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...

6,000 penalties issued to parents who did not inform HMRC that they needed to pay the High Income Child Benefit Charge (HICBC), have now been cancelled. The HICBC is designed to claw back some/all of the child benefit received by the taxpayer through their self-assessment tax return where their income or their partner’s income exceeds £50,000 in the tax year. For every £100 of income a relevant taxpayer has over £50,000, they will be required to repay 1% of the child benefit received (by them or their partner). If the income of an individual or their partner is £60,000 or more, the HICBC will claw back 100% of the child benefit received in the tax year. Issues with Implementation Whilst the charge was well publicised when it...

Determining a company’s residence status is crucial when considering its liability to UK tax. There are two important tests to consider when deciding a company’s residence: the Incorporation Test, and the Central Management and Control ("CMC") Test. Incorporation Test The incorporation test set out in 2009 CTA s.14 is simple; a company incorporated in the UK is regarded as resident in the UK for tax purposes. If a company does not fall into this test, the second test must be considered. “Central Management and Control” Test The CMC test is derived from case law.  As the name suggests, this test seeks to determine where the central management and control of the company vests. This involves looking at where the orde...

What is Ordinary Share Capital (OSC)? If you are considering claiming Entrepreneurs’ Relief (ER) when disposing of a shareholding, it is important to check that you meet the conditions in order to be eligible for the relief. One of these conditions is that as an employee or director, you beneficially own a minimum holding of 5% of the Ordinary Share Capital (OSC) of the company for a specified period (currently 2 years). The legislation states that OSC “in relation to a company, means all the company’s issued share capital (however described), other than capital the holders of which have a right to a dividend at a fixed rate but have no other right to share in the company’s profits”, e.g. preferences shares. However, the ...

Domestic Reverse Charge Implementation Delayed In a move described as a ‘victory for common sense’ by the Federation of Master Builders (FMB) chief executive, the implementation of the domestic reverse charge which was due to take effect on the 1st October 2019 will now come into effect on the 1st October 2020. The domestic reverse charge means that customers receiving a service in the constructing and building sector may have to pay the VAT to HMRC instead of paying the supplier. Some 150,000 businesses will be affected by the change. Reasons for the delay HMRC announced the delay on the 6th September 2019 citing concerns from industry representatives and the desire to avoid the changes coinciding with Brexit as the reasons...

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 ...