Weekly Tax Update 21 September 2021

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

Tax Article Large Companies 1500X1000 May 22
Ami Jack
Published: 21 Sept 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 HMRC agent update 88

HMRC has published Agent Update 88, which provides an overview of the recent issues of which tax agents should be aware. It includes updates on HMRC services, and forthcoming changes.

The latest Agent Update summarises various recent issues and changes, including guidance on:

  • the winding down of the Coronavirus Job Retention Scheme;
  • how to register non-taxable trusts with the trust registration service;
  • making tax digital for VAT;
  • registering for self-employment and Class 2 NICs; and
  • HMRC agent services.


1.2 HMRC removes relaxation for self-employment registration

Everyone applying to register as self-employed with HMRC must now obtain a National Insurance number (NINO) beforehand. The temporary relaxation in the rules was to account for difficulties in obtaining these during the pandemic, and those who took advantage of this must now obtain an NINO and register for Class 2 NICs.

During the pandemic, applying for an NINO became more difficult as the Department for Work and Pensions (DWP) suspended face to face appointments. Now that these have resumed taxpayers are expected to obtain an NINO before applying to register as self-employed with HMRC by using form CWF1.

Those who took advantage of the relaxation by applying without an NINO using form SA1 must now obtain one, and contact the National Insurance helpline to register for Class 2 NICs.


1.3  Report on changing the end of the tax year published

The Office of Tax Simplification (OTS) has concluded its review of the potential for moving the end of the tax year. The review did not aim to provide a specific recommendation about whether or not a change should be made, but the OTS does not consider that such a change should take place in the immediate future. Instead, it suggested that taxpayers be allowed to use 31 March as a stand-in for 5 April for some purposes. 

The review sets out the benefits and drawbacks of a tax year end change, and notes that any change should not be implemented before other projects are complete, from 2023 at the earliest. It looked in detail at the potential for moving the year end to 31 March, and considered a move to 31 December more briefly.

It sets out the clear benefits of a year end matching a month end, or the calendar year end. 31 December would align with other countries and be the simplest approach, as well as assisting international taxpayers. The system impact would be similar to a move to 31 March, but be a greater change overall. 31 March would align with the UK’s financial year and assist taxpayers who prepare accounts. Detrimental effects would be mostly around implementing the change, as this would take a lot of resource from the Government and taxpayers. The OTS notes that it would not be feasible to make a change until after the implementation of Making Tax Digital for income tax.

Overall, the OTS believes that a change should not be made in the immediate future, but that “the government and HMRC [should] pursue ways to formalise arrangements to allow (or even require) taxpayers to use a 31 March cut off to stand in for 5 April in respect of the calculation of profits from self-employment and from property income, ahead of the implementation of Making Tax Digital for Income Tax.


1.4  New Financial Secretary to the Treasury

Lucy Frazer MP replaces Jesse Norman MP as the Treasury Minister chiefly responsible for dealing with HMRC and the tax system.

As part of a general reshuffle, a new Financial Secretary to the Treasury has been appointed: Lucy Frazer MP. We wish Ms Frazer well in her new position.


2. Private client

2.1 HMRC ‘nudge’ letters: remittance basis charge

HMRC has announced a new campaign of ‘nudge’ letters, sent to taxpayers that HMRC believes may have omitted to report an event, as a way of encouraging them to get their affairs in order without starting a formal enquiry. These have been used mostly for offshore matters, and this batch aims to improve compliance with paying the remittance basis charge (RBC).

These letters are being sent to individuals that HMRC believes became liable to pay the RBC in 2019/20. The criteria are that records indicate they have lived in the UK for 7 years out of 9 or 12 years out of 14 prior to the tax year starting 6 April 2019, and have claimed to be non-UK domiciled. They will be asked to amend their 2019/20 tax return, or explain to HMRC why no amendment is needed.

The letter sets out some common tax return errors made by remittance basis taxpayers, and information about UK tax residency rules. Agents will receive a copy of the letter if applicable.


3. PAYE and employment

3.1 HMRC wins appeal on the taxation of football referees

The CA has found that the UT and FTT erred in law in their approaches to tests to determine whether or not a contract engaging a referee for a football match was one of employment. It remitted the case back to the FTT for it to consider if the CA findings about mutuality of obligation and control were sufficient for it to classify the contracts as those of employment.

The taxpayer, a company, engaged referees for football matches who were paid per match attended. HMRC issued determinations on the basis that these payments should be subject to PAYE and NICs as employment income, and the taxpayer appealed. The FTT and UT had found that these engagements were self-employments, on the basis that there was insufficient mutuality of obligation.

The CA considered a number of previous cases in the area. It did not consider the overarching contracts, but instead looked at the specific contracts engaging a referee for each game. It found that the FTT erred in law in finding that the ability of each side to pull out negated mutuality of obligation, as did the UT. The UT further erred in finding that contracts could not be for employment if they merely provided for a worker to be paid for the work he did. The CA also found that the FTT had erred in finding that the coaching system for referees was irrelevant to the question of control.

The case has been remitted back to the FTT for it to reconsider whether or not there was sufficient mutuality of obligation and control in the individual contracts for these to be contracts of employment in light of the CA conclusions.

HMRC v Professional Game Match Officials Ltd [2021] EWCA Civ 1370


4. VAT

4.1 FTT issues ruling on the reconstruction of a listed building

The FTT has ruled that a reconstruction of a listed building did not qualify for zero rating, as the retained element of the existing building was not de minimis.

The taxpayer acquired a listed building that previously operated as a care home, which was then converted into 86 flats. The conversion included the retention of external walls, the majority of the roof and also additional internal features, including the chapel and marble staircase, in compliance with planning requirements.

HMRC argued that the retention of the additional features precluded zero rating and the sale of the converted flats was exempt from VAT, thereby preventing VAT recovery on conversion costs. The taxpayer argued that specific features were retained in order to maintain the structural integrity of the exterior of the property and that other retained features, such as the chapel and marble staircase, were de minimis. The taxpayer also maintained that the EU principals of Fiscal Neutrality and Proportionality should apply in its favour.

The FTT considered the features of the converted building and found that some retained elements, such as the staircase, were significant and could not be considered as de minimis. The FTT also considered fiscal neutrality and proportionality and found that neither of these principals were breached and therefore dismissed the appeal.

Richmond Hill Developments (Jersey) Ltd v HMRC [2021] UKFTT 0290 (TC)


5. And finally

5.1 Right and Repulsive

Here come the Tax Roundheads again.  The latest notion is that the tax year should be aligned with the calendar year, on the basis that this would be simpler, enable companies with international connections to flourish and all round just be more rational. The only problem is how to get there.

And finally objects.  To complete the 1066 And All That observation we want to be wrong but romantic.  April 5 and the potty reasons for its choice have served since 1752.  We don’t need to rehearse them here because all tax lovers know the ridiculous story about various Popes, their calendars and short tax years.  We want April 5 to stay because the story is just too good to waste; but if we must move the date, let’s at least go back to the correct one: March 25th.  The spring equinox has a scientific basis, and a historical pedigree going back thousands of years and was indeed our New Year until the calendar bores got going. Where tax leads, everyone else must follow.  Cold Turkey for tax?  Not any more.


This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.