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"). ...

Whether a property is residential or non-residential for Stamp Duty Land Tax ("SDLT") purposes is not always clear cut, and this will affect the tax payable and also the reliefs/exemptions that might apply. Residential rates can be as high as 15% (where the 3% surcharge applies), whilst non-residential rates top out at 5%. Mixed use properties (used for both residential and non-residential purposes) are subject to non-residential rates. In light of the different rates and reliefs that can apply, it is crucial that the nature of the property is correctly identified at the time of purchase. HMRC has recently clarified their views and guidance on what constitutes residential property for SDLT purposes - some of the points discussed ar...

The latest battle before the Court of Appeal (CoA) between a South African diver and HMRC has thrown up interesting questions about how far UK law can affect the interpretation of its double tax treaties with other countries. The CoA’s 2-1 judgement in favour of the diver overturned a previous decision in favour of HMRC by the Upper Turbinal and restores the decision of the First-Trier Tribunal (FTT). In light of the split decision, HMRC may try to appeal to the Supreme Court so taxpayers relying on the UK’s various “deeming” provisions for tax may wish to keep abreast of this case. Background Fowler was a South African diver working in the North Sea. Under a specific relief in the UK’s domestic tax law, income fr...

In Dieno George v HMRC, the First-Tier Tribunal (FTT) denied a claim for entrepreneurs’ relief (ER) by a chief executive on a 6.9% shareholding in the limited company. The case highlights the importance of meeting the exact conditions of the legislation, even where circumstances might suggest that such conditions are met and that the relief may be obtained. Background Mr George (the taxpayer) was recruited by Thornton & Ross Limited (the company) in October 2001, successfully working to expand the company’s business and obtaining the position of chief executive in Mach 2002. The taxpayer subscribed £999,996 for 600 C Ordinary shares in the company in 2005, and a further £10,000 for 1547 D Ordinary shares in 2008. These ...

Deciding if/when to incorporate your business is an important consideration that many entrepreneurs will face in the life-cycle of their business. Before a decision can be made as to whether incorporation is right for you, it is important to be aware of what a limited company is, and how it differs from operating as a sole trader/partnership. What is a limited company (Ltd)? A UK private limited company is a separate legal entity, with its own assets and liabilities. When operating as a sole-trader or a partnership, assets and liabilities of the business will belong to the individual or partner. Companies are owned by shareholders through the issue of shares. If you own shares in company (which may be purchased from another shar...

It is generally accepted that the writing-off or release of a director's loan in a close company is taxed as a distribution in the director's hands. However, this treatment will not apply where the loan is written-off or released in satisfaction of a performance-based bonus, as demonstrated in the recent First-Tier Tribunal ("FTT") case of Esprit Logistics Management Ltd and Others v HMRC (2018). Directors' Loan Accounts ("DLA"): The Basics It is common practice for a director of a close company to have a current account within the company's books, where amounts they are entitled to from the company are credited and amounts taken out are debited. Where a director has an outstanding loan with a close company which is not repaid with...

The Office of Tax Simplification (the "OTS") has concluded its review on whether depreciation should replace capital allowances ("CAs") for tax purposes, and has found that whilst deductions for depreciation would simplify the system and more accurately reflect the underlying cost of assets, this would not outweigh the disruption such a change would cause. Background Under the current rules, a business recognises the reduced value of an asset in its accounts by including deductions for depreciation. Furthermore, deductions are made to account for the purchase of new capital assets. However, when calculating its taxable profits, the business is required to add back expenditure incurred on the acquisition of assets and any depreciat...

In Pimlico Plumbers Ltd v Smith, the Supreme Court has upheld the decision of the Court of Appeal that former self employed plumber Mr Smith (the taxpayer) was in fact a ‘worker’ of Pimlico Plumbers Ltd (Pimlico), and is therefore entitled to bring claims against Pimlico in relation to his status as a worker for the company. Background The taxpayer, a self employed plumber and heating engineer, worked for Pimlico between August 2005 and April 2011. Pimlico conducts a large scale plumbing business in London. After suffering a heart attack, Mr Smith made a request to Pimlico that his working schedule be reduced from 5 days to 3 days per week. The request was denied, and Mr Smith was subsequently dismissed. The taxpayer issued ...