This week we have some bad news for Furnished Holiday Let owners, good news for some care home owners and plenty more for tax enthusiasts.
As the 2021 Finance Bill makes its way through parliament one can always expect that small tweaks to the proposed legislation will be made along the way. It seems this time there was a sizeable error made in the drafting of the extended loss relief provisions. An amendment to the Bill confirms that the new rules will not now extend to Furnished Holiday Let (FHL) businesses.
We all love a good tax case, and the courts and tribunals have been munching their way through some of tax’s tricky imponderables over the last few months.
Of cases that have been beneficial to care homes: the Upper Tribunal (UT), in a Stamp Duty Land Tax (SDLT) valuation case has upset the tax valuation ‘apple cart’ by separating goodwill from the capital value of a lease. Meanwhile, up in the Supreme Court, it was decided that for VAT there was no transfer of a property interest under a sale and leaseback. This removes a substantial hurdle when financing new homes.
The UT also appears to have settled another long running and complicated saga concerning an IT contractor’s efforts to avoid Income Tax by using an Offshore Employee Benefit trust. It has ruled that although it is an employer’s duty to collect PAYE, giving credit for PAYE paid to an employee is a matter of tax collection and not PAYE assessment. It also confirmed, should ever it have been supposed, that use of EBTs for tax avoidance was never accepted by HMRC as ‘prevailing practice’.
We also have two cases on company reorganisations both designed to achieve the substantial shareholding exemption, one of which also involved a look at tax avoidance motive and the capital gains share for share exchange rules and last but by no means least a case on trusts documentation.
More news and updates below.
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Finance Bill amended to exclude FHL loss carry-back
The Finance Bill 2021 introduced the extended three-year carry-back for trading losses. There has been a subsequent amendment to clarify that furnished holiday lettings (FHLs) will not qualify for the relief.
Trust avoids tax charges as documents were flawed
In the non-tax case of Ware v Ware  EWHC 694 (Ch), the High Court agreed to rectify flawed trust deeds of appointment which resulted in unexpected tax charges. The trustees had never intended to make the changes included in the deeds.
Consultation: Clamping down on promoters of tax avoidance
HMRC have issued a new consultation, ‘Clamping down on promoters of tax avoidance’ setting out proposed new measures and the powers to allow them to further tackle promoters of tax avoidance schemes.
SEISS 4: Tax return amendments
Following publication of the Treasury Direction for the fourth Self-Employment Income Support Scheme (SEISS) grant, taxpayers and agents should be aware of the obligation to notify HMRC of amendments to tax returns.
COVID-19: Self-Employment Income Support Scheme (SEISS)
The online service for the fourth SEISS grant opened on 22 April 2021.
Furnished Holiday Letting
What is Furnished Holiday Letting? How do you qualify for Furnished Holiday Letting? What are the rules for Furnished Holiday Letting?
Losses, trade losses and sideways relief
How can trade losses be utilised? What are the restrictions?
Finance Bill 2021: tax update & rolling planner
This rolling planner tracks the key tax announcements that affect the 2021-22 tax year and beyond.
Guides and Updates (subscribers)
Trusts & Tax planning
What is a trust? How can trusts be used in tax planning? What are the advantages and what are the pitfalls?
What is a trust? What types of trust are there? How are UK trusts taxed?
Substantial Shareholding Exemption (SSE)
What is the Substantial Shareholding Exemption? When does it apply? How does it interact with de-grouping charges?
Goodwill: trade-related properties
What are the tax and accounting issues when valuing goodwill in connection with the purchase or sale of a trade-related property? What are HMRC's views?
Upper Tribunal separates goodwill from trade-related property
In Zyrieda Denning, MH Hants Limited & MP Hants Limited v HMRC  UKUT76, the Upper Tribunal (UT) determined that the market value of a leasehold interest, for Stamp Duty Land Tax (SDLT) in two care homes was substantially less than that calculated under the RICS principles.
Challenge to HMRC's discretion not to collect PAYE from offshore EBT fails
In Stephen Hoey v HMRC  UT 0082, the Upper Tribunal confirmed that the First Tier Tribunal has no power to challenge HMRC's discretion to disapply the PAYE regulations and upheld an EBT discovery assessment.
Tax avoidance not main purpose of reorganisation
In Euromoney Institutional Investor PLV v HMRC  TC08046, HMRC was unsuccessful in blocking a company's claim for share-for-share relief on a reorganisation. The First Tier Tribunal (FTT) found no main purpose of tax avoidance.
Receipt under settlement agreement subject to Corporation Tax
In Charlton Chauffeur Drive Limited v HMRC  TC08042, the First Tier Tribunal (FTT) found that sums received by a company from a firm of auditors under a legal settlement agreement were compensation in respect of employee fraud. As such, they were revenue in nature and not capital, as the company had claimed.
SSE denied as no group existed
In M Group Holdings Limited v HMRC  TC08054, the First Tier Tribunal (FTT) dismissed an appeal against a closure notice denying Substantial Shareholding Exemption as a group had not existed for 12 months prior to the disposal.
No VAT recovery for another's property
In Knightsbridge Accountants Ltd v HMRC  TC8026, the First Tier Tribunal (FTT) disallowed input tax claimed on the purchase of a commercial property, there was no evidence to show that the purchaser had legal or beneficial ownership of the property.
No VAT clawback for sale and leaseback of care home
In Balhousie Holdings Limited v HMRC  UKSC 2019/0103, the Supreme Court found that Balhousie was not liable to a VAT self-supply charge arising from the sale and leaseback of a new care home following acquisition from a developer. It had retained its entire interest throughout.
Car or van for VAT?
What is a car for VAT? What is a van for VAT? What VAT can be recovered on a car that is bought? Leased? What about fuel? Or mileage reimbursements?
When is a recharged cost outside the scope of VAT? How do you account for VAT if you are acting on behalf of someone else?
VAT Land & Property: Relevant residential charitable purpose
What are the VAT rules for land and property that is used for a relevant residential purpose or a relevant charitable purpose? What are the claw back provisions affecting change of ownership or use?
Be a winner with our game-changing tax diagnostics tools for Business Asset Disposal Relief, SDLT & annexes/subsidiary properties, Company reorganisations, R & D Zone and TAAR on winding up. Sign up now!
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
- CPD: CIS Reverse Charge VAT
- CPD: Trading Loss Relief: Individuals
- CPD: Business Property Relief
- CPD: Furnished Holiday Lettings
More at CPD Index
Missed last time's Web-update?
- Agent Update: April 2021
- Employer Bulletin: April 2021
- SEISS: Fourth grant details
- SME Brexit Support Fund
- HMRC updates SAO manual
- Enterprise Management Incentive (EMI): New call for evidence
- Van Benefits
- Loss claims denied as closure notices were valid
- Finance Bill 2021: Tax Update & Rolling Planner 2021-22
- Corporate Anti-Tax Evasion Policy Template
- COVID-19: Taxation of Coronavirus Support Payments
- Closure notices
- SDLT: Non-residents' surcharge ...More
Links to all of March's newswires...More
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