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.
1.1 New guidance on Land Transaction Tax
The Welsh Revenue Authority has published an updated collection of Land Transaction Tax (LTT) guidance documents. These are aimed at professional advisers.
Several new guidance documents have been added to the collection recently. These include topics such as leases, the differences between SDLT and LTT, and the new rates and bands introduced in the 2020 Welsh Government Budget.
1.2 Guidance updated for HMRC compliance checks
HMRC guidance has been updated with more information for agents and taxpayers on how to assist HMRC with compliance checks.
The new ‘Helping us with the checks’ section explains what taxpayers may be asked to do during an enquiry, such as sending in documents, meeting an officer to discuss the matter, or agreeing to an inspection. It also covers what may happen if the taxpayer does not agree. This includes issuing information notices, and potential outcomes of checks, including appeal rights.
The guidance also covers what to do if the taxpayer is affected by the impact of coronavirus, what to do if help is needed and whom to ask, including links to independent organisations.
It is written in simple terms, and includes links to several videos that explain the more complicated points.
1.3 UT dismisses appeal on SDLT annuity arrangement
The UT has upheld an FTT decision on an SDLT avoidance arrangement, finding that for purchase of land with an annuity, the redemption payment was part of the chargeable consideration. The taxpayers had argued that the consideration was limited to the first twelve annuity instalments under the SDLT annuity rules. The annuity, however, had been set artificially low.
The taxpayers jointly purchased a property for an initial deposit and a small annuity. The taxpayers’ obligation to pay the annuity was then assigned to a third party for the aggregate cost of the payments plus a 10% fee and the court accepted this as a novation. Before the first annuity payment was due, it was redeemed by the vendors and the assignee repaid the balance. The SDLT return showed the consideration as just the deposit and the value of the first twelve annuity payments. The annuity had been so low that the principal would have been repaid after 1,893 years’ worth of payments.
The UT agreed with the FTT finding that the transaction had been designed to trigger the submission of an SDLT return without generating a tax liability. The redemption payment was made at the taxpayers’ direction, not the assignees’, on completion. The effective date of transaction was the date of completion, not the date the annuity was created. The chargeable consideration was therefore the amount paid on completion, not the expected value of the first twelve annuity payments. Even if this were not the case, anti-avoidance provisions would operate to treat the redemption payment and deposit together as the consideration.
Hannah & Anor v HMRC  UKUT 22 (TCC)
2. PAYE and employment
2.1 EU member states adopt detached worker provisions
None of the EU member states has opted out of the detached worker provisions. Individuals working temporarily in the UK or the EU for less than two years will therefore usually only pay social security or NICs in their home country.
Under the UK/EU Trade and Cooperation Agreement, workers generally only have to pay social security contributions in one country at a time. When an individual moves to another country for more than two years, they will usually pay social security in that new country. The position for individuals moving for less than two years, however, was less clear. EU member states had the opportunity to opt out of the ‘detached worker’ provisions, but have now all agreed to adopt them. These provisions mean that workers who obtain approval from their local tax authority can continue to pay social security contributions only in their home country if they work abroad for less than two years. These rules also apply to individuals moving between the UK and Switzerland for less than two years. The limit is 12 months for individuals moving between the UK and Iceland, with a possible extension by a further 12 months, and 36 months for those moving between the UK and Norway. Updated guidance has been published by HMRC to reflect these changes.
2.2 HMRC Employer Bulletin: February 2021
The latest Employer Bulletin from HMRC covers information and updates on COVID-19 support measures as well as year-end reporting.
It includes information on:
- how to obtain financial support under the Coronavirus Job Retention Scheme;
- the National Insurance holiday for employers of veterans;
- disguised remuneration;
- end of tax year reporting; and
- the VAT reserve charge for construction, which is coming in on 1 March.
3.1 VAT deferral new payment scheme opens
Businesses can now join the VAT deferral new payment scheme (the Scheme). It allows businesses to pay VAT deferred in 2020 by instalments.
The Scheme was announced in 2020, and will be open for most businesses from 23 February until 21 June 2021. Businesses on the VAT Annual Accounting Scheme or the VAT Payment on Account Scheme will, however, be invited to join the Scheme in March 2021. The Scheme allows businesses to pay their deferred VAT in interest-free instalments. The number of instalments, from 2 to 11, depends on when the business joins the Scheme. The deadline for joining the Scheme is now 21 June 2021, which will allow a business up to 8 instalments. This is a change to the past Scheme rules, which initially required businesses to join by the end of March 2021. Businesses that do not join the Scheme must pay the deferred VAT in full by 31 March 2021.
4. Tax publications and webinars
4.1 Tax publications
The following Tax publications have been published.
5. And finally
5.1 The height of romance
Naturally, we are sure that none of our readers forgot St Valentine’s Day on Sunday. If you did, though, do not despair: just look to Twitter for inspiration – at the #TaxValentines hashtag that is. You won’t regret sending one (well, you might*) - just don’t complain about VAT on the chocolates.
Though not aspiring to the heights of those romantics who have suggested eloping to a tax haven, or disclosing their love in accordance with DAC6, we have had a go:
Roses are red,
But VAT standard rated1 -
I sent my love Jaffa cakes2,
She was not elated.
*The editorial team accepts no liability for any adverse consequences for your personal relationships.
1 s2 VATA1994
2 VATA 1994, Sch 8, Group 1, Note 5
|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.