Measures implemented in countries around the world to combat coronavirus will impact the UK residence status of many taxpayers. Many of the tests set out in the Statutory Residence Test (SRT) are based on day counting, with a day in the UK generally being a day on which you are in the UK at midnight. For some of the tests it is possible to ignore days attributable to exceptional circumstances – up to a cap of 60 days per tax year. HMRC typically views exceptional circumstances as being an event outside of the taxpayer's control that prevents them from leaving the UK (although rarely HMRC may accept that a taxpayer outside the UK may return for exceptional circumstances – such as the death/serious illness of a spouse or child). ...

HMRC have issued detailed guidance regarding how the coronavirus job retention scheme will work in practice. How Much is the Grant? Employers can claim: the lower of; 80% of furloughed workers regular wage, or £2,500 per month associated employer NICs on that subsidised wage, and minimum automatic enrolment employer pension contributions on that subsidised wage This gives a maximum grant per employee of £2,804 per month (£2,500 salary + £245 Employer NIC + £59 automatic enrolment pension contribution). For salaried employees; the employee’s actual salary as at 28 February 2020 (excl. commission and bonuses) should be used to calculate the 80%. For employees whose pay varies, the position will depend on the l...

The government has announced a much awaited support package for self-employed individuals and partnership businesses that have suffered a loss of earnings due to COVID-19. Eligible individuals will receive a grant of up to 80% of their average monthly trading profits, up to a cap of £2,500 per month.  Initially the scheme will run for a 3 month period. The scheme will be available to those who meet the following conditions: 2018/19 tax return submitted – if the return has not yet been filed then you must do so by 23 April 2020 Traded in 2019/20 Are trading when they apply (or would be but for COVID-19) Intend to continue trading in 2020/21 Have lost trading/partnership profits due to COVID-19 Either: Tradi...

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. 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-flows to ensure your Time-to-Pay arrangements agreed with HMRC are realistic and give you and your business time to breathe. Speak with your accountant and tax adviso...

Betting and gambling does not constitute a trading activity, and as such, any winnings are not taxable profits for income tax purposes. Nevertheless, if you make substantial sums of money in betting then care should be taken to ensure that you are able to prove the source of these funds. If betting activities cannot be evidenced, then you run the risk of having these winnings treated as trading profits by HMRC. This is what happened to a successful gambler in the case of Simon McMillan v HMRC (2019). In this case, the cards were stacked in McMillan's favour as he had several credible witnesses who could attest to his gambling activities.  The First-Tier Tribunal accepted his explanations, holding that based on the evidence his substa...

The IR35 anti avoidance provisions are contained in ITEPA 2003. The provisions impose employment taxes on those using a Personal Service Company (PSC) to enter into a contract for services (and thus pay corporation tax on profits) who in practice are engaged under a contract of service (and therefore should pay income tax and NICs on income). Recently, there has been a string of cases involving HMRC challenging well known TV presenters on the basis that they are caught by IR35. The most recent judgement of which was Eamonn Holmes v HMRC (2020). The Facts TV personality Eamonn Holmes set up a PSC in 2001 called Red, White and Green Ltd (RWG). From 2006 onward he has been presenting This Morning on ITV. During this time, RWG has been...

The off-payroll working rules (commonly referred to as IR35) were introduced in April 2000 to prevent individuals/contractors from providing employment services to clients through an intermediary (e.g. limited company or partnership) in order to reduce or avoid PAYE and National Insurance contributions (NICs). The intermediary comes within the scope of IR35 where the worker would be treated as an employee of the client but for the existence of the intermediary. IR35 is therefore designed to catch ‘one-man’ companies who contract almost exclusively for one major client. When IR35 applies, the income of the intermediary is regarded as the worker’s earnings from employment, and the intermediary will be required to operate PAYE and�...

If a sole trader makes a loss from their business, it may be possible for them to offset this loss against their other income in the same year. This would lead to a reduction in their taxable income and therefore less tax payable. A reduced tax bill is obviously a very appealing prospect. However, as David Cliff (“DC”) (in the case of D Cliff v HMRC [2019]) recently found out in his appeal to the First Tier Tribunal, there are strict rules in place that dictate when a sole trader is allowed to offset their losses against other income; failure to adhere to these rules may result in a discovery assessment by HMRC and hefty penalties. Loss Relief Rules The legislation states that in order for loss relief to be claimed against the...

The case of Reneaux and Another v HMRC (2019) provides guidance on the level of business activity required to be treated as “trading” for Entrepreneurs’ Relief (“ER”) purposes. In this case, the First-Tier Tribunal (“FTT”) held that the occasional use of business premises and the letting of those premises were not sufficient to amount to a trade. Entrepreneurs' Relief  ER is a valuable relief which can reduce the rate of Capital Gains Tax (“CGT”) on the sale of business assets to 10%. In brief, in order for sole traders or partners of partnerships to qualify for relief they must have sold whole or part of their business, or disposed of an asset used in a business at the time the business ceases to be carried on ....

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...