We are continuing our review of budget 2021 this week and we take a look at some of the new consultations. We have been having some debates, internally, on a couple of topical issues: these centre on the practicalities of incorporating a buy-to-let portfolio and on building your own office at home. 

The restriction on interest relief for higher rate taxpayers ensures that many individual landlords look to a corporate wrapper for maintaining their investment portfolios. A major cost in transferring your buy-to-let portfolio into company ownership is Stamp Duty Land Tax (SDLT). Conveniently, there is no SDLT due on incorporation of a property partnership provided that the partners are all shareholders in the new company. The result is that landlord taxpayers are often being advised to create a partnership in order to avoid SDLT. This is often achieved by forming a business with their spouse. We note that advice is often silent on the extent of the SDLT anti-avoidance provisions, although the potential problems do not end there.

A partnership is not valid in law unless it carries on a business. What activities constitute running a business vary depending on the type of partnership you choose. We suggest, based on case law in other areas, that you need to be doing more than just being a landlord to be running a partnership 'business', although there is actually no guidance at all from HMRC on the point. If you have managed to tick the qualifying partnership box that leads to another trap. If the activity really is a genuine business, HMRC’s manuals indicate that National Insurance contributions are due. What type of NICs? Well, that would depend on your business activities. 

Building an office in your garden? This is one of those queries that has many different variants and there are many different outcomes. We have updated and enhanced our guide to this in an attempt to cover all angles.

Do also check out our new version of the Sole trader v Limited company: tax differences & savings guide for 2021-22 as well as the Employment Related Securities bulletin.

If you have any queries do post them on our Virtual Tax Partner advice service at www.VtaxP.co.uk scroll down for more news and updates.

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

Enterprise Management Incentives Call for Evidence
HM Treasury has issued a Call for Evidence to review the Enterprise Management Incentives (EMI). It follows the Chancellor’s announcement in Budget 2021 whether the EMI scheme should be extended to include more companies.

HMRC: Consultation responses: R&D Qualifying expenditure 
The responses to the government consultation entitled 'The scope for qualifying expenditures for R&D Tax Credits' have now been released.

HMRC consultation: R&D Tax Reliefs
HMRC have issued a further consultation looking at the scope of 'R&D Tax Reliefs'. 

Employment-Related Securities: What’s New? March 2021
HMRC’s latest Employment-Related Securities Bulletin focuses on the impact of COVID-19 on employee share and incentive schemes. Here is our enhanced version.

Budget 2021
Our Budget 2021 zone covering key budget announcements together with items published without announcement. Individual tax articles with links to our guides.

COVID-19: Self-Employment Income Support Scheme (SEISS)
UPDATE: Support for the self-employed during the Coronavirus crisis.

COVID-19: Coronavirus Job Retention Scheme (CJRS) from 1 November 2020
UPDATE: What is CJRS?  When does the CJRS apply?  How to claim CJRS?  How to calculate CJRS claim amounts?

Editor's Pick 

When does a valid partnership exist?
UPDATE: Advising on a partnership? Which type are you recommending? A useful round-up of the requirements.

Incorporation of a property business
UPDATE: With no restriction on interest relief for companies v. a rise in the rate of Corporation Tax (in 2023), is it still that attractive to hold property via a company?

SDLT & partnership incorporation
UPDATE: You are advised to form a property partnership to avoid Stamp Duty Land Tax. Really? Is it that simple?

Property Profits & Losses
UPDATE: What is property income?  How is it taxed?  How are profits calculated? How are losses relieved? When is National Insurance due on property income? Is property income classed as a business activity?

Creating an office at home or in your garden
UPLDATE: Many more company owners now work from home. Can you obtain tax relief on the cost of building or conversion? What are the VAT issues? Are you taxable on any employment benefit?

Guides and Updates (subscribers)

Sole trader v. limited company: Tax differences & savings (2021-22) 
NEW: This guide considers whether, from a purely tax point of view, it is more efficient to run your business as a sole trader or as a company.

Budget 2021: Subscriber guide
A summary of key budget announcements together with items published without announcement.

Budget 2021: Corporation Tax rate change
In the 2021 Budget, the Chancellor announced that the rate of corporation tax would change with effect from 1 April 2023. 

Budget 2021: Interest and penalty reform (subscriber guide)
A points-based Late submission penalty regime will replace existing late submission penalties for VAT and Income Tax. 

Tax Cases

LLP profit reallocation scheme fails  
In HFFX LLP & Ors v HMRC TC8023, the First Tier Tribunal found that an LLP scheme to reallocate profits via a corporate vehicle using allocations of special capital failed to work and the profits were chargeable to Income Tax on individual partners.

Overseas university's services outside scope of VAT
In St George’s University v HMRC [2021] TC 07999, the First Tier Tribunal (FTT) ruled that the place of supply of educational services by a West Indies' university (overseas) which were undertaken in the UK, was based in West Indies and therefore outside the scope of VAT.

Deficiencies in invoices prevent VAT recovery
In Tower Bridge GP Ltd v HMRC [2021] UT30, a company did not have valid invoices to deduct input tax, there was evidence of fraud in the supply chain and HMRC declined to exercise its statutory discretion to allow alternative evidence.

Tax Toolkits (freeview)

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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 Update 4 March 2021

  • Budget 2021
  • Budget 2021: COVID-19 measures
  • Budget 2021: Corporation Tax
  • Budget 2021: Land & Property
  • Licence agreement was amortisable intangible asset 
  • Cricket Club had a reasonable excuse for incorrect zero-rating certificate
  • Court of Appeal confirms CASC not a charity for VAT
  • Annual statistics for charity tax relief
  • Budget 2021: Subscriber guide
  • Budget 2021: Off-Payroll Working
  • Budget 2021: Company losses 
  • Social Investment Tax Relief ...More


SME Tax Monthly Summary February 2021

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

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