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 ...

The provision of company shares can be a valuable tool in incentivising key members of staff to remain with the company long term and actively grow the company’s business and increase profits. HMRC has several approved employee share schemes, each with their own tax advantages for the employee and employer/shareholders. However, certain conditions must be met by the employer/employee in order for these schemes to qualify and therefore they are not always commercially viable. Growth shares are a practical option, especially where the company shares already have significant intrinsic value. What are Growth Shares? Suppose that a company wishes to incentivise one of its managers to stay with the business and continue to contribut...

The Mutual Assistance in the Recovery of Debt (MARD) is an arrangement which allows a country’s tax authority to collect debts via other countries’ tax authorities and vice versa. We’ve seen an increasing number of these MARD cases at PD Tax, yet it is a surprisingly little-known topic. MARD Example: Susan Susan was born in the UK and studied creative writing and literature at a UK university. Whilst studying, Susan freelanced as a writer for local publications and received payments without tax/NICs being deducted via PAYE. Susan wasn’t aware she needed to register as self-employed with HMRC and complete tax returns to report her income. Susan emigrated to Germany after she graduated, leaving no assets in the UK. Y...

Registering for self-assessment  Taxpayers who are required to submit tax returns for the first time regarding the 2017/18 tax year (i.e. between 6 April 2017 – 5 April 2018) are required to register for self-assessment by 5 October 2018. Penalty charges   Failing to notify HMRC by the deadline and failing to pay tax due by the 31 January 2019 deadline may result in a penalty. This penalty is calculated as a percentage of the income and/or capital gains tax that is late for payment. The percentage that will apply is determined in light of the behaviour of the taxpayer (non-deliberate, deliberate, or deliberate and concealed), whether or not the taxpayer made a “prompted” or “unprompted” disclosure, and the amount ...

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 Sunday Times has reported that HM Revenue & Customs are set to investigate individuals who they believe may have sold a second home and/or rental property but did not report any capital gains tax ("CGT") on their tax returns. Letters will be sent to 1,500 individuals that HMRC has identified as having sold property during the 2015/16 without declaring a CGT liability. The letters will invite taxpayers to explain why they haven't paid the CGT that HMRC’s computer models suggest they may owe.  Failure to reply could result in a formal investigation and increased penalties. If you have any doubts about your tax affairs, then you should speak to a tax professional to ensure you are complying with the law. If you have undi...

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...

The submission of an incorrect tax return may result in a penalty if the error was the result of careless or deliberate behaviour. However, where an individual can demonstrate that they took "reasonable care" when preparing their return, then a penalty will not be charged. Tax Avoidance Arrangements Where you entered into a tax avoidance scheme which is later defeated by HMRC resulting in an incorrect tax return, the presumption is that you have not taken reasonable care and will therefore be subject to the penalty. This applies for returns or documents sent to HMRC after 16 November 2017 relating to the 2017/18 tax year onwards. However, it you entered into the arrangement as a result of taking professional advice, then HMRC will gene...

Please note that this article was updated on 1 August 2018. Please see the bottom of the article for further information. Individuals who have undeclared UK tax liabilities arising from offshore income or assets must disclose such items to HMRC under the requirement to correct (RTC) and pay any tax that is owed by 30 September 2018, or face a more severe set of penalties under failure to correct (FTC). HMRC have begun contacting individuals who have sources of offshore income/gains requesting that they consider whether their UK tax compliance obligations have been met. There are generally 2 kinds of approach: HMRC have received information regarding unreported income/gains in an overseas country/territory, and are contacting you ...

In the case of McGreevy [2017], the First-Tier Tribunal held that ignorance of the law in respect of the requirement to file a Non-Resident Capital Gains Tax (NRCGT) Return within 30 days of compliance was a reasonable excuse. In the judgement, the tribunal judge was highly critical of HMRC’s efforts in publicising the new requirements to taxpayers and ultimately used their discretion to reduce the taxpayer’s penalties to zero. Please see our blog for further details on the case. However, the judge in the recent cases of Hesketh [2017] and Welland [2017]  has rejected the ruling in McGreevy and held that ignorance of the 30-day deadline is not a reasonable excuse. The judge ruled in favour of HMRC in both cases on the...