This time we have update on P11D penalties because it is that time of year again.

We have revised guidance on the Cap on Income Tax reliefs. I keep meeting businesses affected by these rules and so we have some examples to illustrate the problems.

I have also updated our note on the Wear and Tear allowance and withdrawl of the replacement cost concession. The rules might not exactly as you thought.

Of case summaries this week we have one involving a Chartered Accountant who was successful in managing to persuade the Tribunal to backdate an application to join the VAT Flat rate scheme. HMRC were criticised for failing to make their discision making process clear.

We have also summarised the recent cases on IHT APR and BPR and also have a note on avoiding negligence.

Scroll on down for more news, toolkits, briefings, and updates.

Best wishes


Nichola Ross Martin FCA
Tax Director
Your online Virtual Tax Partner: practical support for accountants, tax advisers and their clients

 News headlines

Flat rate scheme: retrospective authorisation
A Chartered Accountant was successful in a claim for retrospective authorisation to use the VAT Flat Rate scheme.

Topical tips: avoiding negligence claims
Summaries of recent cases involving costs and delay which are worth scanning if you have a moment to spare.

RTI: relaxation in reporting extended to April 2014
HMRC has announced that its concession to relax the strict timing of submission under Real Time Information (RTI) reporting will now be extended until April 2014

Agora Capital Diamond Schemers
Lock up your elderly relatives: high pressure sellers on the prowl. 

Digital by default (you'll be lucky)
The government's plans for rural broadband are "a train crash waiting to happen", full NAO report due for publication this Summer.

Missed last time's summary?
Nichola's SME Tax W-update 12 June 2013

Updates and new guides for subscribers

Tax penalties: P11Ds
Which penalties apply for late filing and errors in returns

Limit (cap) on income tax reliefs
NEW: guide with examples as we have already met two cases where planned investment in plant is being capped. Was this really the policy intention?

Wear and tear allowance and renewals basis
UPDATE: HMRC withdrew its renewals basis concession in April 2013, and the wear and tear allowance was enacted in 2011/12. Can you still obtain tax relief on the cost of replacing furniture? We look at the small print: another situation where the rules may surprise you.

IHT: Business Property Relief
UPDATE: the dust has barely settled on the Upper Tier Tax Tribunal's decision that a furnished holiday letting does not qualify for BPR see (HMRC v Nicolette Vivian Pawson [2012]), when we find in The Trustees of David Zetland Settlement v HMRC TC02690 [2013] that the First Tier Tribunal has refused BPR on a very actively managed serviced office business. One would hope that the trustees will appeal.

Back to basics

Travel rules for owner-managers
Back to basics guidance for directors

Travel rules for the self employed
Guidance for sole traders and partners, following the decision in Samadian this is one area of tax that badly requires simplification.

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:

Employee Shareholder Status - tax & planning NEW: the new measures introducing a new category of employee share owner are interesting for all sizes of companies. Our guide explains all.

Cash or accruals accounting toolkit UPDATE: we have added "Adviser Alerts" to warn you about certain aspects of cash accounting that may catch you out. Further guidance on transitional measures of changing accounting method.

Flat rate expenses or actual cost toolkit UPDATE: new introduction to help explain this new systems to clients with added tips for advisers.

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 directors is more likely to be able to charge rent and there may be some additional issues and complications by virtue of their office.

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.

Disincorporation relief 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 tax-payers). 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 case.

P11D forms online
Two forms are now available online - No Return of Class 1A NICs and Notification of payrolled benefits.

Employee owner status
New briefing note to chat over with clients, with links to detailed guidance.

NIC holiday for new employers
Last chance to claim for new businesses however this scheme ends in September 2013.

Editor's choice

Joint income: splitting income within the family
A family tax planning exercise involving joint bank accounts went very wrong when HMRC invoked the Settlement provisions. The tax tribunal seems to have had sympathy with a taxpayer who struggled over the interaction of income tax and trusts anti-avoidance.

Investigations: the presumption of continuity
When the `presumption of continuity' is made during the course of a tax investigation HMRC will take the view that an under-declaration made in one year will have been repeated in other years. The onus of proof is on the taxpayer to disprove this.

Guides and toolkits

Employment related loans
NEW: anti-avoidance measures were announced in the 2013 Budget which may inadvertently catch out some close company owners with partnership interests. Additionally, the exempt limit rises next year.

Directors' loan accounts: toolkit
UPDATED: following Budget 2013

IR35: changes from 2013
From April 2013 under measures introduced in the 2013 Finance Act office holders will become within the scope of IR35.

Simpler income tax accounting and fixed expenses
Introduction to the new regime

NICs on dividends
UPDATE: review of the circumstances (based on case law) in which we would expect HMRC to classify dividends as employment income and commentary on the PA Holdings case.

Employment Allowance: NICs £2,000 relief
The NICs holiday ends in September 2013, this relief applies to all employers from April 2014

What expenditure qualifies for plant & machinery allowances?
UPDATE: added some examples from HMRC

Close companies: tax planning and pitfalls
UPDATE: s455 tax charge on loans to participators. New measures to counter tax avoidance via use of loans with partnerships, trusts, transfers of value and "bed and breakfasting"

High Income Child Benefit Tax Charge
Only two new questions to go on the 2012/13 tax return & HMRC is making a new calculator

Mansion tax(es) - at glance
Plans to tax individuals (and unsettle the coalition) may have been thrown out, but new annual tax charges apply on higher value property for corporate owners and other non-natural persons from April

Fees and subscriptions (professional bodies)
HMRC updates List 3: have all employees claimed tax relief yet?

CGT Top tips: losses & connected persons
Think twice before selling property to your company at a loss; a cautionary tale of clogged losses.

Essential reading

for paying subscribers only


Repairs and renewals
UPDATE: another case on resurfacing and explaining the interaction between the rules for residential property letting, integral features and repairs.

Annual Investment Allowance
NEW: a handy summary with planning points

Investigation news

Property Sales campaign
Top tips on HMRC's latest disclosure opportunity

Tax masterclass: running an LLP & Co structure
UPDATE: this guide is for trading companies and professional practices: we see many different structures

Disincorporation relief
New: a summary of the proposed rules. You may also register now for new Masterclass

ABC or alphabet shares: directors & employees
UPDATE: essential reading for directors

ABC or alphabet shares: family companies
UPDATE: issues for the family

Distributions & striking off
NEW: this guide explains the rules now that ESC C16 has been legislated and notes potential planning points and pitfalls

High Income Child Benefit Tax Charge
The new charge explained with helpful flow charts to decide who pays and when

Accountancy & tax fees
What is allowable and what is not

Employer pension contributions
Last chance for income tax and NICs relief for pension contributions made on behalf of an employee's family

Tax planning for income at marginal tax rates
Strategies to avoid unexpected tax charges such as the High Income Child Benefit Tax Charge (HICBC)

Property profits & losses: toolkit
Our toolkit covers the points made in HMRC's version but adds a great deal more information about what you can and can't claim

Editor's favourites

AIA: rules where there is a change of rate
Worked examples

Dividends: index
Guides to dividends: minutes, warrants and tax on unlawful distributions

Tax-free benefits in kind and perks
UPDATE: last chance for a cyclists breakfast!

Tax penalties: SA late filing & payment
Guide plus examples: don't overlook the late payment provisions

Avoiding marginal rates of tax
Tax planning tips and examples

Tax-efficient profit extraction checklist (companies)
A new checklist and briefing too for companies and their owners

Relevant earnings for pensions purposes
A useful page to bookmark

Most popular

Here is a small selection of our guides (there are now over 900 guides and checklists available to paid subscribers)

Tax Data

PAYE late payment penalties buster

Overpayment Relief (formerly error or mistake)

What expenses can I claim?

Goodwill & incorporation: tax issues

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