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 ...

Now that 2019 has been brought to a close, the 31 January 2020 deadline for 2018/19 tax returns will soon be upon us. If you have not already submitted your 2018/19 self assessment tax return, you may want to get this underway soon. A £100 late filing penalty will apply where your tax return is up to 3 months late, and further penalties can apply if the tax return remains outstanding after this date. Any tax due should be paid by 31 January 2020 as well, and interest will begin to run on any tax outstanding from this date. A penalty of 5% of the unpaid tax will apply where the payment is not made within 30 days of the above date. If you need assistance with filing your tax return for 2018/19, please contact a member of our team...

Liquidation Liquidation or the winding up of a company is a process whereby the assets of a company are realised and distributed to creditors in satisfaction of any debt owned in the order of priority set out in the Insolvency Act 1986. Following this, the company is dissolved. In the case of a members’ voluntary liquidation (“MVL”), a company is likely to have surplus assets to be distributed to its shareholders. Tax Treatment Generally, when undergoing an MVL, distributions to shareholders (who have last priority in liquidation) will be treated as capital distributions and therefore will attract the more generous capital gains tax rates (10% for gains falling within your basic rate band, and 20% on the excess). Furthermo...

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�...

As discussed in our blog Government Announces Review of the Loan Charge (12 September 2019) it was announced that an independent review was to be held into the April 2019 Loan Charge, with results due in mid-November 2019. As a result of the upcoming general election, the report will now be delayed until the new government is formed. With the government's response unlikely to be published before the end of the year, this will cause uncertainty for those who are due to report the loan charge on their tax returns before the 31 January 2020 deadline. In light of this, HMRC has published guidance setting out what those affected by the loan charge will need to do: Those who have already reached a settlement with HMRC and paid the am...

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...

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 ...

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 ...

Top slicing relief is a valuable tax relief available to taxpayers who have a chargeable event gain on the disposal of a life insurance policy/investment. However, calculating the relief is complex, and often requires specialist knowledge in order to ensure that the tax due is correct. Whilst referred to as a “gain”, such policies are actually subject to income tax. In the case of Silver v HMRC, Mrs Silver (the taxpayer), disposed of a life insurance bond in 2015/16 realising a chargeable event gain of £110,722. The gain was included on the taxpayer’s tax return for the year, resulting in a tax liability of £4,059. However, HMRC challenged the calculation, on the basis the taxpayer should not have had the benefit of the personal ...