This time we have summaries covering a wide range of tax case decisions which cannot fail to be of interest to SME advisers, especially as two feature accountants.

HMRC's appeal against actor Tim Healy's claim for accommodation costs when away from home on work has been heard after a delay. The case goes back to the FTT for another hearing leaving the acting profession and many other business travellers none the wiser as to when we can safely advise clients as to the deductibility of their accommodation costs. Many might appreciate the Office of Tax Simplification having a go at addressing this problem. It is absurd in these situations to say that we must apply the law "according to the facts of each case" because not only is each case different but there is now so much diverse reported case law on this that we are constantly getting different angles of approach even from the Upper Tier Tribunal. HMRC will not treat Mr Healy's case as a test case which seems chronically unfair for the taxpayer who I have no doubt had no idea that he had lit a touch paper when he decided to rent a flat instead of a hotel room.

Do read on for my summary and 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

Tim Healy: when can an actor obtain tax relief on accommodation costs?
HMRC v Tim Healy [2013] UKUT 0337 (TCC): we are no wiser as the Upper Tier Tax Tribunal remits the actor’s accommodation case back to the First Tier Tax Tribunal for a rehearing...More

Purchase of own shares: what is the tax effect when the transaction is void under Company law?
In Russell Baker v HMRC TC02790 the Tribunal had to decide whether the payment received by the taxpayer was taxable as a distribution instead of capital or not taxable at all...More

Tax cases featuring accountants

No loss relief for non-commercial business
In Stephen Kitching v HMRC TC02781 [2013] an accountant taxpayer was denied income tax relief for his trade losses. His sports shop had not made profits for 14 years running...More

Joint property mix up
In another case on joint property Mr and Mrs Koshal v HMRC TC02826 [2013], a couple held a property portfolio in joint names but the accountant husband wanted income to be assessed only on his wife. He failed to show any transfer of beneficial interest...More

Just missed deadlines:

31 July 2013 - tax credits renewals, payment of second instalment of income tax for 2012/13, filing of late returns to avoid penalty.

What's new?

HMRC has updated List 3 - the table lists the professional subscriptions are allowable for tax if paid by employees.

Missed last time's summary? See Nichola's SME Tax W-update 24 July 2013

Updates and new guides for subscribers

Joint property: legal v beneficial ownership
UPDATE: we have seen many cases recently where spouses (including accountants) fail to understand the rules. This guide provides you with a concise summary of the differences between legal title and beneficial ownership and explains what elections or actions are necessary to ensure that tax treatment matches your intentions.

Purchase (repurchase) of own shares
Step by step guide to ensure Companies Act and tax compliance is met to allow a repayment to be treated as capital in the hands of the outgoing shareholder.

Disincorporation Relief
New: this new relief applies from 1 April 2013. It may be useful for small companies which decide that it it is administratively easier to scale down and become sole trades or partnerships.

Wear and tear allowance and the renewals basis
UPDATE: the rules changed on 6 April 2011 and then again on 6 April 2013: this updated guide explains the different tax treatments year by year.

IHT: non-domiciled spouses
From 6 April 2013 a non-dom spouse may elect to be treated as UK domiciled, this might be a dangerous election to make without some careful consideration.

Tax penalties: SA late filing and payment
UPDATE: taxpayers have been calling up about penalties and so we updated this guide.

Schedule 36 information notices
NEW: mini guide to HMRC's power's with topical tips and case law

IHT: restrictions on liabilities against the estate
NEW: provisions were introduced by the Finance Act 2013 that restrict to what extent certain liabilities may be deducted against an estate on death. HMRC has now updated its manuals to reflect the changes which may catch out advisers and taxpayers alike.

Goodwill: trade related properties
UPDATE: a handy guide if you are considering valuations for incorporation, roll over relief or stamp duty land tax.

Close Company Loans Toolkit
NEW: We have summarised the new rules following the Finance Act 2013 changes which will apply from 20 March 2013 (once the Act receives Royal Assent, with examples, tips and planning points.

Leaving payments and directors
UPDATE: a handy summary that answers many of your FAQs to our Virtual Tax Partner Support line.

Limit (cap) on income tax reliefs
NEW: guidance on this Finance Act 2013 measures with examples. 

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. 

10 second comment

HMRC have appointed a new Chief Digital and Information Officer and so we give our congratulations to Mark Dearnley who leaves Vodaphone to take up his new role. We also note from another press release that "by 2015-16 SMEs (small and medium enterprises) and their agents will be able to (amongst other things)

  • access nearly everything they need through a single personalised homepage..."

That sounds exciting. The only trouble is that some of us are suffering from "digital exclusion". We won't get decent broadband in this part of the country until 2017 at the earliest and our MP has told us to invest in satellite technology, so we probably won't even get "superfast" broadband ever. We hope that HMRC does not forget about us.

More tax stuff

My Tax Return Catch Up campaign This new Self Assessment disclosure opportunity offers best terms yet and seems to be attracting a lot of interest.

A GAAR is born! The general anti-abuse rule now applies following Royal Assent to the Finance Bill 2013.

Consultation: Reform of Close Company Loans to Participator rules More changes proposed for 2014.

 'Simpler' Accounting for tax

Accounting: Simpler Income tax (cash basis) / fixed expenses
Start here (self-employed taxpayers) to decide which of (or both) the new measures to adopt.

Board and lodging adjustments
All change from 5 April 2013.

Cash or accruals accounting toolkit
At a glance summaries with planning points and examples for all advisers in this new guide.

Flat rate expenses or actual cost toolkit
Essential briefing for advisers and clients.

Top Tips for directors

Converting part of a home into an office 
 How to create a tax-efficient home office.

Directors' tax planning toolkit 2013/14 
Our rolling planner which is updated throughout the year

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.

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.

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 
A guide is for trading companies and professional practices: we see many different structures and so we are constantly updating this guidance.

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.

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

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.

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

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.

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

Adviser planning update: losses
Navigating the new losses minefield in 2013/14.

Annual Investment Allowance
NEW: a handy summary with planning points.


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