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"). ...

HMRC’s position with regards to the taxation of of cryptocurrencies or cryptoassets (such as Bitcoin, XRP/Ripple, Ethereum) has been an evolving area, as the wide range of forms and uses of these assets can make it difficult to determine the nature of a transaction, and therefore how a transaction should be taxed. Previous guidance on the matter provided that the taxation of cryptoassets very much depended on the circumstances of the transaction in question. Whilst the same is still true, HMRC has recently issued more detailed practical guidance for individuals, which may provide more clarity going forward. What is a Cryptoasset? HMRC has confirmed that they do not consider cryptoassets to be currency or money. In a report undert...

Here are some of the highlights from the Chancellor of the Exchequer's 2018 Budget (published on 29 October 2018): Personal Tax The Personal Allowance will be raised to £12,500 and the Higher Rate Threshold (i.e. the amount that an individual can earn before paying higher rate tax) to £50,000 in April 2019 – a year earlier than planned. These levels will remain the same in 2020/21, and then increase by CPI going forward. The final exemption period for Principal Private Residence Relief (PPR) which provides Capital Gains Tax relief on the sale of your home will be reduced from 18 to 9 months. Under the current PPR rules, where you have let a property which at one point was your home Lettings Relief may be available to reduc...

If you incur expenses in relation to your employment and you are not reimbursed by your employer, then you may be able to claim tax relief on the costs incurred. If your work-related expenses meet the relevant conditions, then they can be deducted from your income and therefore reduce your total taxable income and your liability to tax. In general, work-related expenses can only be deducted from your income if they are incurred "wholly, exclusively and necessarily" in the performance of the duties of employment. In the UK, the Courts have traditionally taken a very restrictive approach in what expenses can be deducted for tax purposes. Therefore, unless an expense is incurred in actually carrying out the duties of your profession,...

The Confederation of British Industry ("CBI") has submitted its recommendations to the Treasury on how to tackle the UK's skills shortage and encourage productivity and investment in business. After highlighting that the UK has the lowest level of business investment as a proportion of GDP in the G7, the CBI asked the Chancellor to use to Budget to assure businesses that the Government is committed to taking action to boosting UK competitiveness. A selection of the CBI's key demands have been provided below. 1. Capital Allowances The CBI has recommended that the Annual Investment Allowance ("AIA") for capital allowances is increased to £500,000 for two years to boost innovation and UK competitiveness. It is thought that this i...

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...

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 ...

Under the Construction Industry Scheme (CIS), contractors are required to deduct funds from a subcontractor's payment and forward it directly to HMRC, which in turn are deemed to be advance payments towards the subcontractors' tax liabilities. Who is involved in CIS? Businesses that carry out construction work may be required to register under CIS, regardless of the nature of the business itself. These businesses can involve contractors, subcontractors, and/or a mixture of both. Construction work relating to a permanent or temporary building/structure and civil engineering work (e.g. roads) will be covered by CIS, and includes the following: Preparation of a site Demolition Building Repairs Alterations and decoarti...

HMRC has changed the registration deadline on its disguised remuneration (DR) settlement opportunity. Those looking to take advantage of this opportunity should register their interest as soon as possible. Background As reported in our previous blog, HMRC is currently running a settlement opportunity for users of DR schemes to settle their tax affairs before a new loan charge comes into effect in April 2019. HMRC had stated that users must register their interest by 31 May 2018 and submit all the required information by 30 September 2018. These dates were designed to give HMRC enough time to process cases before the April 2019 loan charge comes into effect. New Deadline Despite the 31 May deadline for registrations havi...

HMRC has launched a consultation on extending the off-payroll working (IR35) rules to the private sector. This follows changes to the rules for public sector engagements in April 2017 which placed the burden of compliance upon the end client rather than the worker/intermediary. Background As covered in previous blogs, the IR35 rules were introduced in 2000 to prevent individuals providing employment services to clients through an intermediary (e.g. limited companies or partnerships) in order to avoid or reduce PAYE and National Insurance contributions (NICs). An engagement will normally be within the scope of the rules where the worker would be treated as an employee of the end client but for the existence of the intermediary. ...