The Supreme Court published its decision in the Tooth discovery case this week. The key issue in the case was whether the act of putting the right figures in the wrong place of a tax return could be regarded as making a deliberate error. Making a deliberate error potentially exposes a taxpayer to a 20-year assessment window.

The court found that the explanation that entries were included in the ‘white space’ of the return because there was nowhere else to put them had adequately explained the rogue entries. HMRC had instantly understood the infomation on the return, therefore, there was no error in terms of the entries when you consider the return as a whole. The problematic tax return was submitted in 2009. With hindsight, it seems extraordinary that it had to take the highest court in the land to decide such a basic problem. It goes to show that you should use the white space of the return when you need to explain an entry in order to protect yourself from investigation or worse still, discovery assessment.

A new bill proposes to give the Insolvency Service new measures to investigate directors of dissolved companies, with retrospective effect. This measure was previously consulted on. It appears that there is a real problem in connection with people trying to avoid repayment of COVID-19 related loans.

Other matters that caught our attention this week include new service issues with the CGT online residential property filing system and a new consultation that creates an acronym that none of us had seen before.

More news, updates and case highlights below. 

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

Agent Update: May 2021
HMRC have issued their Agent Update for May 2021. We have summarised the key content for you with links to our detailed guidance on the topics covered.

New powers to investigate directors of dissolved companies
The 'Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill' will give the Insolvency Service new powers to investigate directors of companies that have been dissolved. The aim will be to prevent directors from dissolving their companies to avoid creditors. 

Service issues with online CGT filing for UK residential property 
Gains arising from UK residential property must be reported using HMRC's online reporting system. The system is new and experiencing service issues.

COVID-19: Test & trace/self-isolation support payments
UPDATE: Class 2 and 4 NICs exemption is backdated to 2020 for self-employed recipients of the £500 support payment claimed by those on low incomes who have been asked to self-isolate due to COVID-19.

R & C Brief 6 (2021): VAT liability of juice cleanse programmes 
Revenue & Customs Brief 6 (2021): 'VAT liability of juice cleanse programmes’ clarifies HMRC's policy on the distinction between standard rated beverages and zero-rated meal replacement juices.  

Consultation: DOTAS, DASVOIT and POTAS regime amendments
The Finance Bill 2021 will, when passed, will enable HMRC to act decisively where promoters fail to disclose avoidance schemes at an early stage. This consultation seeks views on the changes to the existing regimes.

Editor's Pick  

Finance Bill Tax Update and Rolling Planner 2021-22
UPDATE: new NICs measures included in the National Insurance bill 2021.

Directors: Tax planning toolkit for 2021/22
This year's toolkit, like all our maintained guides, is a rolling planner and is updated throughout the year

Discovery Assessments
When can HMRC issue an assessment outside of the normal statutory time limits? What conditions must be met? What are your rights of appeal and defences? Case law tracker.

Guides and Updates (subscribers) 

Trust Registration Service
What is the Trust Registration Service? What trusts does it apply to? What are the requirements and deadlines?

Apprenticeship levy (employers' briefing)
UPDATE: What is the apprenticeship levy? Who pays it? How much is it? 

LBTT: Multiple Dwellings Relief   
What is Multiple Dwellings Relief (MDR) for Land and Building Transactions Tax purposes? When does it apply and how is it claimed?  What are the differences between MDR for SDLT and LBTT?

Sole trader v limited company: Tax differences & savings (2021/22)
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.

When does a partnership exist?
When does a partnership exist? Why does it matter? What are the implications for different taxes?

Property profits & losses:Toolkit (2021/22)
Our Property profits & losses toolkit takes HMRC's version and adds a great deal more information about what you can claim as an individual.

Tax Cases 

Tooth: Discovery basic condition not met
In HMRC v Raymond Tooth [2021] UKSC 17 the Supreme Court ruled that entering the right figures in the wrong boxes of a tax return because there is nowhere else in the return to put them and to then make a full disclosure of that fact, cannot be construed as a deliberate error. No 20-year time limit applied. It also ruled that the concept of 'staleness' in respect of assessments has only a very narrow application.

F1 lawyer finds £40m payments are income not gifts   
In Stephen Mullens v HMRC [2021] UKFTT 131 TC8112, the First Tier Tribunal (FTT) upheld discovery assessments charging income tax on £40m of payments omitted from returns as gifts but allowed the taxpayer's appeal on capital losses arising on stolen jewellery. 

VAT Guides

Partnerships & VAT
Like any other business, partnerships are required to register for VAT once their taxable turnover passes the applicable threshold. However, there are some complications specific to partnerships.

What are the conditions for forming a VAT group? What rules apply once a VAT group is in place?

Tax Toolkits 

Tax Tools
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!

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 13 May 2021 

  • Call for Evidence: Simplifying the VAT land exemption
  • Mini-umbrella company fraud exposed 
  • R & C Brief 5 (2021): VAT liability of installation of blinds 
  • Get your business ready for the Plastic Packaging Tax 
  • OECD calls for IHT revenues to be increased 
  • Apprenticeship Levy scheme failing says CIPD 
  • IR35: Kaye Adams v Lorraine Kelly v Christa Ackroyd v Eamonn Holmes
  • CGT: Unsupported costs are not deductible
  • Making Tax Digital: VAT (subscriber guide)
  • Non-resident Tax Toolkit
  • Offshore income toolkit
  • CGT: deductible expenditure
  • Place of supply: Mini One Stop Shop (MOSS)
  • Online Marketplaces: Selling goods in the UK
  • International goods ...More


SME Tax Monthly Summary April 2021

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

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