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...

Determining a company’s residence status is crucial when considering its liability to UK tax. There are two important tests to consider when deciding a company’s residence: the Incorporation Test, and the Central Management and Control ("CMC") Test. Incorporation Test The incorporation test set out in 2009 CTA s.14 is simple; a company incorporated in the UK is regarded as resident in the UK for tax purposes. If a company does not fall into this test, the second test must be considered. “Central Management and Control” Test The CMC test is derived from case law.  As the name suggests, this test seeks to determine where the central management and control of the company vests. This involves looking at where the orde...

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 ...

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...

Domestic Reverse Charge Implementation Delayed In a move described as a ‘victory for common sense’ by the Federation of Master Builders (FMB) chief executive, the implementation of the domestic reverse charge which was due to take effect on the 1st October 2019 will now come into effect on the 1st October 2020. The domestic reverse charge means that customers receiving a service in the constructing and building sector may have to pay the VAT to HMRC instead of paying the supplier. Some 150,000 businesses will be affected by the change. Reasons for the delay HMRC announced the delay on the 6th September 2019 citing concerns from industry representatives and the desire to avoid the changes coinciding with Brexit as the reasons...

HMRC has confirmed that the concession for trusts in receipt of small amounts of interest income has been extended until at least 5 April 2021. Under the arrangement, trustees and personal representatives ("PRs") are not required to submit tax returns or make payments under informal arrangements where the only source of income is savings interest and the tax liability is less than £100. Why was the concession introduced? From 6 April 2016, banks and building societies stopped withholding income tax on interest paid to individuals and trusts. Whilst individuals were awarded with a  “Personal Savings Allowance” enabling them to earn up to £1,000 interest tax free, this allowance was not extended to trusts. Therefore, trusts...

The Government has announced that an independent review will be held into the April 2019 Loan Charge with the results due in mid-November 2019. The review will consider the impact of the loan charge on taxpayers who have entered into disguised remuneration schemes and provide recommendations. In particular the review and recommendations will consider: Whether the Loan Charge is an appropriate response to the tax avoidance behaviour in question Whether changes to the Loan Charge already announced address any legitimate concerns raised regarding the impact on individuals (for example in relation to affordability) The impact on wider taxpayer fairness HMRC’s ability to tackle tax avoidance effectively in the future In ...

When businesses/companies employ capital assets (e.g. machinery, motor vehicles) for use in their business, such costs are not deductible from trading profits because the expenditure will have an enduring benefit for the trade. Instead, relief is available through capital allowances which essentially allows relief for the fall in value of capital assets, providing a deduction when arriving at taxable profit. Furthermore, the annual investment allowance (AIA) is available to businesses to encourage greater levels of investment. The AIA reduces the costs of capital by providing 100% capital allowances for the first £1,000,000 (between 1 January 2019 and 31 December 2020) of plant an machinery (excluding cars) acquired by the business for...

Stamp Duty Land Tax ("SDLT") is payable by the buyer on the purchase of land and property in England and Northern Ireland. The rate at which SDLT is charged is determined by whether or not the property is "residential" property, which is defined in the legislation as a building that is: Used or suitable for use as a dwelling; or In the process of being constructed or adapted for such use. The rates of SDLT for residential property are higher than those for non-residential property, plus an additional 3% surcharge may also apply where the purchaser already owns residential property. Therefore, it is important that the nature of the property is correctly identified. In P N Bewley Ltd v HMRC (2019), the First-Tier Tribunal con...