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 Tax Update and May Day Bank Holiday
Tax Update will be taking a break next week for the Bank Holiday. The next issue will be on 12 May.
1.2 OTS finds HMRC has made considerable progress with its guidance
The OTS has published an evaluation update paper reviewing HMRC’s improvements to its taxpayer guidance. HMRC has made ‘considerable progress’ in this area since October 2018.
In 2018, the OTS reviewed HMRC’s guidance for taxpayers and made twelve recommendations for improvement. The review recommended, in particular, a new three-tier structure to HMRC’s guidance, with clear distinctions between mainstream guidance, specialist guidance and HMRC’s manuals. HMRC has committed significant resource to the Guidance Team, made progress in implementing a new guidance model, and made use of external feedback and a Guidance Strategy Forum. The OTS recommends that additional resources be committed to HMRC’s guidance work.
2. Private client
2.1 HMRC letters: Enterprise Investment Scheme relief
HMRC will send letters to investors who claimed tax relief under the Enterprise Investment Scheme (EIS) or Seed EIS, in respect of companies that ceased to meet the EIS conditions. The letters request information to enable HMRC to make an assessment to withdraw EIS relief.
HMRC has announced that it will send letters to taxpayers who invested in companies that ceased to meet the conditions for EIS or Seed EIS relief up to July 2019. The taxpayers are requested to provide details of their investments and the IT relief received, to enable HMRC to raise assessments where relief should be withdrawn. The letters also ask taxpayers who claimed CGT relief on the sale of their EIS investments to contact HMRC to discuss their tax position. HMRC has confirmed that no penalties will be charged where EIS tax relief claims were made before the company invested in ceased to qualify for EIS relief.
3. Business tax
3.1 New country-by-country reporting penalty factsheet
HMRC has published a factsheet setting out the penalty regime for country-by-country reporting (CbCR).
The factsheet explains when penalties may be imposed and how HMRC determines the amount to be charged. £300 penalties may be charged for failing to file a CbCR return, failing to notify HMRC in relation to CbCR reporting, or failing to provide information requested by HMRC. Daily penalties of £60 may be imposed for continuing failures. The maximum penalty for an inaccuracy is £3,000. It also explains how to appeal against penalties, and what to do if you believe your company has a reasonable excuse for failing to comply.
3.2 ICAEW calls for super deduction extension
The ICAEW has called for the new super deduction and special rate first year allowance to be extended to assets purchased for the purpose of leasing to third parties.
The ICAEW argues that the extension is in line with the Government’s aim to encourage commercial investment and growth. Under the current drafting of the Finance Bill, the 130% super deduction and 50% special rate first year allowance are not available for assets that were acquired with the intention of leasing them out. The ICAEW has also noted that excluding assets acquired for third party leasing would result in considerable complexity where parts of buildings are fitted and leased out.
4. Tax publications and webinars
4.1 Tax publications
The following Tax publications have been published.
The following client webinars are coming up over the next week.
- 29 April: MTD Phase 2 - Are you ready?
- 6 May: Professional Practices Spring Webinar Series
- 12 May: S&W Sessions: Transfer Pricing
5. And finally
5.1 Family Fortunes
We were taken by an interesting recent little op-ed piece in the Times by Paul Johnson of the IFS, who contrived to quote Niccolo Machiavelli while conjuring up game show memories of Bob Monkhouse and Max Bygraves. We salute him. His thesis was simple: inheritance is a big and growing barrier to the social mobility that virtually all politicians favour. Part of the answer, he felt, was inheritance tax. He went on to suggest that this could actually be by reducing the rate and broadening the base as a way of increasing effectiveness and reducing avoidance.
Readers will recall that that view chimes with the All Party Parliamentary Group’s Report on in Intergenerational Fairness. It has to be said, without expressing a view as to what should happen, if there are any voices speaking up for narrowing the tax base and increasing the rate, they are very quiet. Mr Johnson, himself no bending reed, is, as it happens, a straw in the wind.
|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.