The Coronavirus pandemic has not only endangered the health of the UK, but it has also had a huge impact on the economy. This financial strain has led to many people choosing to give up/use some of their income to support: 1) Businesses or employers; or 2) Charities. But what are the tax implications of these acts of generosity? Supporting a business or an employer People are showing support for a business or an employer in several ways such as: 1) waiving salary or bonuses before they are paid; 2) waiving dividends; or 3) giving salary or bonuses back to a business or employer after they have been paid. The tax treatment of this support depends on which route is taken (i.e. 1, 2 or 3). 1. Waiving salary or bonuses before they are...

On a sale of shares, proceeds of the sale may be paid in full on completion. Alternatively, part of the proceeds may be paid on completion, with the balance becoming payable at one or more future dates. In the latter case, there may be certain performance conditions attached to the future proceeds (typically related to the financial performance of the company) that must be met in order for the vendor to receive further payment. The latter case is commonly called an “earn out”, and there are several tax points to consider when negotiating a sale of shares to ensure that the earn out is practical and tax effective for the parties involved. Why Consider an Earn Out? There are numerous reasons to have an earn out as part of a share...

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...

Changes introduced by the Finance Act 2019 (FA-2019) address inconsistencies between the tax treatment of tangible fixed assets (e.g. cars, vans, machinery, buildings) and intangible fixed assets (e.g. goodwill, intellectual property). The new provisions bring the intangible fixed assets rules more in line with those applying to tangible fixed assets. Degrouping Charge A degrouping charge may apply where a company (Co A) acquires assets from another group company (Co B) on a no gain/no loss basis, and Co A leaves the group within 6 years of acquiring the asset. The effect of a degrouping change is that Co A is deemed to have disposed of and reacquired the asset at market value immediately after the asset was acquired, thereby crea...

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...

Often when making a donation, a charity will ask whether Gift Aid can be claimed on the donation. There are certain tax advantages and reliefs to making Gift Aid donations, which are explained in more detail below. Basic Operation of Gift Aid Gift Aid is a tax incentive that allows UK registered charities (and charities registered in other EU member states, Norway, Iceland, and Liechtenstein) to claim the basic rate tax (currently 20% in 2018/19) back on the donation from HMRC. For example: Assume a taxpayer wishes a charity to receive a total of £100. The taxpayer will actually give the charity £80 and the charity will then claim back the £20 from HMRC. Tax Relief – Higher Rate/Additional Rate Taxpayers Further tax reli...

The government has recently published a draft of the Finance Bill 2018-19, containing measures that will form a part of the next Finance Bill. Consultation of the draft legislation will run until 31 August 2018, following which the final contents of the Finance Bill 2018/19 will be confirmed in the Autumn Budget 2018. A round-up of some of the key measures is provided below. Increase in Time Limits for Offshore Non-Compliance The current periods that HMRC are able to assess for both on and offshore non-compliance are 4, 6, and 20 years depending upon behaviour - 4 years where the taxpayer took reasonable care, 6 years where a loss of tax has arisen through careless behaviour, and 20 years where a tax loss has arisen through deliberate...

In Pimlico Plumbers Ltd v Smith, the Supreme Court has upheld the decision of the Court of Appeal that former self employed plumber Mr Smith (the taxpayer) was in fact a ‘worker’ of Pimlico Plumbers Ltd (Pimlico), and is therefore entitled to bring claims against Pimlico in relation to his status as a worker for the company. Background The taxpayer, a self employed plumber and heating engineer, worked for Pimlico between August 2005 and April 2011. Pimlico conducts a large scale plumbing business in London. After suffering a heart attack, Mr Smith made a request to Pimlico that his working schedule be reduced from 5 days to 3 days per week. The request was denied, and Mr Smith was subsequently dismissed. The taxpayer issued ...

The submission of an incorrect tax return may result in a penalty if the error was the result of careless or deliberate behaviour. However, where an individual can demonstrate that they took "reasonable care" when preparing their return, then a penalty will not be charged. Tax Avoidance Arrangements Where you entered into a tax avoidance scheme which is later defeated by HMRC resulting in an incorrect tax return, the presumption is that you have not taken reasonable care and will therefore be subject to the penalty. This applies for returns or documents sent to HMRC after 16 November 2017 relating to the 2017/18 tax year onwards. However, it you entered into the arrangement as a result of taking professional advice, then HMRC will gene...

In the case of Christa Ackroyd Media Ltd v HMRC, the First-Tier Tribunal found the that the former ‘Look North’ presenter Christa Ackroyd would have been an employee of the BBC, had she been providing her services directly, rather than through her personal service company (PSC), resulting in additional income tax and national insurance contributions (NICs). Background Ms Ackroyd worked at the BBC as a presenter for ‘Look North’ on BBC 1, pursuant to two fixed term contracts between the BBC and her PSC, Christa Ackroyd Media Ltd, from May 2001 to June 2013. The intermediaries legislation (also known as IR35) was introduced to prevent individuals from providing employment services to clients through an intermediary (e.g. a li...