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...

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...

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...

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...

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...

Following a number of tribunal cases (including Mohammed Salem Kadhem v HMRC [2017]), HM Revenue & Customs has updated its official guidance on the circumstances when a director is required to submit a self-assessment tax return. Previously, HMRC has maintained that a director of a company was required to register for self-assessment and submit a tax return by virtue of holding office - even if there was no tax liability to report. However, following several defeats in the courts, HMRC has now confirmed that provided that you are subject to PAYE on your income and you have no further liability to tax, you will not be required to submit a tax return. It is important to note that if you receive dividends in excess of the dividend...

Whilst you may be entitled to a State Pension once you reach retirement age, you may wish to have additional funds in order to support you. Pension funds aim to provide you with a further source of income to draw on later in life and are oftentimes a tax-efficient way to save for your retirement. This is because not only can you receive tax relief on payments made into your pension, but growth within the pension is also tax free. With this in mind, please read on for our summary of the taxation of pension contribution. Maximum Contribution & "Relevant Earnings" Firstly, the maximum contributions you can personally make into your pension in a year is the greater of £3,600 and 100% of your "relevant earnings". Relevant ear...

Here are some of the highlights from the Chancellor of the Exchequer's 2018 Budget (published on 29 October 2018): Personal Tax The Personal Allowance will be raised to £12,500 and the Higher Rate Threshold (i.e. the amount that an individual can earn before paying higher rate tax) to £50,000 in April 2019 – a year earlier than planned. These levels will remain the same in 2020/21, and then increase by CPI going forward. The final exemption period for Principal Private Residence Relief (PPR) which provides Capital Gains Tax relief on the sale of your home will be reduced from 18 to 9 months. Under the current PPR rules, where you have let a property which at one point was your home Lettings Relief may be available to reduc...