We have been gripped by accounting and IT stories in the news this week.

In the long-running drama of the Post Office’s accounting scandal, a defective IT system and subsequent cover-up by management ruined the lives and livelihoods of some 700 sub-postmasters. It transpired that the IT team had been attempting to resolve bugs in the back-end of a supposedly closed system, which the Post Office failed to mention in court proceedings, preferring instead to blame the postmasters for cash differences. The postmasters have now had their criminal convictions quashed by the Court of Appeal. We hope that the real villains of this scandal will face appropriate prosecution.

Accounting for the source of the funding of cash spent on repairs to the flat in Downing Street does not seem to be an IT issue, but it is by all accounts such an incredibly complex matter that it is the subject of several enquiries. We won’t comment further. Instead, we take inspiration from the story to showcase topical updates on a range of the tax aspects of flats and annexes, including guides to repairs and replacements.

The other notable IT story this week is that HMRC’s systems went wrong and sent out thousands of penalty notices to the wrong people. If you have a tax penalty and have a reasonable excuse for your failure, do check out our Grounds for Appeal Toolkit. 

We also have a Stamp Duty update and lots of VAT cases.

More news and updates below. If you have any tax queries, then do please visit our sister service for Virtual Tax Partner support.

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

HMRC software issues caused data breach
Thousands of fixed penalty notices were incorrectly issued in March 2021 and HMRC have advised that it was due to software issues. All affected penalty notices have been reissued.

Business Rates Review: Interim Report 
Following their July 2020 Call for Evidence entitled Fundamental Review of Business Rates, an interim report has been released providing an overview of responses and the subsequent policy decisions in advance of a final report which is expected in Autumn 2021.

Stamp Taxes Newsletter April 2021 
HMRC have just published their Stamp Taxes news for April 2021. This is our enhanced version.

Repayments for Corporate Loss carryback claims
HMRC have advised that companies seeking Corporation Tax repayments following loss carryback claims will have their claims dealt with automatically within eight weeks if the repayment box is ticked on the CT600 return.

Editor's Pick  

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

Ceasing trading: What are your options?
What are your options if you are going to cease trading? What processes must be followed if you want to close down a company? What are the tax, company and insolvency law requirements?

P11Ds: Top Tips
Top Tips for employers on preparing form P11D for 2020/21 together with a checklist.

Flats and annexes

Replacement of domestic items relief
Landlords are prohibited from claiming capital allowances on their expenditure on assets such as plant and machinery and fixed fixtures used by their residential tenants. This relief provides the mechanism for tax relief.

Repairs & renewals
What expenses can you claim for tax? In what situations are repairs disallowed and treated as capital expenditure? 

SDLT: Annexes & granny flats
UPDATE: Try out our new tool to work out what rules apply to your purchase.

PRR: Private Residence Relief: settled property & granny flats
UPDATE: When can Private Residence Relief (PRR) be claimed for annexes and 'granny flats'? When does it apply to settled property? What are the conditions for relief?

Guides and Updates (subscribers)

Tax Penalties: Grounds for Appeal Toolkit
What grounds are there to appeal a tax penalty? How can you word a tax appeal? Can you appeal HMRC errors? What is a reasonable excuse?

Substantial Shareholding Exemption (SSE)
What is the Substantial Shareholding Exemption?  When does it apply?  How does it interact with de-grouping charges? 

IHT: Gifts with reservation
UPDATE: What are the Gift with Reservation (GWR) rules? When do they apply?

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

How do you wind up (liquidate) a company? What types of liquidation are there? What are the formalities and the tax consequences of liquidation?

VAT Cases

Golf club loses 'new claim' appeal 
In Royal County Down Golf Club V HMRC [2021] TC08055, the First Tier Tribunal (FTT) dismissed the taxpayer's appeal, finding that a repayment claim made in 2015 was a new claim, made out-of-time, and not an amendment to an earlier 2009 claim.

Head office and branch: Separate taxable persons 
In Danske Bank A/S v. Skatteverket, case no. C-812/19 (11 March 2021), the Court of Justice of the European Union (CJEU) held that the provision of services between the bank's Danish head office and its Swedish fixed establishment was subject to VAT.

Historical bad debt relief denied over lack of evidence 
In Saint-Gobain Building Distribution Limited v HMRC [2021] UKUT 75 the Upper Tribunal (UT) ruled that a historical bad debt relief claim could not be made due to lack of supporting evidence. There was no proof that relief had not already been claimed.

No VAT due: no continuous supply of intra-group services 
In The Prudential Assurance Company Limited v HMRC [2021] TC07480, the First Tier Tribunal (FTT) ruled that no VAT was due on intra-group services supplied within a group where invoices were not issued until after the supplier left the group. There was no continuous supply of services.

VAT News

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?

Tax Toolkits 

Tax Tools
Be a winner with our game-changing tax diagnostics tools. Sign up now.

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 22 April 2021 

  • Finance Bill amended to exclude FHL loss carry-back 
  • Trust avoids tax charges as documents were flawed
  • Consultation: Clamping down on promoters of tax avoidance
  • SEISS 4: Tax return amendments
  • COVID-19: Self-Employment Income Support Scheme (SEISS)
  • Upper Tribunal separates goodwill from trade-related property 
  • Challenge to HMRC's discretion not to collect PAYE from offshore EBT fails
  • Tax avoidance not main purpose of reorganisation
  • Receipt under settlement agreement subject to Corporation Tax  
  • SSE denied as no group existed 
  • No VAT recovery for another's property
  • No VAT clawback for sale and leaseback of care home
  • Substantial Shareholding Exemption (SSE)
  • Goodwill: trade-related properties...More


SME Tax Monthly Summary March 2021

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

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