Certain taxpayer expenditure can qualify for tax relief, and these amounts are known as deductible payments. The payments are deducted from income when calculating taxable income, effectively saving tax at a taxpayer’s marginal rate. For example, if a taxpayer pays tax at a marginal rate of 40%, they will  have saved 40p for every £1 of the payment they pay in the tax year. Interest paid on qualifying loans is a deductible payment, however there is a cap on the amount that may be relieved each tax year.  The total amount which can be deducted is the greater of £50,000 or 25% of adjusted total income (being total income less payroll giving and gross pension contributions paid). Qualifying Interest Where a loan is a qualify...

Capital Allowances are a form of tax relief that can be claimed by traders when they incur expenditure on “plant and machinery”. They can be deducted from the tax adjusted profit for the accounting period, thereby reducing the taxable trading profit. However, the definition of what constitutes “plant and machinery” is a contentious issue and one that is discussed in a significant amount of case law. The case law, along with the Capital Allowances Act 2001 and HMRC practice, suggests that an asset qualifies as “plant” if it has an expected life of two years or more and has a clear function in enabling the activities of the business to take place. Buildings and a number of other structures are specifically excluded from t...

Changes introduced by the Finance Act 2019 (FA-2019) address inconsistencies between the tax treatment of tangible fixed assets (e.g. cars, vans, machinery, buildings) and intangible fixed assets (e.g. goodwill, intellectual property). The new provisions bring the intangible fixed assets rules more in line with those applying to tangible fixed assets. Degrouping Charge A degrouping charge may apply where a company (Co A) acquires assets from another group company (Co B) on a no gain/no loss basis, and Co A leaves the group within 6 years of acquiring the asset. The effect of a degrouping change is that Co A is deemed to have disposed of and reacquired the asset at market value immediately after the asset was acquired, thereby crea...

If your business imports and/or exports goods with the EU, you may be struggling with the uncertainty around the UK's withdrawal from the EU. In December 2018, HMRC published a letter for businesses that trade with the EU and steps that should be taken to prepare for no deal. This blog will help you to understand these steps and the actions that you should take. Firstly, in the event of no deal, you will be responsible for making customs declarations for your UK-EU trade. In order to ensure that you are ready for this, you should: Register for a UK Economic Operator Registration and Identification (EORI) number. You can do this at gov.uk/hmrc/get-eori. Register with HMRC’s new Transitional Simplified Procedures (TSP) for cus...

Entrepreneur’s relief  ("ER") is a valuable relief from Capital Gains Tax ("CGT") which, when available, restricts the tax rate to a flat 10% on up to £10 million worth of lifetime gains. The 2018 Budget announced changes to the conditions for obtaining ER, and in light of the new rules it may be worthwhile for taxpayers to dispose of relevant assets before 6 April 2019. Minimum Qualifying Period ER applies to disposals of: shares in a trading company; (the whole or part of) a business; assets in association with the sale of a business; assets from a solvent company that has ceased trading. For disposals involving shares, the shareholder would need to work for the company and hold at least 5% of the ordinary s...

In our two part series, we'll be looking at the tax advantages of company share option schemes for directors looking to reward, retain, and incentivise their staff. In brief, a share option gives a recipient the right (but not the obligation) to acquire shares in a company in the future. This can give employees the chance to share in the growth of the company, providing strong incentives, whilst being very cost-efficient from the company’s perspective as well. In this part, we'll focus on two of the more common schemes used by SMEs: Company Share Option Plans (“CSOPs”) and Enterprise Management Incentive schemes (“EMIs”). The second part will examine Share Incentive Plans ("SIPs") and Save As You Earn schemes ("SAYEs"). ...

A corporate restructuring takes place where a company and/or a group of companies undergo a process of reorganising the ownership structure for the benefit of the business. Common reasons for a restructuring include a change of ownership, mergers (i.e. merging two or more separate companies into one), and demergers (i.e. the separation of a company into two or more smaller companies). From a tax perspective, the term “reorganisation” is not defined in the legislation. However, it is accepted that it refers to a company organising its share capital in a different way. Where the transactions in a reorganisation meet certain conditions for tax purposes, the reorganisation is not treated as involving a disposal of the original sha...

With less than 6 weeks to go until most VAT registered businesses are required to comply with MTD, there is still concern that not enough progress has been made on making business owners aware of the new rules. Only 1 in 200 eligible businesses have already signed up to MTD, and HMRC has published research indicating that as at December 2018, 1 in 5 businesses required to join hadn't even heard of it. Adrian Rudd, Chair of the joint CIOT/ATT Digitalisation and Agent Strategy Working Group has said "We note that by far the most common way those who are aware of MTD have been made aware is by their tax adviser or accountant. We and our members will continue to do what we can to raise awareness over the months ahead but it is likely tha...

Directors claiming to provide services outside the scope of PAYE to their companies should consider the case of Petrol Services Ltd v HMRC in which the First-Tier Tribunal (FTT) found that payments to two directors were effectively remuneration liable to income tax and NICs under PAYE. Background Petrol Services Ltd (PSL) carried on a petrol business. The company had two directors who didn’t receive remuneration directly but did have separate “consultancy agreements” under which they were entitled to a set amount each month and required to work up to 15hrs per week. In practice PSL had no employees and the petrol stations were sublet to shop and carwash tenants who paid rent and collected payments for PSL. The two dir...

It was announced in the Budget 2018 that the government was introducing a new Structures and Buildings Allowance ("SBA") for costs incurred in relation to the construction, conversion, and/or renovation of non-residential structures and buildings. Effective from 29 October 2018, the SBA is available on the construction, conversion, and/or renovation costs relating to non-residential structures located in the UK or overseas. Please note that the SBA is only available for projects where the contract was entered into on or after 29 October 2018. The SBA is given at an annual rate of 2% on a straight-line basis for a fixed 50-year period from the date the structure comes into use.  Interestingly, there will not be a system of balancing ...