After a bit of a lull in tax news during the general election we are now going into overdrive. As usual we have cherry picked the best bits for SME advisers. I must apologise about the length of this time's edition, but stay with it: there are a lot of top tips, tax traps and tax cases reported this time which are worth a quick read through.

We represented the taxpayer in two of the cases reported here, each of which were heard at different times but tribunal decisions are a little like buses: the judgments appeared one behind the other. The cases were those on VAT penalties and actor's accommodation costs. 

Whilst on the topic of VAT we have an important update on a change of interpretation by HMRC of the rules on reclaiming pre-registration input tax.

Other key points to note are:

  • HMRC's recent climb down on late filing penalties
  • if you are advising any non-residents who happen to sell their UK residential property they have only 30 days to report the transaction with HMRC
  • a new case sets the bar higher in terms of "what is business" for IHT Business Property relief, it features a multiple property Furnished Holiday lettings business and relief was denied.

Back soon,

Nichola Ross Martin FCA Tax Director


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

News and views

HMRC late filing penalty update
HMRC says that it will not challenge self assessment late filing penalties in cases where the taxpayer has a reasonable excuse for not filing their tax return on time and has made an appeal. It transpires that the cost of investigating appeals outweighs the financial benefit of most penalties.

Employer's NICs Allowance scheme in the Spotlight
Following reports that a recruitment company has been caught out promoting a scheme to abuse the Employer's NICs allowance. HMRC has published a new anti-avoidance Spotlight, "Employment Allowance Avoidance scheme - contrived arrangements caught by existing rules".

Gift Aid and the 0% savings band
A tax trap for low income donors: don't Gift Aid if you don't pay any tax.

New advisory fuel rates
New rates apply for employees from 1 June 2015 (rates go up)

CGT: new reporting for non-residents & UK residential property
UPDATE: individuals and companies will need to report ALL transactions with HMRC, within 30 days of the date of completion and make a payment of the tax that is due.

Case round-up

VAT: excessive assessment was not made in "best judgement"
In M Hodges v HMRC [2015] a scaffolder was successful in reducing HMRC's assessment of VAT penalties from £394,694 to £7,807 despite being found guilty of dishonesty. HMRC's sampling technique was unsound.

Actor and accommodation costs
In Tim Healy v HMRC [2015] the well known actor was unsuccessful in claiming tax relief for renting a flat when working away from home. His admission that he chose the flat because he wanted a spare room to accommodate potential guests led to the FTT's conclusion that the expense was not "wholly and exclusively incurred" for the purpose of his business. Subject to appeal. 

CIS penalties
CJS Eastern v HMRC [2015]  features late filing penalties in the Construction Industry Scheme. A useful decision for pre FA 2009 penalties: the FTT explored its powers to reduce both fixed and month 13 penalties.

Late filing penalties: a club is not a person  
A loophole in the law: a community amateur sports club (CASC) is not a person under tax law, so it cannot be charged a tax penalty under section 98A TMA 1970. 

Valuation of unlisted securities
In Brian Foulser and Mrs Doreen Foulser v HMRC  the FTT noted that there is "no prescribed formula" for valuation of unlisted securities before having to decide on the market value of an unlisted company.

Remedy for a mistake (on a legal form)
In Lobler v HMRC [2015] a taxpayer ticked the wrong box when withdrawing funds from a life policy with the result was that he was imposed with a 700% tax liability. The Upper Tribunal allowed his mistake to be rectified. Thankfully the rules are more straight forward if you make a mistake on a tax return.

Editor's choice (subscription content)

IHT: Business Property relief and Furnished Holiday Lettings (FHL)
UPDATE: a new case review on FHL. Following the Pawson case (a single property), this case features a multiple unit FHL business. 

EIS: practical issues for advisers
NEW: a new guide and new top practical tips 

Employee Shareholder status: tax planning
UPDATE: be aware of the potential tax traps on share for share exchanges and reorganisations.

VAT: pre-registration input tax
UPDATE: HMRC have change of practice, with also top tips for Flat Rate scheme users and coping with mixed supplies.

Useful guides for the self employed (following the Tim Healy decision, above)

What expenses can I claim? Accommodation costs
Subscriber guide with full analysis of the above decision, comparison of case law and guides to different costs (allowed and disallowed for tax).

What expenses can I claim? Subsistence
Subscriber guide with guides to different costs (allowed and disallowed for tax).

Useful guides for directors and employees (different rules than in the above case):

Accommodation costs: with travel and temporary workplaces

Subscriber guide to claiming tax relief on hotels, clubs and flats

Topical Tips: avoiding mistakes in contracts
The law provides different remedies when a party to a contract has made a mistake. We offer some practical tips. 

Missed last time's update?

Nichola's SME Tax Update 27 May 2015

  • ATED return penalties: are your clients aware of the new regime?
  • Employers quarterly update
  • CPD: Spring Capital Taxes update


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