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...

Whether a property is residential or non-residential for Stamp Duty Land Tax ("SDLT") purposes is not always clear cut, and this will affect the tax payable and also the reliefs/exemptions that might apply. Residential rates can be as high as 15% (where the 3% surcharge applies), whilst non-residential rates top out at 5%. Mixed use properties (used for both residential and non-residential purposes) are subject to non-residential rates. In light of the different rates and reliefs that can apply, it is crucial that the nature of the property is correctly identified at the time of purchase. HMRC has recently clarified their views and guidance on what constitutes residential property for SDLT purposes - some of the points discussed ar...

If you have recently received a PAYE coding notice from HMRC, you may be wondering what it means and what you should do with it. This can be a complex topic, and if you are confused you are certainly not alone. Therefore, the aim of this blog is to help you to understand your coding notice and any actions that you may need to take. PAYE Firstly, PAYE stands for “Pay As You Earn” and is the system that is used by your employer to deduct tax directly from your wages or salary. In order to ensure that your employer deducts the correct amount of tax, HMRC issues a PAYE code to your employer (and to you through a coding notice) to provide the relevant information. The PAYE coding notice essentially tells you your tax code and explains ...

HMRC’s position with regards to the taxation of of cryptocurrencies or cryptoassets (such as Bitcoin, XRP/Ripple, Ethereum) has been an evolving area, as the wide range of forms and uses of these assets can make it difficult to determine the nature of a transaction, and therefore how a transaction should be taxed. Previous guidance on the matter provided that the taxation of cryptoassets very much depended on the circumstances of the transaction in question. Whilst the same is still true, HMRC has recently issued more detailed practical guidance for individuals, which may provide more clarity going forward. What is a Cryptoasset? HMRC has confirmed that they do not consider cryptoassets to be currency or money. In a report undert...