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 ...

Certain taxpayer expenditure can qualify for tax relief, and these amounts are known as deductible payments. The payments are deducted from income when calculating taxable income, effectively saving tax at a taxpayer’s marginal rate. For example, if a taxpayer pays tax at a marginal rate of 40%, they will  have saved 40p for every £1 of the payment they pay in the tax year. Interest paid on qualifying loans is a deductible payment, however there is a cap on the amount that may be relieved each tax year.  The total amount which can be deducted is the greater of £50,000 or 25% of adjusted total income (being total income less payroll giving and gross pension contributions paid). Qualifying Interest Where a loan is a qualify...

Venture Capital Trusts ("VCTs") represent a tax efficient way for investors to unitise their investments across a number of qualifying entities. A VCT is actually a company which is quoted on a UK stock market.  That company in turn owns shares or equity, or lends money to unconnected trading companies. New shares listed on the stock market attract better tax benefits than shares which are bought on the stock market.   The tax benefits for newly listed shares are as follows: 30% income tax relief on annual investments of up to £200,000. This tax reducer can reduce a tax liability to zero, but cannot in itself create a repayment.  The individual must hold the VCT shares for more than 5 years to consolidate this. There is n...

Seafarers’ Earnings Deduction (SED) is a valuable UK tax relief for those working at sea.  However SED has an important (and less well-known) restriction which claimants should also understand as it could leave them worse off by potentially thousands of pounds. Seafarers’ Earnings Deduction (SED) SED can reduce the tax payable by UK or EEA resident seafarers who work aboard a ship. The relief isn’t available to Crown employees or non-UK/EEA residents. In order to claim the relief, a seafarer must have worked on a ship and spent a certain amount of time (known as an “eligible period”) outside the UK. Certain vessels and fixed installations aren’t treated as “ships” (e.g. oil rigs), therefore those working in thes...

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...

Entrepreneur’s relief  ("ER") is a valuable relief from Capital Gains Tax ("CGT") which, when available, restricts the tax rate to a flat 10% on up to £10 million worth of lifetime gains. The 2018 Budget announced changes to the conditions for obtaining ER, and in light of the new rules it may be worthwhile for taxpayers to dispose of relevant assets before 6 April 2019. Minimum Qualifying Period ER applies to disposals of: shares in a trading company; (the whole or part of) a business; assets in association with the sale of a business; assets from a solvent company that has ceased trading. For disposals involving shares, the shareholder would need to work for the company and hold at least 5% of the ordinary s...