Weekly Tax Update 17 March 2021

The latest tax update and VAT round up for the week.

Accounts 724599511
Ami Jack
Published: 17 Mar 2021 Updated: 13 Apr 2023

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. General

1.1 New guidance on SDLT for non-UK residents

HMRC has published guidance on the new 2% surcharge for non-UK residents acquiring residential property in England or Northern Ireland. 

As announced in the Budget, non-UK residents will be subject to an additional 2% surcharge on SDLT when acquiring residential property. The rules take effect from 1 April 2021. They apply to both companies and individuals, and to some UK companies controlled by non-UK individuals. The guidance covers topics such as the SDLT residence tests, reliefs, how to obtain a refund, and what records purchasers should maintain.


1.2 Finance Bill 2021 published

The Finance Bill was published on 11 March, following the Budget. It sets out the final legislation for previously announced measures.

Much of the legislation was previously published in draft for measures announced before the Budget, such as the SDLT surcharge for non-UK residents. Minor amendments have been made following consultations. The legislation for Budget 2021 measures was not available previously.

The legislation will not take effect until Royal Assent to the Finance Act.


2. Private client

2.1 Pre-grant verification for self-employment support

HMRC is contacting some of the taxpayers who noted on their 2019/20 tax returns that they have become self-employed, asking them to verify their business activity. This is an anti-fraud measure, as they may be eligible for the fourth grant under the self-employment income support scheme (SEISS).

Unlike previous grants made under the SEISS, the fourth grant is open to those who became self-employed in the 2019/20 tax year. If eligible, they will receive a date from which they can make a claim in mid-April.

HMRC is contacting a subset of these taxpayers, asking for information to confirm their identity and business activity. The taxpayer will be called from an unknown number and asked to provide their email address. A Dropbox link will be sent to that, which they must use within 2 days to upload ID and three months’ worth of bank statements from the account used for their business.

Those who fail to comply will not be able to claim the fourth SEISS grant.


2.2 HMRC raising protective assessments for offshore tax liabilities

HMRC has informed the CIOT that it will be issuing some taxpayers with assessments for liabilities relating to their offshore tax affairs before 5 April. These will allow HMRC to continue investigations into tax years where the time limit for assessments is due to expire at the end of this tax year.

Most of these will be issued to taxpayers who have disclosed an offshore tax liability to HMRC under the worldwide disclosure facility. They will be issued in cases where HMRC is not yet ready to make a final assessment, but needs to extend the time in which it can investigate.

HMRC issue protective assessments every year, but more are expected this year as the extended time limits for assessments under the requirement to correct rules expire on 5 April 2021.


3. PAYE and employment

3.1 Employment-related securities bulletin

HMRC has published edition 38 of the Employment-related securities (ERS) bulletin, which provides an overview of recent changes, including working time requirements for Enterprise Management Incentive (EMI) working time requirements.

Issues covered include:

  • HMRC continuing review of the impact of the pandemic on tax-advantaged share schemes;
  • EMI: working time requirement relaxation extended;
  • EMI: new call for evidence on whether or not the scheme should be extended, and, if so, how;
  • a new email address for share asset valuations;
  • a reminder on the non-statutory clearance process; and
  • HMRC contact details for share schemes enquiries.


4. Business tax

4.1 UT clarifies the meaning of ‘plant’ for capital allowances

The UT agreed with HMRC that underground gas cavities were not eligible for capital allowances because they were not ‘plant’. If an asset functions as both plant and premises, it should be classified by determining which function is more appropriate. 

The taxpayers had incurred expenditure in relation to underground cavities used for gas storage. HMRC denied claims for capital allowances on those costs, and the FTT found in favour of HMRC. The primary question was whether or not the cavities were ‘plant’ for the purposes of capital allowances. The FTT found that the cavities functioned as both plant and premises, but that they predominantly functioned as premises. They were therefore not eligible for capital allowances.

The taxpayers appealed to the UT on the grounds that having any plant-like function is sufficient to be considered ‘plant’ for capital allowances purposes. The UT disagreed. It held that the FTT had applied the correct test, although its terminology was inconsistent with case law. The correct approach is to consider which function is more appropriate, rather than which is predominant. It was more appropriate to classify the cavities as premises than as plant, based on the facts of the case. They were therefore not eligible for capital allowances.

Cheshire Cavity Storage 1 Limited (and another) v HMRC [2021] UKUT 50 (TCC)


5. Tax publications and webinars

6. And finally

6.1 Chin up

As we near the one-year anniversary of the first lockdown and reflect on the tumultuous and, frankly, exhausting past twelve months, we would like to echo this encouraging message from McVities:

‘If a cake can be a biscuit, you can be anything!’

We agree; if only for VAT purposes.


Ref: NTAJ14032138


Organisations CourtsTaxes etc
ATT – Association of Tax TechniciansICAEW - The Institute of Chartered Accountants in England and WalesCA – Court of AppealATED – Annual Tax on Enveloped DwellingsNIC – National Insurance Contribution
CIOT – Chartered Institute of TaxationICAS - The Institute of Chartered Accountants of ScotlandCJEU - Court of Justice of the European UnionCGT – Capital Gains TaxPAYE – Pay As You Earn
EU – European UnionOECD - Organisation for Economic Co-operation and DevelopmentFTT – First-tier TribunalCT – Corporation TaxR&D – Research & Development
EC – European CommissionOTS – Office of Tax SimplificationHC – High CourtIHT – Inheritance TaxSDLT – Stamp Duty Land Tax
HMRC – HM Revenue & CustomsRS – Revenue ScotlandSC – Supreme CourtIT – Income TaxVAT – Value Added Tax
HMT – HM TreasuryUT – 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.