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...

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-...

The Upper Tribunal has found that Mr Davies, Mr McAteer and Mr Evans-Jones (the taxpayers) could not benefit from the Motive Exemption or Treaty Relief in relation to overseas property income subject to UK tax under the Transfer of Assets Abroad rules. Transfer of Assets Abroad Rules  The transfer of assets abroad (TOAA) rules were brought in in their original form for income tax in 1935, and extended to capital gains tax (CGT) in 1965. The rules are complex and far reaching, but in short they may apply where non-UK resident companies or trusts are created which can benefit UK-resident individuals. An income tax charge will apply to the individuals where the following conditions are met: There must be a transfer of assets by ...

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...

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...

Many property owners in the UK may have recently received a letter from HMRC regarding 'income from letting property'. Individuals will receive letters where the HMRC compliance department have reason to believe that the individual has one more properties that are rented (or have been rented in the past), and the income has not been declared to HMRC. Do I have anything to report/pay? Subject to certain certain specific exemptions, if an individual rents property and receives an income, they will need to report the income and expenses to HMRC each tax year (6 April to 5 April each year). Where there is a profit for the year, there may well be pay tax on these profits. It is important to note, especially for individuals who have not ...

The case of Reneaux and Another v HMRC (2019) provides guidance on the level of business activity required to be treated as “trading” for Entrepreneurs’ Relief (“ER”) purposes. In this case, the First-Tier Tribunal (“FTT”) held that the occasional use of business premises and the letting of those premises were not sufficient to amount to a trade. Entrepreneurs' Relief  ER is a valuable relief which can reduce the rate of Capital Gains Tax (“CGT”) on the sale of business assets to 10%. In brief, in order for sole traders or partners of partnerships to qualify for relief they must have sold whole or part of their business, or disposed of an asset used in a business at the time the business ceases to be carried on ....

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 ...

Private residence relief (“PRR”) was first introduced over 50 years ago and is one of the more widely known tax reliefs, providing relief from capital gains tax ("CGT") on the sale of your home. That said, there has been contention over the definition of the terms “period of ownership” and “periods of occupation”, both of which are crucial for determining if PRR can be applied. Last year we wrote a blog on the case of Higgins v HMRC where the Upper Tribunal held that the period of ownership for PRR purposes starts from the date the contract for purchase was signed, even though the property in question had not yet been built. Mr Higgins has appealed his case to the Court of Appeal who has now reversed the Upper Tribunal�...

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...