The case of Sambhi v HMRC (2020) provides a useful reminder of the "temporary workplace" rules for the purposes of income tax relief on travel and subsistence costs. In this case, the First Tier Tribunal ("FTT") dismissed the taxpayer's appeal and held that a change in the average travel time of 30 minutes or in travelling expenses of £14 were not "substantial" enough to qualify for relief. Temporary Workplace: An Introduction The cost of commuting from home to your workplace is not deductible as an expense against your employment income. This is because it is not a cost wholly, exclusively, and necessarily incurred in the performance of your employment; rather it is a cost incurred to put you in the position of being able to perform...

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 19 March 2020 (excl. commission and bonuses) should be used to calculate the 80%. However, originally the amount needed to be calculated using the emp...

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. The reality of this is exemplified by the fact that people are still receiving loan charge settlement letters (which require a response in 30 days) during this time. 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-...

In line with government guidelines, large swathes of UK workers are currently working from home.  Whilst there are a range of expenses you may be able to claim depending on your specific circumstances, this blog is aimed at those of you who own a limited company and are running the business from home. Rather than claiming the flat rate of £6 per week (£26 per month) under the simplified expenses rules, it may be more beneficial to instead rent out the personal work space in your home to your limited company. Under this arrangement, where the rent charged is equal to costs (see below), then no taxable rental profits will arise. Furthermore, provided that the rent is charged at no more than the market rate then the rental payments ma...

The IR35 anti avoidance provisions are contained in ITEPA 2003. The provisions impose employment taxes on those using a Personal Service Company (PSC) to enter into a contract for services (and thus pay corporation tax on profits) who in practice are engaged under a contract of service (and therefore should pay income tax and NICs on income). Recently, there has been a string of cases involving HMRC challenging well known TV presenters on the basis that they are caught by IR35. The most recent judgement of which was Eamonn Holmes v HMRC (2020). The Facts TV personality Eamonn Holmes set up a PSC in 2001 called Red, White and Green Ltd (RWG). From 2006 onward he has been presenting This Morning on ITV. During this time, RWG has been...

The long-awaited independent review of the controversial loan charge has now been published, along with the government's response. These documents provide some much-needed clarity for taxpayers caught up with the charge. Background The 2019 Loan Charge broadly imposes a tax charge on disguised remuneration loans from 1999 that remain outstanding at 5 April 2019, effectively bringing years of disguised remuneration into charge in 2018/19. Therefore, the loan charge had the punitive effect of up to 20 years' tax becoming payable in one year. HMRC argued this was justified as a strong stance needed to be taken against tax avoidance schemes. However, MPs and various action groups have stated the charge was retrospective in nature and ...

In March 2018 we published a blog on the case of Christa Ackroyd Media Ltd v HMRC at the first-tier tribunal (FTT). In short, the FTT found that former BBC ‘Look North’ presenter Christa Ackroyd was caught by the IR35 anti-avoidance rules and was therefore an employee rather than a freelance contractor through her personal service company, Christa Ackroyd Media Ltd (“CAM”). The FTT stated that where individuals are engaged through an intermediary (in this case CAM) under hypothetical contract terms that would represent employment by the end user if engaged directly, the intermediary must treat their monies received as income and operate PAYE. The FTT asserted that a test of overall control and mutuality of obligation were r...

On a sale of shares, proceeds of the sale may be paid in full on completion. Alternatively, part of the proceeds may be paid on completion, with the balance becoming payable at one or more future dates. In the latter case, there may be certain performance conditions attached to the future proceeds (typically related to the financial performance of the company) that must be met in order for the vendor to receive further payment. The latter case is commonly called an “earn out”, and there are several tax points to consider when negotiating a sale of shares to ensure that the earn out is practical and tax effective for the parties involved. Why Consider an Earn Out? There are numerous reasons to have an earn out as part of a share...

The 2019 Loan Charge The 2019 Loan Charge was introduced by the Finance (No 2) Act 2017. The charge means that all employment related loans entered into on or after the 5th of April 1999 which remain ‘outstanding’ (i.e. no settlement agreement has been reached with HMRC) on the 5th April 2019 will be chargeable to tax as employment income in the 2018/2019 tax year. Employment loans were most common in the late 1990s and early 2000s and the vast majority involved employers providing funds to employee benefit trusts ("EBTs") that would then loan the money to the employee on the understanding that it would never need to be repaid. In the Rangers case, the Supreme Court largely dismissed the effectiveness of these types of schemes ...

In this two part series, we’ll be looking at the tax advantages of company share schemes for directors looking to reward, retain, and incentivise their staff. In Part 1 we looked at Company Share Option Plans (“CSOPs”) and Enterprise Management Incentive schemes (“EMIs”) which are more common with SMEs. In this part, we’ll be looking at Share Incentive Plans (“SIPs”) and Save As You Earn schemes (“SAYEs”) which can often be more appropriate for larger companies. As we discussed in Part 1, providing employees with shares directly can come with significant tax and National Insurance Contribution ("NIC") costs as well as cash flow problems for the employees receiving shares. Tax Advantaged Share Schemes for Empl...