This time we take a look at CGT Private Residence Relief on "granny flats", worth considering in view of our aging population. We report on yet another failed tax avoidance scheme, this time the taxpayers claimed to be car dealers. We revisit changes to motoring expenses, partnership tax changes and RTI penalites.

The RTI penalty changes are slighlty confusing, as I note that HMRC says that it is not charging late payment penalties under RTI, but what it means is that it is not going to start its automatic late payment penalty system just yet. This means that if you are late in paying PAYE you will be penalised on a two strikes and you are out basis (second default creates a penalty) under the current Schedule 56 FA 2009 regime.

Follow the links below for summaries and briefings.

Best wishes

Nichola Ross Martin FCA
Tax Director

Your online Virtual Tax Partner: practical support for accountants, tax advisers and their clients

News (Freeview)

Granny flat qualifies for CGT Private Residence Relief (PRR)
In Wagstaff & Wagstaff v HMRC [2014] TC03183, the First Tier Tribunal (FTT) held that a ‘granny flat’ (the Flat) owned by a couple, which was subject to an agreement allowing a relative to live there for life (or until remarriage), was eligible for Capital Gains Tax (CGT) Private Residence Relief (PRR).

Ex-dj Chris Moyles in "car dealer" tax scheme
Three taxpayers, who included former BBC Radio One DJ Chris Moyles were unsucessful in claiming tax relief under a tax avoidance scheme in which they claimed to be car dealers.

Real Time Information (RTI) penalties
UPDATE: summary of the new regime. Some confusion about late payment penalties; it seems that the new automatic penalties will not apply until April 2015, however the existing Schedule 56 FA 2009 penalty regime remains.

Official rate of interest
HMRC's official rate of interest goes down to 3.25% on 6 April 2015.

Employment Allowance: NICs £2,000 relief
From April 2014 most employers may claim a £2,000 Employment Allowance that may be offset against employer’s NICs (ER’s NICs) and so reduce the payroll cost of being an employer. From 2015/16 there is no Employers NIC for under 21's.

Annual Tax on Enveloped Dwellings (ATED)
Don't forget that the ATED return and tax payment for 2014/15 are both due on 30 April 2014.

DOTAS: what to do if you are given a scheme reference number?
UPDATE: guidelines for ATED schemes

Our Subscriber Toolbox

Focus on CGT private residence relief (PRR)

CGT Private Residence Relief: dependent relatives

The property must have been occupied rent-free and without any other consideration by the relative from before 6th April 1988

CGT Private Residence Relief: settled property & granny flats
Where the property is occupied under the terms of a settlement, or via personal representatives. See recent case above.

CGT private residence relief
The exemption for the last 36 months of ownership reduces to a 18 month period from 6 April 2014: time to review elections?

'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
These changed on 5 April 2013.

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

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

Travel (self employed)
UPDATE: we summarise the rules for the different trades and professions based on case law

Editor's choice: focus on directors

Directors' tax planning toolkit 2022/23
Update: what's hot and what's not in tax planning this year

ABC or alphabet shares: directors & employees 
This links you to guides for directors, family companies and employers.

Directors' service contracts - top tips
Company law requires that a director has a service contract with his company.

Negligible value claims 
If the value of an asset (such as shares in an unquoted company) has become negligible a taxpayer may make a negligible value claim under section 24 TCGA 1992 and claim a loss on the asset. Using share loss relief the loss may be claimed against income.

Employees and share schemes

PAYE: Starter checklist new employee 2022-23
Note that this is our (improved) version of HMRC's New Employee Starter checklist, updated for the 2022-23 tax year. 

Employee Shareholder Status - tax & planning
The new type of employee and a new type of employee share scheme.

Employment Related Securities
This explains what happens when you give an employee or director shares outside of an approved share scheme or EMI option scheme.


Partnerships: profit allocations with mixed membership
These are designed to counteract tax advantages where individual partners use the flexible profit or loss sharing arrangements in order to allocate profits to corporate members.

When is a LLP member taxed as an employee?
A new three step test is being introduced to determine whether a LLP member is "salaried member" for tax purposes.

Directors' loans: new rules from April 2013

Loans to participators 
A loan to a LLP whose members are participators in a close company will be subject to the corporation tax loan to participator rules, see Close Company Loans Toolkit.

Directors' loan accounts: toolkit (freeview)
A checklist that details the main tax issues surrounding directors' loans.

Close company loans toolkit
Essential reading with a focus on new rules for "bed and breakfasting" loans to participators and measures affecting loans to LLPs. Review of latest consultation for reforming the loans to participator rules.

Most popular

Property & letting: CGT and IHT issues
Contrasting cases involving business asset CGT relief and residential properties.

Tax planning for income at marginal tax rates 
Strategies for avoiding higher rates of tax, in general, for the self employed and for employees and directors.

Research & Development Relief
SME guide to R & D reports.

Capital reduction: index
Capital reduction is the process by which share capital or other capital reserves, including the share premium account of a company are repaid to shareholders. We now have a full range of guides on this topic for shareholders and directors.Still coming to terms with the 2013 Finance Act and other recent changes?

Limit (cap) on income tax reliefs
Includes examples of situations which are affected by this cap.

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

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

When an inspector calls

Let Property Campaign
Still open: aimed at property landlords who have failed to disclose rental income. Unlike other fixed term opportunities this one has apparently no deadlines for registration.


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.

IHT: restrictions on liabilities against the estate
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.

Essential basics

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.

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

Can I charge my company rent for use of my home?

  • 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


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