We have a new HMRC Agent update, a new, and maybe controversial HMRC interpretation of the purchase of own shares rules, plus some interesting cases and updates.

We detected that HMRC had changed its view on certain aspects of the qualifying conditions for a purchase of own shares (POS) when it declined to provide clearance on a couple of applications involving multiple completion contracts. It took a while to work out the issues, and now HMRC has described its thoughts in detail. Whether its new interpretation, as detailed below, will ever be tested by the tribunals remains to be seen, as there are other ways to achieve a buy out of retiring shareholders, some of which are also much easier for lawyers to draft.

Bring on the sheep! We have the outcome of two long-running Stamp Duty Land Tax (SDLT) appeals in which two sets of taxpayers purchased houses 'with land'. In each case it was a paddock comprising a couple of acres. Both expected their land to be non-residential, as it 'obviously' was 'land land' and not part of the garden. Not so, said the Court of Appeal (CoA) on finding that the SDLT legislation places no size limit when it comes to the scale of the grounds of a residential property. The taxpayers' land purchases were thus found to be residential and subject to a higher rate of SDLT than had the land been non-residential and a mixed rate applied. The outcome is very confusing for taxpayers who might think that Parliament would set a size limit for grounds in SDLT, just as there is for Capital Gains Tax Private Residence Relief.

Now that we have that decision in the bag, it would be quite useful to set a limit for residential grounds, as a typical 'equine' property could be sold with land from about one to 20+ acres. As things stand, based on this decision all that land could be deemed to be residential if it is just used by the owners for domestic pleasures. A pragmatic solution is presumably to use the land for commercial farming before and during the sale process, hence 'bring on the sheep'. Other farm animals are available from normal agricultural outlets.

Back soon, 

Nichola Ross Martin FCA CTA (Fellow)
Tax Director


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Quick News (Freeview)

Agent update: February 2022
HMRC have issued their Agent Update for February 2022. We have summarised the key content for you with links to our detailed guidance on the topics covered.

HMRC'New take on Purchase of Own shares via multiple completion contracts 
HMRC have changed their view on the Purchase of Own Shares ‘connection test’: this affects multiple completion contracts.

Taxpayer exposed to long-term risk from COVID fraud 
The Public Accounts Committee has published 'COVID-19 cost tracker update'. It expects that all Coronavirus state-backed schemes will cost at least £15bn in fraud and has exposed the taxpayer to "substantial, long-term financial risks".

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IHT: Loans and restrictions on liabilities against the estate
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Tax Cases 

'Pony paddocks' are residential for SDLT purposes
In (1) David Hyman and Sally Hyman and (2) Craig Goodfellow and Julie Goodfellow v HMRC [2022] EWCA Civ 185, the Court of Appeal (CoA) found that there is no acreage limit on the land that could be classed as residential property for Stamp Duty Land Tax (SDLT) purposes. 

HMRC AML visit costs £16k+ penalty for small firm
A cautionary tale: in Delta Tax Agents Ltd v HMRC [2022] TC8403 a small firm of tax agents received a high penalty for failing to demonstrate that were undertaking Anti-Money Laundering compliance in accordance with the regulations. They were then unsuccessful in making a late appeal against the penalty.

VAT Cases & Guides 

Revenue and Customs Brief 3 (2022): Postponed VAT accounting and the Flat Rate Scheme 
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Input VAT on delivery charges was not recoverable 
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Tax Queries?

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CPD for lunch 

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Missed last time's Web-update?

Nichola's SME Tax W-update 17 February 2022

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  • Employer Bulletin: February 2022 
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