surplus cash not required for working capital and other prized assets held by a company are potentially being left at risk. Therefore, a company may wish to implement an asset protection strategy to help limit liability risks arising from the coronavirus crisis. Holding Companies & Shielding Company Assets A holding company (“HoldCo”) is a limited liability company that acts as the parent of a trading company (“TradeCo”). HoldCo does not carry out any trade activities itself and will instead own the shares in TradeCo along with any other assets that the owners would like to protect. The basic steps to implement the planning are as follows: The shareholders of TradeCo incorporate a new c...

HMRC have issued detailed guidance regarding how the coronavirus job retention scheme will work in practice. How Much is the Grant? Employers can claim: the lower of; 80% of furloughed workers regular wage, or £2,500 per month associated employer NICs on that subsidised wage, and minimum automatic enrolment employer pension contributions on that subsidised wage This gives a maximum grant per employee of £2,804 per month (£2,500 salary + £245 Employer NIC + £59 automatic enrolment pension contribution). For salaried employees; the employee’s actual salary as at 28 February 2020 (excl. commission and bonuses) should be used to calculate the 80%. For employees whose pay varies, the position will depend on the l...

The government has announced a much awaited support package for self-employed individuals and partnership businesses that have suffered a loss of earnings due to COVID-19. Eligible individuals will receive a grant of up to 80% of their average monthly trading profits, up to a cap of £2,500 per month.  Initially the scheme will run for a 3 month period. The scheme will be available to those who meet the following conditions: 2018/19 tax return submitted – if the return has not yet been filed then you must do so by 23 April 2020 Traded in 2019/20 Are trading when they apply (or would be but for COVID-19) Intend to continue trading in 2020/21 Have lost trading/partnership profits due to COVID-19 Either: Tradi...

In this ‘pause from normality’ it is important to keep your tax compliance guard up. The period we are going through is not a ‘tax holiday.’ If the quality of your tax compliance drops, then the existence of Covid-19 will be no excuse for inaccuracies or negligence later down the line when faced with an HMRC enquiry, nor is it likely to be an excuse for late returns unless you become seriously ill. Our advice: Understand the specific tax payment holidays and reliefs that exist through Covid-19 and apply them to the best of your ability. Prepare cash-flows to ensure your Time-to-Pay arrangements agreed with HMRC are realistic and give you and your business time to breathe. Speak with your accountant and tax adviso...

Betting and gambling does not constitute a trading activity, and as such, any winnings are not taxable profits for income tax purposes. Nevertheless, if you make substantial sums of money in betting then care should be taken to ensure that you are able to prove the source of these funds. If betting activities cannot be evidenced, then you run the risk of having these winnings treated as trading profits by HMRC. This is what happened to a successful gambler in the case of Simon McMillan v HMRC (2019). In this case, the cards were stacked in McMillan's favour as he had several credible witnesses who could attest to his gambling activities.  The First-Tier Tribunal accepted his explanations, holding that based on the evidence his substa...

On 11 March 2020, Chancellor of the Exchequer Rishi Sunak announced a number of key spending pledges and tax changes. Here are some of the tax highlights: Personal Tax  The personal allowance will remain at £12,500 in 2020/21. The basic rate band will also be frozen at £37,500, so individuals will typically be able to earn £50,000 before paying tax at the higher rate in 2020/21. The Primary Threshold and Lower Profit Limit for National Insurance Contributions (NICs) will increase from £8,632 to £9,500 from April 2020, benefiting employees and self-employed individuals. The flat rate deduction for working from home will increase from £4 to £6 per week. From April 2021, there will be National Insurance holiday for emp...

The off-payroll working rules (commonly referred to as IR35) were introduced in April 2000 to prevent individuals/contractors from providing employment services to clients through an intermediary (e.g. limited company or partnership) in order to reduce or avoid PAYE and National Insurance contributions (NICs). The intermediary comes within the scope of IR35 where the worker would be treated as an employee of the client but for the existence of the intermediary. IR35 is therefore designed to catch ‘one-man’ companies who contract almost exclusively for one major client. When IR35 applies, the income of the intermediary is regarded as the worker’s earnings from employment, and the intermediary will be required to operate PAYE and�...

Discussions regarding the development of the HS2 train line have been plagued by controversy and uncertainty. However, with phase 1 of the HS2 line seemingly ploughing full steam ahead from London to Birmingham, one thing is certain: it’s going to be a bumpy ride for the HS2 developers. With homes, businesses, and nature reserves located along the entire proposed line, HS2 has already caused a large amount of disruption. Those who are affected should receive compensation from HS2 for their loss; indeed, some have already received payments of over £1million. The receipt of this HS2 compensation is taxable on the recipient (albeit reliefs may be available). This is something that many of those affected may not be aware of. The tax...

If a sole trader makes a loss from their business, it may be possible for them to offset this loss against their other income in the same year. This would lead to a reduction in their taxable income and therefore less tax payable. A reduced tax bill is obviously a very appealing prospect. However, as David Cliff (“DC”) (in the case of D Cliff v HMRC [2019]) recently found out in his appeal to the First Tier Tribunal, there are strict rules in place that dictate when a sole trader is allowed to offset their losses against other income; failure to adhere to these rules may result in a discovery assessment by HMRC and hefty penalties. Loss Relief Rules The legislation states that in order for loss relief to be claimed against the...

Determining a company’s residence status is crucial when considering its liability to UK tax. There are two important tests to consider when deciding a company’s residence: the Incorporation Test, and the Central Management and Control ("CMC") Test. Incorporation Test The incorporation test set out in 2009 CTA s.14 is simple; a company incorporated in the UK is regarded as resident in the UK for tax purposes. If a company does not fall into this test, the second test must be considered. “Central Management and Control” Test The CMC test is derived from case law.  As the name suggests, this test seeks to determine where the central management and control of the company vests. This involves looking at where the orde...