Hello,

Given the current resurgence of coronavirus, it came as no surprise today when the Treasury announced that this Autumn's budget has been cancelled. This announcement was later followed by an economic statement, the 'Winter Economy Plan', made by the chancellor, Rishi Sunak. 

The lack of a budget is quite good news for those who were worried about potential changes to Capital Gains Tax (CGT), and given that we may all be 'locked down' again in a matter of weeks, that is one less thing to worry about! We have summarised the chancellor's statement below. Things to watch are that a) you have set the correct reduced rate of VAT if you are dealing with businesses in the hospitality industry; b) that you and your staff are keeping up with all the different changes to the coronavirus job retention scheme (CJRS) and the new job support scheme. I hope that our COVID-19 tracker is helpful in keeping you up to date.

This time we have a new land and property tax update CPD and if you want to feel even more 'up to date' then don't forget that our Finance Act 2020 rolling planner and tracker covers tax announcements for all key taxes for SMEs and their owners, as well as VAT and Stamp Duty Land Tax (SDLT).

We also bring you our review of the tax cases that we think will interest you. One for 'tax geeks' to note is that the judgment in the Pickle's case on overvalued goodwill on incorporation was later revised by the First Tier Tribunal (FTT) on a point a law. The case was heard earlier in the year and the question, in that case, was whether overvalued goodwill credited to a director's loan account resulted in a distribution. This was quite a strange conundrum, and not something ever considered by the tribunal before. A credit to a loan account just creates a liability for one party and a debt for the other, and unless you could do something with your debt, such as maybe cash it in or assign it for cash, you could not really say that a debt could ever be a distribution in its own right. The tribunal judges initially disagreed on this but in the revised judgment reworked their reasoning to decide the matter based not on the value of the debt but on what the directors actually withdrew from their loan account in cash. 

We are again featuring guides and updates on topical subjects, many of which are being inspired by queries coming in to the Virtual Tax Partner service. Last week we looked at Transactions in Securities and this time we have been updating our Entrepreneurs' Relief 'ER' guides as 'Business Asset Disposal Relief' 'BADR' following the renaming of the relief by Finance Act 2020. So far no one is calling it BADR, everyone seems to still like ER. We are unsure whether it will be just too confusing to stop calling it ER. Is BADR better? Shall we update all our guides, what do you think? 

For all your tax queries, please do post them up to our sister site: www.VtaxP.co.uk.

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 and tax advisers.

Quick News

Economy Statement by Rishi Sunak: At a glance
Key announcements made by the chancellor in his Economy Statement to the House of Commons today

COVID-19: Package to support and enforce self-isolation
The government has announced a support payment of £500 for lower-income earners required to self-isolate and new fines for those breaching the rules.

COVID-19: Tracker
Our tracker covers measures announced by the government to support individuals and businesses, as we get through COVID-19.

Editor's Pick

Business Asset Disposal Relief (BADR)
What does the relief (formerly known as Entrepreneurs' Relief) do? When does BADR apply? What is the rate of BADR? How to claim BADR.  

Goodwill & incorporation: Tax issues
What are the tax issues in respect of goodwill on incorporation? What tax reliefs apply if you buy and sell goodwill? What are the valuation and clearance procedures?

Finance Act 2020: Rolling Planner & Tracker
What's hot in tax in 2020/21

Guides and Updates (subscribers)

A 'Start-ups' index for companies
If you are starting a new business and you want to consider other types of trading vehicle, check out A new business? Start here.

Badges of trade (are your trading or not?)
The 'Badges of Trade' are a series of key indicators which have been built up over time by the courts to decide whether a transaction or series of transactions indicates the existence of a trade as opposed to just investment activity.

Construction Industry Scheme (CIS)
What is the Construction Industry Scheme? Who does it apply to? How does it work? Can a property investment business be a contractor?

Directors loan accounts toolkit
What are the tax issues when a director is owed money by their company or vice versa?

Case Update (Freeview)

Tax and overvalued goodwill on incorporation
In Neil Pickles and Sharon Pickles v HMRC [2020] TC07681, goodwill was overvalued on the incorporation of a farm and then credited to the directors’ loan account without declaring CGT. Was this a distribution? 

CIS: Keep adequate records to support your claims
In Miroslaw Pawlikowski v HMRC [2020] TC7584 the FTT dismissed the taxpayer’s appeal against HMRC’s denial of tax credits for 2016/17 in respect of certain CIS deductions.

HMRC pay taxpayer's costs despite winning
In HMRC v Cheshire Centre for Independent Living [2020] UKUT0275, the Upper Tribunal (UT) ordered HMRC to pay the taxpayers costs despite HMRC’s case being successful.

VAT News

VAT: Ready to trade with the EU from 1 January 2021
HMRC have written letters to VAT-registered businesses in Great Britain trading with the EU and/or the rest of the world, highlighting actions they need to take to continue trading with the EU from 1 January 2021.

CIS: Construction Industry reverse charge
The count down begins for the introduction of the Construction Industry Scheme (CIS) VAT Domestic Reverse Charge (DRC). This applies to supplies of construction services from 1 March 2021. 

VAT cases

Transfer of a business offshore to avoid irrecoverable VAT is not abusive if it reflects commercial reality
In Paul Newey (T/A Ocean Finance) v HMRC [2020] TC07844, the First Tier Tribunal (FTT) held that the offshore transfer of a business to avoid incurring irrecoverable VAT was not abusive.

Hire of children's ice skates is a separate supply at zero rate
In The Ice Rink Company Ltd Planet Ice (Milton Keynes) Ltd v HMRC [2020] TC07829, the First Tier Tribunal (FTT) held that the hire of children's ice skates is a separate supply to be zero-rated.

Supply and installation of ‘energy-saving materials’ as insulated roof panels is standard-rated
In Greenspace (UK) Limited v HMRC [2020] TC07828, the First Tier Tribunal (FTT) found that supply and installation of conservatory roof insulation in the form of insulated roof panels is a standard-rated supply.

Virtual Tax Partner Toolkits (freeview)

Virtual Tax Partner © Tax Toolkit© Tax Toolkits
NEW: be a winner with our game-changing tax diagnostics tools. Sign up now.

  • Entrepreneurs' Relief: Sole traders: sale of a business, incorporation, sale of assets
  • Entrepreneurs' Relief: Company owners: rules for sales pre 29 October 2018, sales between 29 October 2018 and 5 April 2019 and after.
  • TAAR: closing your Personal service company? Will your final dividends be taxed as income?
  • Salary or dividend, or a mixture of both. Better to claim the Employers' Allowance?
  • Making Tax Digital for VAT: when do you need to join.

Tax Queries?

Virtual Tax Partner© Support
Have a tax query? Need a second option? Open a ticket and ask a question. A team of tax experts with a very wide range of expertise: covering direct and indirect tax, as well as accounting, R&D claims, reorganisations and much more. 

CPD for lunch 

Byte-sized chunks of CPD for subscribers

NEW

More at CPD Index

Missed last time's Web-update?

Nichola's SME Tax W-update 17 September 2020

  • Support for deferring students
  • COVID-19: Three-month extension for SAO filings
  • COVID-19: Temporary remote witnessing for wills
  • Consultation: The scope of qualifying expenditures for R&D Tax Credits 
  • R&D relief and furloughed workers
  • Withdrawal of the VAT Retail Export Scheme
  • Trustees granted extra powers to allow for IHT planning
  • R&D relief denied for lack of credible evidence...More

Nichola's SME Web-Updates for August 2020

Links to all of August's newswires...More 

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