Nichola's SME tax W-update 9 November 2018

Hello

This week we take a closer look at the Budget announcements affecting Personal Service Companies (PSC), we have a VAT update and for some reason we all decided to report IHT cases.

The Budget announced PSC changes to bring off-payroll working to medium and large engagers in the private sector from 2020. We look at the government's proposals and consultation responses for clues as to what is next.

We have updated our guides for PSCs and directors.

The 2019 Finance Bill has now been revised and published. The proposed changes that were going to introduce a points-based system to the late filing penalty regime are not included. They appear to have been shelved until at least 2021, presumably because it will be very difficult for many people to understand Making VAT Digital and to combine that with a new penalty system would just be too much, not only for the public but for HMRC's IT systems.

It's unusual to report so many IHT cases at once, however, they are all of particular note and most have resultant decisions that may well affect a few individuals in your client base.

HMRC has failed to overturn the FTT's decision that a horse livery is an active business for IHT relief. HMRC tried to argue that a livery was just like a holiday let. I can see some similarities in that you are letting some space, however in terms of activities, I think most holiday makers would run a mile if you mentioned that you regularly wormed all your residents! 

The Court of Appeal's confirmation that a widow's failure to draw down all her pension benefits resulted in a transfer of value from her estate is going to set the cat amongst the pigeons for many IFAs, as it overturns an Upper Tribunal decision in a different case.

The same court also ruled on what must be one of the last few cases on unresolved reversionary lease schemes. Lady Hood's executors were 'hoodwinked' by a covenant which unexpectedly created a gift with reservation. 

Also this time: our VAT Update. 

If you have any tax queries please do try out our Virtual Tax Partner support portal at www.VtaxP.co.uk.

Enjoy the guides and updates and the news is below. 

Back soon

Nichola Ross Martin FCA CTA (Fellow) Tax Director

www.rossmartin.co.uk

Your Virtual Tax Partner®: online PRACTICAL support for accountants & tax advisers BY accountants & tax advisers

Quick news (freeview)

High Income Child Benefit Charge (HICBC) penalty case review
HMRC is reviewing cases where a failure to notify penalty was issued to taxpayers who did not register for the HICBC: there may be defects in the penality rules.

The Taxation of Trusts: consultation
A new consultation ‘The Taxation of Trusts: A Review’ considers whether the current system for taxing trusts meets the principles of transparency, fairness, neutrality, and simplicity.

Amendments to tax returns: call for evidence
A call for evidence aimed at providing an understanding of issues faced by taxpayers who are amending returns.

Making Tax Digital (freeview)

No new announcements, see Making VAT Digital for links to useful guides and tools.

Editor's Choice (subscribers)

Personal Service Company update 2018/19
NEW: what's hot and what's not if you are running your own service company or advising one. Updated for all Budget 2018 announcements and proposals.

Offpayroll working: private sector
UPDATE: the government responds to proposals and new measures are revealed. Enagagers who qualify as small will not be required to operate offpayroll working. Further consultation to follow.

Tax Guides and Updates (subscribers) 

Losses: trading and other losses
UPDATE: The compliance requirements for the new corporate loss relief rules affect all companies however small or large. We have added further details and links to the draft guidance from HMRC.

Personal Service Companies & Tax
UPDATE: if you are new to contracting or have had enough of contracting start here.

Finance Act 2018-19: tax update and rolling planner
UPDATED: for all measures affecting SMEs following Budget 2018.

CGT: disposal of a business or its assets
UPDATE: there is more to CGT than Entrepreneurs' Relief! A handy summary of the main reliefs which may apply when an individual or company replaces or disposes of a business asset, or a business, or shares in a company.

Case Update (freeview)

Livery business still qualifies for BPR
In HMRC v The Estate of Maureen M Vigne (deceased) [2018] UKUT 0357, the Upper Tribunal (UT) dismissed HMRC’s appeal against the FTT decision. The FTT had applied the correct legal tests and BPR applied to a DIY livery business. 

IIP Trusts: No income or gains: no return and no penalties
In Trustees of the Paul Hogarth Life Interest Trust 2008 v HMRC [2018] TC06757 the First-Tier tribunal (FTT) held that a notice to file a  tax return cannot be served on a trust where all income is mandated to the life tenant and there are no chargeable gains; the late filing penalties were invalid.

IHT due on transfer of pension death benefit
In HMRC v Parry and others [2018] EWCA Civ 2266 the Court of Appeal held that a failure to exercise pension rights and a statement of wishes leaving death benefits to the deceased’s sons were both transfers of value and IHT was due on the entire pension fund.

IHT lease carve out scheme 'Hoodwinked' by covenant
In Viscount Hood (Executor of the estate of Diana, Lady Hood deceased) v HMRC [2018] EWCA Civ 2405 the Court of Appeal concluded that IHT planning whereby the taxpayer granted a sub-lease to the her sons failed. The presence of covenants which passed on the donor's obligations under her head lease, created a gift of property subject to a reservation of benefit.

VAT (freeview)

Student Union supplies not closely related to education
In Loughborough Students’ Union v HMRC [2018] UKUT 3434, the Upper Tribunal (UT) decided that sales of stationery, art materials and other items from student union shops were not exempt supplies closely related to education.

Split payment method of VAT collection: condoc outcome
HMRC have published ‘Alternative method of VAT collection – split payment: summary of responses’, and have indicated they will continue to work towards a viable alternative VAT collection model for online shopping.

VAT and tourism in Northern Ireland: condoc outcome
HMRC have published ‘VAT, Air Passenger Duty and Tourism in Northern Ireland: summary of responses’ and, whilst acknowledging the effect on tourism of these taxes, will take no action at this stage.

VAT (subscribers) 

A VAT update: Nov 2018
This article looks at what has happened in VAT during the last 6 months.

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Nichola's SME tax W-update to 2 November 2018

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