Tax Update provides you with a round-up of the latest tax developments. Covering matters relevant to individuals, trusts, estates and businesses, it keeps you up-to-date with tax issues that may impact you or your business. If you would like to discuss any aspect in more detail, please speak to your usual Smith & Williamson contact. Alternatively, Ami Jack can introduce you to relevant specialist tax advisors within our firm.
1. Private client
1.1 ATT publishes guidance on online CGT reporting
The ATT has published a note on the practicalities of using the new HMRC online reporting service for CGT on UK property. It has not been approved by HMRC, but is based on members’ experiences using the portal.
The guidance covers the basic rules as well as a step-by-step guide to the authorisation process. It also explains what to do for digitally excluded and digitally challenged clients, how the rules apply to estates, and the use of paper returns.
2. Business tax
2.1 HMRC updates guidance on R&D relief and furloughed staff
HMRC’s guidance on R&D relief has been updated to explain how HMRC will treat staffing costs for employees furloughed during the COVID pandemic. In general, staffing costs met by the Government will not be eligible for R&D relief.
Employees furloughed under the Coronavirus Job Retention Scheme (CJRS) were required to cease all work in relation to their employment until 1 July 2020. From that date, they may have been flexibly furloughed and so could only have worked on R&D projects part-time. HMRC considers that furloughed employees cannot be regarded as directly or actively engaged in R&D. Staffing costs incurred for periods while employees were furloughed and not working should not, therefore, be included in R&D claims. This also applies to any top-up payments made by employers while employees were furloughed under the CJRS.
The costs of sick leave and annual leave are generally viewed by HMRC as necessary costs of undertaking R&D work that are potentially eligible for R&D relief. To the extent that sick leave or annual leave is met by the Government through the CJRS, these costs will be treated as having been subsidised and will not qualify for relief within the R&D scheme for small and medium enterprises. Those costs can, however, be eligible for relief under the R&D expenditure credit scheme for large companies. HMRC has confirmed that it will accept a fair and reasonable apportionment when calculating the proportion of subsidised staffing costs in these situations.
3. Tax publications and webinars
3.1 Tax publications
The following Tax publications have been published.
4. And finally
4.1 ‘Disproportionate and draconian’
It is an unshakeable principle of tax that every gap in the law, no matter how small, eventually ends up causing a problem. Last week, in Re Webster, we reported on how an unfortunate taxpayer found the one box on a tax return that cannot be amended post-submission; that is, carry back claims for gift aid. Incurring a £200,000 bill on the charitable donation made on the first anniversary of his wife’s death must have been bad enough, but the penalties for carelessness when he tried to correct it with HMRC added insult to injury. His attempt to obtain rectification from the HC failed, with the judge commenting that although he did not have the power to correct the return, he would not have done so if he could, as a careless error ‘is not one that ought to engage the court's sympathy’.
Putting aside the unkindness of that comment, surely a system in which this can be the consequence for mistyping one figure (in fact claiming less relief than he meant to) is deeply flawed?
Sympathy may have been lacking at the HC, but surely not with our readers. We wish him a better outcome at the tax tribunals.
|ATT – Association of Tax Technicians||ICAEW - The Institute of Chartered Accountants in England and Wales||CA – Court of Appeal||ATED – Annual Tax on Enveloped Dwellings||NIC – National Insurance Contribution|
|CIOT – Chartered Institute of Taxation||ICAS - The Institute of Chartered Accountants of Scotland||CJEU - Court of Justice of the European Union||CGT – Capital Gains Tax||PAYE – Pay As You Earn|
|EU – European Union||OECD - Organisation for Economic Co-operation and Development||FTT – First-tier Tribunal||CT – Corporation Tax||R&D – Research & Development|
|EC – European Commission||OTS – Office of Tax Simplification||HC – High Court||IHT – Inheritance Tax||SDLT – Stamp Duty Land Tax|
|HMRC – HM Revenue & Customs||RS – Revenue Scotland||SC – Supreme Court||IT – Income Tax||VAT – Value Added Tax|
|HMT – HM Treasury||UT – Upper Tribunal|
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.