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...

Seafarers’ Earnings Deduction (SED) is a valuable UK tax relief for those working at sea.  However SED has an important (and less well-known) restriction which claimants should also understand as it could leave them worse off by potentially thousands of pounds. Seafarers’ Earnings Deduction (SED) SED can reduce the tax payable by UK or EEA resident seafarers who work aboard a ship. The relief isn’t available to Crown employees or non-UK/EEA residents. In order to claim the relief, a seafarer must have worked on a ship and spent a certain amount of time (known as an “eligible period”) outside the UK. Certain vessels and fixed installations aren’t treated as “ships” (e.g. oil rigs), therefore those working in thes...

From 1 April 2019, the National Living Wage (i.e. the statutory minimum for workers aged 25 and above) was increased by 4.9% from £7.83 to £8.21 per hour. Likewise, the National Minimum Wage for younger workers and apprentices also increased above inflation. The minimum wage was introduced in April 1999 to guarantee minimum standard for pay for workers. However, the National Minimum Wage Regulations ("NMWR") can be complex and care should be taken to ensure that your business does not unintentionally breach the rules. In particular, additional consideration should be made where employees are required to be at their workplace before their shift starts, where staff purchase their own workwear, or where you facilitate a salary sacrific...

The provision of company shares can be a valuable tool in incentivising key members of staff to remain with the company long term and actively grow the company’s business and increase profits. HMRC has several approved employee share schemes, each with their own tax advantages for the employee and employer/shareholders. However, certain conditions must be met by the employer/employee in order for these schemes to qualify and therefore they are not always commercially viable. Growth shares are a practical option, especially where the company shares already have significant intrinsic value. What are Growth Shares? Suppose that a company wishes to incentivise one of its managers to stay with the business and continue to contribut...

The Mutual Assistance in the Recovery of Debt (MARD) is an arrangement which allows a country’s tax authority to collect debts via other countries’ tax authorities and vice versa. We’ve seen an increasing number of these MARD cases at PD Tax, yet it is a surprisingly little-known topic. MARD Example: Susan Susan was born in the UK and studied creative writing and literature at a UK university. Whilst studying, Susan freelanced as a writer for local publications and received payments without tax/NICs being deducted via PAYE. Susan wasn’t aware she needed to register as self-employed with HMRC and complete tax returns to report her income. Susan emigrated to Germany after she graduated, leaving no assets in the UK. Y...

If your business imports and/or exports goods with the EU, you may be struggling with the uncertainty around the UK's withdrawal from the EU. In December 2018, HMRC published a letter for businesses that trade with the EU and steps that should be taken to prepare for no deal. This blog will help you to understand these steps and the actions that you should take. Firstly, in the event of no deal, you will be responsible for making customs declarations for your UK-EU trade. In order to ensure that you are ready for this, you should: Register for a UK Economic Operator Registration and Identification (EORI) number. You can do this at gov.uk/hmrc/get-eori. Register with HMRC’s new Transitional Simplified Procedures (TSP) for cus...

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...

In our two part series, we'll be looking at the tax advantages of company share option schemes for directors looking to reward, retain, and incentivise their staff. In brief, a share option gives a recipient the right (but not the obligation) to acquire shares in a company in the future. This can give employees the chance to share in the growth of the company, providing strong incentives, whilst being very cost-efficient from the company’s perspective as well. In this part, we'll focus on two of the more common schemes used by SMEs: Company Share Option Plans (“CSOPs”) and Enterprise Management Incentive schemes (“EMIs”). The second part will examine Share Incentive Plans ("SIPs") and Save As You Earn schemes ("SAYEs"). ...

Business Property Relief (BPR) and Agricultural Property Relief (APR) are reliefs that can significantly reduce or offset an Inheritance Tax liability. In previous blogs (see Related Articles below) we have discussed BPR and the issues involved in determining whether this relief is available. This blog will instead focus on APR and the definition of "agricultural purposes". What is APR? APR is available on certain transfers of property. The property can be transferred either as a gift during the individual’s lifetime or on their death. In order for the relief to apply, the following conditions must be met: 1) The property must be agricultural property. This is defined as agricultural land or pasture which is situated in the...