HMRC has issued "nudge" letters targeting wealthy taxpayers who: have become deemed UK domiciled for tax purposes in the UK (see below); and received a Notice to File a tax return for the 2017/18 tax year, but did not file it despite having submitted returns for 2016/17 and 2018/19. These letters prompt the taxpayer to review their tax position and respond to HMRC either confirming that their tax affairs are in order, or to commence the disclosure process. Over the last couple of years, we have seen "nudge" letters from HMRC asking taxpayers to review their income from rental properties, their offshore assets, income or gains, and the sale of a second home and/or rental property. Deemed Domicile These letters target lon...

Every tax year, a taxpayer is entitled to accrue pension contributions in accordance with their annual allowance (AA). The standard AA currently stands at £40,000 per year, however if you are a “high-income taxpayer” (i.e. adjusted income of £240,000 or more p/a, and threshold income exceeding £200,000 p/a), this AA will be restricted by £1 for every £2 in excess of the £240,000 limit, to a minimum AA of £4,000 (2020/21). These allowances apply across all schemes a taxpayer belongs to and includes all contributions i.e. those made by the taxpayer, their employer and any third party who pays on the taxpayer’s behalf. Where a taxpayer’s contributions exceed the aforementioned AA (whether standard or tapered) they will no lon...

HMRC plans to send 14,000 "nudge" letters to individuals it believes may have made a taxable residential property disposal in 2018/19 but did not report it on their self-assessment tax return, thereby encouraging taxpayers to come forward and bring their affairs up to date. On the sale of residential property, capital gains tax may become payable on the gain. The taxable gain is calculated by taking the sale proceeds and deducting the original cost, the associated costs of disposal/acquisition, any costs incurred on enhancing the value of the property, and the annual exempt amount (£11,700 for 2018/19). If the taxpayer had lived in the property as their main residence throughout their period of ownership, then Principal Private Resid...

The recent First Tier Tribunal (“FTT”) case of Szymusik v HMRC [2020] raised some interesting questions about the eligibility criteria for claiming Seafarers’ Earnings Deduction (“SED”) – But what is SED? And who can claim it? This article will answer these questions, whilst also discussing what we can learn from Szymusik’s case. What is Seafarer’s Earnings Deduction?  The SED is an amount which employed seafarers can deduct from their employment earnings when calculating their UK tax liability - it is not available to seafarers who are self-employed. Who can claim it? In relation to the SED, a seafarer is someone whose employment consists of the performance of duties on a ship, including tasks which are incid...

The Coronavirus pandemic has not only endangered the health of the UK, but it has also had a huge impact on the economy. This financial strain has led to many people choosing to give up/use some of their income to support: 1) Businesses or employers; or 2) Charities. But what are the tax implications of these acts of generosity? Supporting a business or an employer People are showing support for a business or an employer in several ways such as: 1) waiving salary or bonuses before they are paid; 2) waiving dividends; or 3) giving salary or bonuses back to a business or employer after they have been paid. The tax treatment of this support depends on which route is taken (i.e. 1, 2 or 3). 1. Waiving salary or bonuses before they are...

It is common for business/financial decisions to be guided by the tax treatment of the transaction. However, in light of the tax legislation's complexity taxpayers may seek advance assurance before the event takes place to guarantee that the expected tax implications will indeed apply. In light of this, it is possible to write to HMRC to request advance clearance of the tax treatment of certain transactions. The tax legislation provides for clearances for certain arrangements (i.e. statutory clearances), and HMRC also provides a non-statutory clearance service for areas where the rules do not otherwise provide for it. The most common transactions that we as a firm seek clearance from HMRC include: Share-for-share exchanges Pu...

When looking at the capital gains tax (CGT) position following a disposal of an asset, it is important to understand that CGT follows the beneficial interest in the property (as opposed to the legal title). Establishing the owner(s) of the beneficial interest should be considered on a case-by-case basis. The case of Asif Bhikhi v HMRC (2020) demonstrates the importance of properly documenting transfers of property which can often be overlooked in transactions between family members. In this case, the First-Tier Tribunal (FTT) held that there was insufficient evidence to demonstrate that the appellant retained their beneficial ownership of a property on a transfer. In any case, even if there had been an implied trust in place, the transfe...

If you build yourself a new home or if you convert a non-residential building into a home for you or your relative to live in as a main residence, you may be able to claim a VAT refund on building materials and services. In order to be eligible for a refund, you must make a claim with HM Revenue & Customs (HMRC) no later than 3 months after the "completion" of the building. P Wedgbury & S Wedgbury v HMRC - The Definition of "Completion" The term "completion" is unfortunately not clearly defined in the legislation. However, in the recent case of P Wedgbury & S Wedgbury v HMRC (2020) the First-Tier Tribunal (FTT) considered the meaning of "completion" and therefore provides a useful guide for taxpayers who are looking to...

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-...