In its first report from November 2018, the Office of Tax Simplification (OTS) highlighted the significant difference the number of IHT forms submitted each year (275,000), and the number that resulted in inheritance tax (IHT) being due (24,500), highlighting the administrative burden of the current system. In its second report, the OTS provides suggestions of how the system could be made easier to understand, more intuitive, and simpler to operate. Recommendations Lifetime Gifts A number of IHT reliefs/exemptions apply on gifts made during a person’s life. The OTS note that these can be confusing and difficult to apply, and have therefore made the following recommendations: 1 - Replacement of several monetary gift exemptio...

In welcome news for those setting up EMI schemes, HMRC has announced that the window for agreeing EMI share valuations has been extended from 60 to 90 days. The Announcement HMRC made the announcement through the Employment Related Securities Bulletin 32 (June 2019). You can find the full bulletin here. What are EMIs? As covered in our previous blog, EMIs are a type of tax advantaged share scheme that allows companies to reward, retain, and incentivise select staff. EMI schemes operate by allowing companies to give select staff the opportunity to buy shares in the company at a price set when the share option is agreed. The Importance of Correct Valuations If EMI share options are priced at the market price when the o...

Reports from Charity Tax Group confirm that HM Revenue & Customs has issued letters to 3,000 charities with the largest Gift Aid claims requesting that they submit a tax return as part of a compliance review. In addition to this, a random sample of several hundred community amateur sports clubs will also be required to submit a return. The purpose of the return is to show the exemptions that the charity is claiming and to determine whether any tax is due. Where you fail to submit the tax return on time, HMRC may issue a penalty. When must a charity submit a tax return? A charity must submit a tax return where it receives income that does not qualify for tax relief, or if HMRC asks you to. A charity must submit a Compan...

On 18 June 2019, PD Tax travelled to The Hollies for a day of volunteering in partnership with Leeds City Council. A favoured walking destination of Lord of the Rings author JRR Tolkien during his time in Leeds and the rumoured inspiration for Middle Earth, the Hollies is a Victorian villa with extensive grounds and woodland. The house and its 30 acres of land were given to Leeds City Council in 1921 by George Brown, in memory of his son who was killed in the First World War. The grounds then became a public park. Equipped with our wellies, gloves, shears and tree poppers, we cleared paths, chopped down trees and generally made the park a more enjoyable place to spend time. We even managed to dodge the rainy weather of the previ...

HMRC has recently sent out a batch of letters to taxpayers who they believe have offshore assets, income or gains. If you have received one of these letters or if you have offshore assets, read on to find out what this letter is and how you may wish to respond to it. As part of the Common Reporting Standard (CRS) and the automatic exchange of information between jurisdictions, HMRC has received its first set of information and has been made aware of UK taxpayers who have overseas assets. Some of these taxpayers have been approached in the first batch of letters and another batch is due to be sent out this week. The letter does not mean that HMRC suspects that tax has not been declared, nor have they assessed whether an additional liab...

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...

In the case of  The Queen on the Application of T M Jimenez v FTT (2019), the Court of Appeal overturned the High Court's decision and held that HMRC has the power to issue an information notice to non-UK residents, thereby strengthening its ability to tackle cross-border tax avoidance. Background Mr Jimenez, a UK national with a Spanish passport, left the UK to live in Cyprus and then the UAE. It was common ground that he had been a UK taxpayer for some of this time, however the precise period was in dispute and his tax position was under investigation by HMRC. HMRC issued a notice under paragraph 1 of Schedule 36 Finance Act 2008 to Mr Jimenez's address in Dubai requesting information regarding his affairs, including details ...

Capital Allowances are a form of tax relief that can be claimed by traders when they incur expenditure on “plant and machinery”. They can be deducted from the tax adjusted profit for the accounting period, thereby reducing the taxable trading profit. However, the definition of what constitutes “plant and machinery” is a contentious issue and one that is discussed in a significant amount of case law. The case law, along with the Capital Allowances Act 2001 and HMRC practice, suggests that an asset qualifies as “plant” if it has an expected life of two years or more and has a clear function in enabling the activities of the business to take place. Buildings and a number of other structures are specifically excluded from t...

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...