Nichola's SME Tax W-update 22 July 2021

Hello,

This time we report on HMRC's proposals on reforming the tax basis year provisions, we review the other draft proposals for the next Finance Bill, there is another Agent Update and news of a new R&D fund, and for subscribers, a very timely 'What's new' for Capital Allowances.

The planned change to Income Tax quarterly tax reporting under Making Tax Digital means that HMRC is considering changing the tax basis year so that everyone reports their profits for the tax year and not the accounting year. There could be a transition during 2022-2023 when all businesses will have their basis period moved to the end of the tax year and overlap relief will then be given. Such a measure is only likely to materially affect you if you prepare accounts to a period end other than 31 March or 5 April, and so is only likely to affect 7% of sole traders. It will, according to HMRC, affect 31% of partnerships. With so many firms of accountants and tax advisers currently trading as LLPs, any change will, without doubt, be received as a tax planning opportunity by professional firms, many of whom will benefit by transitional rules through overlap relief.

Reforming the basis year is a tax simplification measure, and one, I would suggest, that is well overdue. If this is combined with a change of the tax year end, to say 31 March then life would also be simpler in terms of reporting deadlines if you happen to be VAT registered. What then of PAYE and NICs reporting? Both of these are reported to the 5th of each month? At present, HMRC's plans for changes to the basis year are only a proposal. HMRC is inviting comments to its consultation. The idea of changing the tax year-end is a measure mooted by the Office of Tax Simplification (OTS). It would surely make sense to make both changes in the same year. 

Our Virtual Tax Partner: Practical Tax conference, more details will be revealed next week. Do keep the dates of 12-13 October 2021 open for this exciting new event, which of course will count towards your CPD.

More news, views and updates below. 

Back soon 

Nichola Ross Martin FCA CTA (Fellow)
Tax Director

www.rossmartin.co.uk

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

Quick News (freeview)

Finance Bill 2022
Draft clauses have been published for Finance bill 2021-22, these will be included in the 2022 Finance Act.

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

Consultation: Income Tax Basis Period reform 
HMRC have published a new consultation ‘Basis period reform’ alongside a policy paper and draft legislation that propose a simplification of the income tax rules for the self-employed by allocating trading profit to tax years regardless of the business’ accounting period end date.

New £375m Future Fund open to R&D companies 
Applications for grants from the £375 million Future Fund: Breakthrough have opened. Not to be confused with an earlier 'Future Fund', this scheme is aimed at helping R&D intensive companies bring new technologies to market.

Editor's Pick  (subscribers)

Capital allowances: What's new 2021 
NEW: An update and summary of recent and upcoming changes to capital allowances.

Starting work 1. Self-employed or employed?
If you are finding work what is the difference between being employed or self-employed?

Directors

Directors' Tax Planning Toolkit 2021-22
What is hot or not in 2021-22 (other than the weather). This planner looks at a range of director tax issues, including company profit extraction. 

Can my company build my house?
What are the tax consequences of my company building my house?

Companies

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?

Corporation Tax instalment payments
UPDATE: When does Corporation Tax (CT) have to be paid by instalments? What are the rules and deadlines? 

Employers

Recreational benefits
Employers can provide sporting or recreational benefits tax-free to employees. What is excluded? How should an employer structure benefits?

Private Client & Estate Planning

Top Slicing Relief: How you slice it
Top Slicing Relief (TSR) applies to withdrawals from certain types of investment bond and is intended to adjust the tax liability.

Tax Returns: To-do list before/after 5 April 2021
What tax returns and claims are due before the end of the tax year?  What are my tax filing requirements? This is a checklist of key deadlines for SMEs and their owners.  

Land & Property

SDLT: First-time buyers' guide to Stamp Duty Land Tax 
Now the temporary reductions to SDLT rates have returned towards normal, First Time Buyers relief may be available to reduce SDLT on residential property purchases.

Tax Cases 

Third-party information notice hearing must remain private
In Kandore Limited & 19 Others v HMRC [2021] EWCA Civ 1082, the Court of Appeal agreed that the First Tier Tribunal did not have the power to allow the taxpayers being investigated to participate in a hearing to approve third-party information notices. The legislation prevented it and a public hearing was not appropriate.

Upper Tribunal upholds £1 million NIC liability on bonus payments 
In Charles Tyrwhitt LLP v HMRC [2021] UKUT 0165, the Upper Tribunal (UT) upheld the decision of the First Tier Tribunal (FTT) that found that bonuses awarded to five individuals whilst they were members of an LLP were in fact related to their former roles as employees. As such NICs amounting to about £1 million were due on the payments.

VAT News, Cases & Guides

Failure to notify VAT option to tax not acceptable
In William Newman v HMRC [2021] TC08147, the First Tier Tribunal (FTT) stuck out the taxpayer’s appeal against HMRC’s refusal to accept a late option to tax notification.

VAT and value shifting: Summary of responses
HMRC have published a summary of responses to their consultation  'VAT and value shifting' which took place earlier this year. 

Land & Property: DIY Housebuilders scheme
UPDATE: It is possible to recover VAT on constructing a new residential dwelling, or dwellings, even where there is no planned sale of the property. This recovery can arise under the special refund scheme for DIY housebuilders.

An inspector calls (freeview)

GAAR Panel concludes loan arrangements unreasonable course of action 
The General Anti-Abuse Rule (GAAR) Advisory Panel have published details of three opinions dated 11 May 2021 covering employee rewards using loans, finding the planning used was unreasonable.

HMRC focuses on debt as winding-up moratorium ends  
HMRC have published a new policy paper, 'Tax debt, government lending schemes and Company Voluntary Arrangements (CVAs)' on the collection of tax debts from businesses as the support schemes from the pandemic start to wind down and the moratorium on company winding-up petitions comes to an end in September.

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 15 July 2021 

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