This time: IR35: new checklist, a note on professional negligence, possible restriction on tax relief for goodwill, how do you tax certain benefits provided by your company, CIS successful appeals, guidance for directors on creating a home office, news and updates.
I appreciate the government's current enthusiasm to encourage small business to prosper as employers: "from small acorns mighty oaks grow" and all that. The trouble is that we need some infrastructure too as otherwise our roots are going to shrivel up. I am talking about communications as always. I was unable to publish last week's SME tax news update due to BT's ongoing failure to provide robust broadband in our area. A whole exchange was affected for three and a half days; that is pathetic.
On Real Time Information (RTI) reporting HMRC has fixed its problems with NI numbers so expect new ones which have suffixes. I made further suggestions on the ICAEW website along the lines that we could cure the bulk of the problems of RTI if we file our FPS and EPS by the 19th of the month following payment. That was well received by my fellow accountants. It makes sense to report after payment is made as it is often only following payment that an employee notes an error.
Big news last week was the case of Mehjoo v Harben Barker (a firm of accountants) highlighted in the press:
- A client claimed his accountants were negligent for failing to put him into agressive tax avoidance scheme and he was awarded substantial damages for their inability to provide specialist tax advice to a non-dom.
- Additionally they were forced to cough up his costs for a tax scheme that they had recommended and had subsequently failed!
- He produced a witneses-lawyer from KPMG who said that these schemes were all the rage back in 2002.
- The defence witness-accountant from Grant Thornton had limited knowledge of these schemes.
We might presume then that those schemes were not all the rage at some big firms. Alternatively these schemes were the rage amongst lawyers at some big firms but not amongst accountants at others perhaps...
Anyway, if you have litigious clients with deep pockets beware of what you did not offer them in the past. That is not a joke. Happily for our collective sanity the firm is said to be going to appeal the decision.
There is one thing to be learned; if you are out of your depth with a client seek a second opinion - that is exactly what our Virtual Tax Partner support service is for.
Back in the world of day-to-day SME tax:
We have a new improved version of our IR35 status indicator which is ideal coffee-break reading. We offer IR35 contract reviews if you need them. We have also updated our main IR35 guide.
We have an interesting piece on the disallowance of amortisation of goodwill which is worth a look if you are incorporating businesses. We also look at the new proposals to tax PAYE and NICs avoidance via offshore intermediaries and consider CIS penalties. There is much more of course, so please read on for news, toolkits, briefings, and updates.
Nichola Ross Martin FCA Tax Director
www.rossmartin.co.uk Your online Virtual Tax Partner: practical support for accountants, tax advisers and their clients
Consultation watch: Consultation on Offshore Employment Intermediaries
Under proposals designed to tackle PAYE and NICs avoidance by engaging staff via offshore intermediaries HMRC is proposing that offshore employers are accountable for PAYE, with transfer of debt provisions to intermediaries and the end client...More
- Student loans: repaying loans through SA - new guidance for agents completing tax returns...More
- CIS repayments: an updated leaflet that sets out how subcontractors that are limited companies should reclaim any deductions under CIS...More
- Statutory Residence: HMRC has published a Tax Residence Indicator to help people determine their residence status for tax purposes. It is a pilot version so has limited access...More
- UK/Swiss Agreement: action for UK residents with accounts or investments in Switzerland: a key date in the UK and Swiss Tax Agreement has just passed and a one-off levy will automatically apply...More
- Block on capital allowance claims: new provisions in Finance Bill 2013 to stop claims for capital allowances on capital expenditure on plant or machinery which is covered by a contribution from another business...More
CIS: successful appeals against loss of gross payment status
Two successful appeals: HMRC rebuked for not including relevant case law in its bundle however the point of interest is in the tribunal's power of discretion in taking into account the affect that a loss of gross status might have on the business going forward. Rather salient points given the comments in the editorial above with regard to encouraging small business to become employers.
Director: company paid improvements to property and yacht benefit
Case update: of interest is how the tribunal apportioned the various benefits
Updates and new guides for subscribers
IR35 Employment Status Checklist
UPDATE: with news that HMRC has started a new round of IR35 status enquiries start here to consider all the relevant factors for determining whether an individual is really an employee.
Goodwill and the intangibles regime
Update on: case law restriction on purchase of pre 1 April 2002 goodwill from a related party. In Blenheims Estate and Asset Management Limited v HMRC the First Tier Tribunal dismissed a taxpayer's attempt at using a cross option scheme to try and circumvent the restriction for related parties. He claimed at that he was not a participator in the company and so not a related party on the transfer of goodwill. The FTT found otherwise.
Goodwill amortisation challenged
HMRC have sought to argue that there can be no deduction under the corporate intangibles regime for goodwill purchased by a company from a related party individual who created it after 1 April 2002 because the individual has not actually incurred any expenditure on the goodwill in question.
Accounting: Simpler Income tax (cash basis) / fixed expenses
Start here (self-employed taxpayers) to decide which of (or both) the new measures to adopt.
Converting part of a home into an office
UPDATE: guidance for directors on how to create a tax-efficient home office.
Recent additions and updates
Directors' tax planning toolkit 2013/14
NEW our rolling planner which is updated throughout the year
Can I charge my company rent for use of my home?
UPDATE: you may consider:
- Recharging the company, on the same basis as a conventional home-working employee for a proportion of your bills and running costs. This is explained in Working from home (directors) or
- Formalising a licence agreement with your company in order to allow it to occupy part of your property. It then pays you rent and service charges and you then claim all your expenses under self-assessment...More
Working from home (directors)
UPDATE: the same rules apply to home-working directors as other employees. However, a director is more likely to be able to charge rent and there may be some additional issues and complications by virtue of their office.
Do I pay a salary or dividend? 2013/14
UPDATE and re-write of last year's highly popular guide: this is designed to save you having to do all these workings yourself.
Tax masterclass: running an LLP & Co structure
UPDATE: this guide is for trading companies and professional practices: we see many different structures and so we are constantly updating this guidance.
New: a summary of the proposed rules. You may also sign up for our new Masterclass.
ABC or alphabet shares: directors & employees
UPDATE: essential reading for directors.
Consultation on partnership tax avoidance
Wide-ranging measures aimed at catching disguised employment (fixed profit share partners who carry no risk) and inappropriate allocation of profit (aiming to allocate profit to non-taxpayers). HMRC says that this is not going to cover cases where family members use partnership structures to allocate profits efficiently, as in the Artic Systems casecase.
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