Nichola's SME Tax W-update 16 December 2021

Hello,

We have a new Agent Update from HMRC for you this time, our edited version also provides more detail on HMRC's Income Record Viewer (IRV) service. Agents can now sign up taxpayers for a private beta pilot.The IRV is a game changer for everyone. HMRC will be able to provide details of clients' pay, tax, employment history and tax code via the firm's agent services account.

HMRC's project to pre-populate tax returns with the information that it holds was halted in 2020. In theory the IRV should now go to someone to bridge that gap. Taxpayers can, of course, already see details of their employment income via their own Personal Tax account.

The latest advice on COVID-19 asks us all to consider the economic theory of the law of diminishing returns: we are now being asked to weigh up the marginal utility of social interactions over the Christmas holiday period. The concept behind a diminishing return and marginal utility can be demonstrated by someone eating mini-Christmas puddings. The first one has a high utility value, the pudding is very rich and full of interesting flavours; it’s a novelty. You don’t really want to eat a second one, but you do because it’s offered. You do refuse to eat a third as by now you are full and feeling a bit sick. In terms of marginal utility, the first pudding scores high and the third one has a negative score. In this example you are possibly ambivalent about he second one: you could take it or leave it. 

How does this apply to social interactions? Well, the starting point is to weigh up the marginal utility value of seeing friends, clients and family. If you value interaction with family above all other potential interactions then there is going to be a lesser marginal benefit derived from say partying with workmates, seeing clients or attending events with strangers. Having done that you need to arrange your social interactions to ensure that you have attained the highest score. Interestingly, some US economists considered the diminishing marginal benefit of social distancing in the context of medical demands last year. I will leave you to search that research if you are interested in the findings.

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)

Scottish Budget 2022-23: Summary 
Scottish Finance Secretary Kate Forbes announced the draft Scottish Budget for 2022-23 on 9 December 2021. 

Self Assessment 2020-21 returns: Updated online filing exclusions 
As with previous years, many taxpayers will be unable to file their Self Assessment returns for the year ended 5 April 2021 online due to software specification issues from HMRC. Updated lists of filing exclusions have recently been published. 

Call for evidence on penalties and compliance for ISAs
HMRC have released a call for evidence on 'Individual Savings Accounts: Compliance and Penalties'. It considers the implications of a failure to comply with regulations for all types of ISA.

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

Editor's Pick (subscribers) 

Medical benefits and health checks
UPDATE: What are the tax implications if an employer provides an employee with a COVID-19 jab? What happens if the employer has reinbursed the cost of a private jab?

Basis Period Reform
UPDATE: Do you change your year-end now or is it better to wait until the transitional year?We have added more examples and updated the guidance on losses. 

Directors: Tax planning toolkit for 2021/22
UPDATE: This planner looks at a range of director tax issues, including company profit extraction.  

Guides and Updates (subscribers)  

Self Assessment 

Do I have to file a tax return?
UPDATE: When does an individual need to file a tax return? In what circumstances do HMRC need to be notified that a tax return is required?

Extracting profits (self-employed)
UPDATE: The majority of businesses in the UK are run by sole traders. What tax planning tips will help you to run a tax-efficient business? We review your different options.

Entertaining
UPDATE: Are the costs of business entertainment allowable for tax purposes? What is disallowed? What is allowed?

Land and Property   

Farming: Overview
UPDATE: What is farming? What are the tax consequences and tax considerations of farming?  What are the features of agricultural tenancies? 

Directors and Companies    

R&D: SME Tax Credit scheme
What Research & Development (R&D) schemes are available for small and medium-sized companies undertaking R&D? How to make an R&D claim? What are the qualifying costs and how much can be claimed?

R&D Zone: State Aid and Subsidised expenditure
How do grants and state aid impact R&D claims?  What constitutes subsidised expenditure?  Can clients subsidise R&D expenditure?  What R&D relief is available for expenditure which is subsidised?

Employers 

Company cars
UPDATE: Company car tax: How do you work out car benefit? How do you work out car fuel benefit? Are there savings for low-emissions vehicles? How do you reduce car benefit? Cars and the tax tribunals and Top Tax Tips.

Working from home (employer/ee)
UPDATE: What expenses can employees claim for homeworking? Are the rules the same for the self-employed? How do you make a claim?

Private Client and Estate Planning 

PRR: Private Residence Relief
UPDATE: What is Private Residence relief (PRR)? What are the qualifying conditions? Can you claim relief on two homes? How do you claim PRR? Can you claim PRR if you develop your garden?

Tax Cases

R&D expenditure not subsidised 
In Quinn (London) Ltd v HMRC [2021] TC08321, the First Tier Tribunal (FTT) found that R&D undertaken as part of a larger project had not been subsidised,  enhanced relief under the SME Scheme was available.

Scope of Schedule 36 notice reduced by FTT  
In Metropolitan International Schools Ltd v HMRC [2021] TC08322, the First Tier Tribunal (FTT) reduced the scope of a widely drafted Schedule 36 Information Notice. Items such as 'all computer records' were not reasonably required. Using its powers, the FTT re-made the Notice.

Pension contribution not wholly and exclusively for trade    
In A D Bly Groundworks and Civil Engineering Limited and CHR Travel Ltd v HMRC [2021] TC08329, the FTT concluded that substantial pension payments made on behalf of key employees as part of a tax scheme were not incurred wholly and exclusively for the purposes of the trade.  No corporate tax deduction was available as a result.

VAT Cases and Guides 

A fact could not be remade by FTT and VAT penalty due 
In HMRC v Laurence Donnelly [2021] UKUT 0296, the Upper Tribunal (UT) determined that a point agreed between the taxpayer and HMRC was not open to review by the First Tier Tribunal (FTT).

Church of England spiritual retreats are standard rated 
In Reverend Jane Taylor Trading as Mill House Retreats v HMRC [2021] TC8315/V the FTT found that the provision of spiritual retreats was not VAT exempt. Welfare services were being provided but Church of England supervision did not make them state-regulated.

Health and welfare: VAT
UPDATE: HMRC have updated VAT Notice 701/57 to clarify that the nursing agencies’ concession does not apply to umbrella companies supplying services of staff to a recruitment agency. 

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

• CPD: Business Asset Disposal Relief
• CPD: Appeals: How to Appeal a Tax Penalty
• CPD: VAT: Land and Property

More at CPD Index

Missed last time's Web-update?

Nichola's SME Tax W-update 9 December 2021

• Employer Bulletin: December 2021
• Making Tax Digital for Corporation Tax: Summary of responses
• Office for Tax Simplification: the show must go on 
• Hidden economy conditionality in Northern Ireland and Scotland: Summary of responses 
• HMRC report: Use of marketed tax avoidance schemes
• Responses on the future structure of the tax system
• Consultation: Stamp Duty Land Tax: Mixed-Property Purchases and Multiple Dwellings Relief 
• Christmas parties and gifts 
• Calendar of tax deadlines
• SDLT sub-sale scheme ineffective  
• Employee Share Options are acquired and taxable when granted
• SEISS policy for maternity is discriminatory but justified
• Matchmaking service was consultancy for VAT 
• Foreign and residency pages: FAQs
• Property profits & losses: Toolkit (2021-22)
• Year-end tax planning review
• Trust Registration Service
• Cultural Gifts Scheme and Acceptance in Lieu  ...More 

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