This time we are covering quite a diverse range of topics. What does the Office of Tax Simplification (OTS) recommend for the future of Capital Gains Tax (CGT)? We explore enduring tax imponderables on the nature of a trade. We have ever more essential updates on COVID-19 funding, new guides on farming and Corporation Tax (CT), as well as more updates, cases and, of course,VAT.

Initial reactions to the OTS's first report in its on-going review of CGT indicate that few tax professionals have any appetite for a major reform of the CGT rules. The OTS has recommended some 'easy wins' in terms of providing chancellor Rishi Sunak, who commissioned the review, with suggestions for potential methods of raising tax revenue. They include aligning CGT rates with Income Tax (IT) rates and lowering the CGT annual exemption to expand the tax base. The review also makes recommendations for some pretty far-reaching changes, such as removing the CGT uplift on death with changes to rebasing rules and replacing Business Asset Taper Relief with a retirement relief. The report mainly considers CGT for individuals and does not deal with trusts or issues for those arriving in or departing from the UK.

"Is it a business, a trade or an investment activity?" must be one of the most frequently asked questions across all direct and indirect taxes. We often have to ask this in order to decide whether an activity qualifies for a certain tax treatment or a tax relief or loss claim. Often it is a surprisingly difficult question to answer, as it all depends on the facts and circumstances of each case. Due to this complexity, it may be a tax tribunal that ultimately has the final say. We have two cases this week which explore this conundrum. One considers whether (yet another) Furnished Holiday Let (FHL) is a business or an investment activity for Inheritance Tax (IHT) Business Property Relief (BPR). The other case is quite rare as it is an Upper Tier Tribunal decision on 'ATED' reliefs, the Annual Charge on Enveloped Dwellings. Was the action of re-developing a property to facilitate its sale enough to make the owner the developer and ensure relief from the ATED charge?

Other fun things that you might all enjoy this week include our summary of the new variation of the Coronavirus Job Retention scheme (CJRS) and also a checklist for non-UK resident companies with UK property businesses who have to transition into Corporation Tax (CT). 

Lots more below. Keep safe.

If you have any tax-specific queries, please do post them up to our sister site: www.VtaxP.co.uk

Back soon 

Nichola Ross Martin FCA CTA (Fellow)
Tax Director


Your Virtual Tax Partner® online PRACTICAL support for accountants, tax advisers BY accountants and tax advisers.

Quick News

PAYE RTI reporting: Christmas exception to the rules
HMRC have issued special instructions to employers in respect of PAYE Real-Time Information (RTI) filing.

OTS Capital Gains Tax Review: Simplifying by design
The Office of Tax Simplification has published 'Simplifying by Design', the first report of its current Capital Gains Tax (CGT) review.

COVID-19: Government Support Tracker
We try and keep this updated in real-time for you.

COVID-19: Grant Funding for Business
UPDATE: index with links to current funding

COVID-19: Loan funding
COVID-19: different types of loan funding. All loan funding is repayable. 

COVID-19: Coronavirus Job Retention Scheme (CJRS) from 1 November 2020
NEW: The Coronavirus Job Retention Scheme (CJRS) has recently been extended to 31 March 2021. This guide outlines the guidance issued.

Editor's Pick

Giving your home to your children
What are the tax implications of making a gift of your home to your children? 

Farming: Capital allowances
UPDATE: This guide provides a summary of the type of expenditure which may qualify for capital allowances in farming businesses and outlines some farming-specific points to consider.

COVID-19: Taxation of Coronavirus Support Payments
NEW: This guide summarises the tax treatment of grants paid during the Coronavirus pandemic.

Guides and Updates (subscribers)

Interest paid to directors and individuals
UPDATE: This guide summarises the tax treatment for the company of interest paid to directors or other individuals.

Is it a trade, a business, or an investment activity?
Is your business a trade, a business or an investment activity? The distinction is very important for tax purposes.

Losses, trade and side-ways relief
How can trade losses be utilised? What are the restrictions? What if you are not actually trading or have non-commercial activities?

Annual Tax on Enveloped Dwellings
The Annual Tax on Enveloped Dwellings (ATED), originally called the Annual Residential Property Tax, is an annual charge on UK dwellings held by a non-natural person, e.g. a company.

Non-resident Landlord Scheme
UPDATE: New checklist to deal with the on-coming changes for corporate landlords who move into corporation tax.


Furnished Holiday Let: an investment for IHT
In Executors of the Late Sheriff Graham Loudon Cox vs HMRC [2020] TC07919 the First Tier Tribunal (FTT) dismissed the taxpayer’s appeal for Business Property Relief (BPR) on a holiday lettings business finding that there was nothing exceptional about the business to elevate it beyond being one of mainly investment.

No ATED relief where redevelopment is not a trade
In Hopscotch Limited v HMRC [2020] UKUT 0294, the Upper Tribunal (UT) upheld a First Tier Tribunal (FTT) decision that the taxpayer was subject to the Annual Tax on Enveloped Dwellings (ATED). The redevelopment of the property did not constitute a trade and so relief from the charge was not available

ATED daily penalties discharged as retrospective
In Heacham Holidays Limited v HMRC [2020] TC07883, the First Tier Tribunal (FTT) upheld fixed penalties imposed by HMRC for the late-filing of the taxpayer's ATED return but discharged the daily penalties imposed as they were issued retrospectively without notice. 


Bad debts: VAT recovery
UPDATE: When can you recover VAT on a bad debt? How much VAT is payable to HMRC or recoverable from HMRC when only part of an invoice is paid?

VAT cases

VAT DIY claim refused: not a new build
In Joe Smithers v HMRC [2020] TC07858, the First Tier Tribunal (FTT) refused a VAT DIY builder's claim on basis that works did not amount to the construction of a building and the previous building had not ceased to exist.

New build blinds: building materials for VAT
In Wickford Development Co Ltd (Wickford) v HMRC [2020] TC07864, the First Tier Tribunal (FTT) found that VAT charged on roller blinds incorporated in the buildings was eligible for recovery as ‘building materials’.

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.

  • Business Asset Disposal Relief: Sole traders: sale of a business, incorporation, sale of assets
  • Business Asset Disposal 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

More at CPD Index

Missed last time's Web-update?

Nichola's SME Tax W-update 5 November 2020

  • Employment-Related Securities: What’s New? July/November 2020 
  • Coronavirus Job Retention Scheme
  • Eat Out to Help Out: Repayment to HMRC
  • COVID-19 - Statutory Residence Test 
  • Subcontractor not based at home
  • No reason not to comply with Information Notice
  • No PAYE credit against contractor tax scheme earnings
  • Contractor loan scheme was notifiable under DOTAS
  • COVID-19: VAT & PPE
  • Local authority not a taxable person: Leisure facilities...More


SME Tax Monthly Summary October 2020

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

Come and join our Cloud

Subscribe (and UNLOCK the whole site) A single user annual subscription is £399 (+ VAT).

What do you get?

  • We keep YOU up to date in SME tax.
  • FULL access to www.rossmartin.co.uk: your firm's favourite TAX INTRANET containing over 3,500 actively maintained tax guides, briefings, toolkits and checklists.
  • Want to know more? Commission your own articles and checklists.
  • Structured CPD our detailed SME tax updates "for Advisers Only" provide topical summaries and planning notes our webcasts provide you with structured CPD at your desk.
  • Regular client tax briefings: these cover the latest business and employment tax issues and are designed to assist you plan meetings and improve your client services.