Nichola's SME Tax W-update 16 February 2023

Hello,

A late filing penalty appeal decision this week illustrates a case whereby a taxpayer might possibly have avoided a late filing penalty had she asked HMRC to cancel her notice to file a Self Assessment return, rather than filing an unncessary return late and thus attracting an automatic fine.

You may request that HMRC withdraws a section 8 TMA 1970 Notice to file if you can meet various qualifying conditions, such as no tax liability or insufficient income. Once the notice is withdrawn, any late filing penalties automatically cease to apply, even if you were going to be late filing your return. It's a useful 'tax hack'; it saves everyone time.

VAT is looking forward to celebrating a big birthday on 1 April 2023. It will be 50 years old. Despite leaving the EU, it is highly unlikely that the chancellor will phase out VAT anytime soon as we have only just got the hang of Making Tax Digital for VAT, and what would all the tax tribunal judges do with all their spare time should VAT appeals cease? 

VAT decisions feature an often bizarre range of goods and services, and the selection of VAT decision summaries we have for you this week definitely fit that description. They include a failed attempt by HMRC to challenge the legality of sales of a cannabidiol (CBD), the finding that relationship matchmaking is not 'business consultancy', and that conservatory roof panels are roof panels and not just 'insulation'. 

Finally, we have new a CPD on Associated Companies. Do check out our CPD, it’s bundled free with a subscription to our web service or you can simply buy CPD as a stand-alone product.

More news, consultation outcomes and updates for you below.

That's all for now,

Back soon, 

Nichola Ross Martin CTA (Fellow) FCA
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)  

Why the government didn’t go ahead with Online Sales Tax
It was announced in Autumn Statement 2022 that the government would not proceed with the introduction of an Online Sales Tax (OST). HM Treasury's newly published response to its earlier consultation reveals why the proposed new tax was rejected.

HMRC sends further one-to-many letters 
Recent weeks have seen a spate of one-to-many letters being sent by HMRC to taxpayers. HMRC's latest campaigns target Research and Development Tax Relief, undeclared income from short-term property letting, and individuals exceeding the Business Asset Disposal Relief (BADR) lifetime limit.

Outcome of Reforming Non-Domestic Rates in Wales consultation 
The Welsh government has published its response to the consultation ‘Reforming Non-Domestic Rates in Wales’. It now intends to move forward with the development of the proposals.

LBTT: ADS changes
The Scottish government has published a consultation on proposed legislative amendments to the Land and Buildings Transaction Tax (LBTT) Additional Dwelling Supplement (ADS) rules. These changes include extending 18-month deadlines to 36 months and providing relief from ADS on divorce or separation. 

Editor's Pick 

Salary v Dividends: what are your options in 2023/24
Update: try out our calculator, it works out your options at small, marginal and main corporation tax rates.

Tax Planning & Tips: Tax Year End
Our 2023 range of Practical Tax Year-End and Accounting checklists cover individuals, in their private capacity and their business interests. They make essential reading for any business owner or adviser.

Tax Tools 

Full details of our tax calculators
We have a suite of useful tax tools that help agents, business owners and sole traders calculate their taxes. 

Tax Tools
FREE add-on for subscribers, or available separately

Calendar of tax deadlines and new tax measures
UPDATE: This is a freeview 'At a glance' rolling calendar of common recurring tax deadlines, new tax measures and other tax significant events.  

Guides & Updates

Self-Employed 

Accounting periods and tax basis periods
Which date do I choose? Does it matter? Can I change my accounting date?  What changes are proposed as a result of the reform of basis periods?

Wholly and exclusively…toolkit
When is an expense allowed for tax purposes? What does 'wholly and exclusively' mean? How do you determine if a cost is wholly and exclusively incurred for the purpose of a trade? What cases are there?  

Land & Property

De-enveloping property
How do you transfer a property held by a company to its shareholders? The tax term is ‘de-enveloping’. There is no specific tax relief for de-enveloping: you need to plan the transfer carefully in order to avoid excess tax charges.

Replacement of Domestic Items Relief (subscriber guide)
What is Replacement of Domestic Items Relief? When can it apply and what conditions must be met? 

LBTT: Additional Dwelling Supplement
What is the Additional Dwelling Supplement for the Land and Buildings Transaction Tax? When does it apply? 

Companies

Purchase( repurchase) of own shares
UPDATE: Includes CIOT budget representations in respect of multiple completion contracts.

Interest relief: Making a loan to a close company
In certain circumstances, individuals can claim tax relief for interest paid on a loan where the funds are used by a close company or used to buy an interest in a close company. Which loans qualify? What is a business purpose? 

Capital Allowances

AIA & WDA: Rules where there is a change of rate
UPDATE: How do you apply hybrid rates when there are changes in the rate of allowances? How does this work for Writing-Down Allowances (WDA) or the Annual Investment Allowance (AIA)?

Private Client & Estate Planning

CGT: Holdover/gift relief
UPDATE: Includes CIOT budget representations in respect of the impact of post-April 2002 goodwill on gift relief claims.

Residential Property gains
UPDATE: The definition of 'Residential Property' is important for Capital Gains Tax (CGT) purposes when considering how a gain is reported, when tax is paid and the rates of tax that apply. What is a Residential Property gain? 

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

IHT: Normal Expenditure Out of Income (gifts)
When is normal expenditure out of income exempt for Inheritance Tax (IHT)? How do you claim the exemption?

Penalties & Compliance

S.8(1) Notice to file a tax return
This guide examines the implications of a notice sent to an individual under s.8(1) TMA 1970 to file a tax return and how to get one withdrawn.

How to appeal a tax penalty (subscriber version)
UPDATE: What are the steps in making an appeal? What should your appeal cover? What does recent case law say on this topic?

Mandatory Disclosure (DAC6): Do you need to make a report?
UPDATE: The Mandatory Disclosure rules will replace DAC6 as the reporting requirement for those involved in aggressive tax planning or avoidance through cross-border arrangements. Who might have to make a report? What arrangements are caught? What are the reporting requirements?

CPD for Lunch

Byte-sized chunks of lunchtime CPD for subscribers

• NEW: CPD: Associated Companies
• CPD: Directors Tax Update 2022-23
• CPD: Land and Property Update 2022-23
• CPD: Employers' tax update: 2022-2023

More at CPD Index

Tax Cases (Freeview) 

Not possible to assign film scheme income
In Thomas William Good v HMRC [2023] EWCA Civ 114, the Court of Appeal (CoA) found that although he had assigned the film scheme income to another, the appellant was taxable as he was still entitled to receive the income as he had retained a benefit.

HMRC challenges legality of CBD sales
In The CBD Flower Shop Limited v HMRC [2023] TC8724, the First Tier Tribunal (FTT) blocked an application by HMRC to amend their statement of case to challenge the legality of the cannabinoid products sold.  Allowing the amendment would have prejudiced the taxpayer in the underlying VAT case.

Late filing excuses not reasonable   
In Onuchika Eleonu v HMRC [2023] TC8726, the First Tier Tribunal (FTT) dismissed an appeal against penalty notices.  The excuses offered by the appellant were not reasonable.

VAT Cases & Guides  

Conservatory roof panels not insulation for VAT 
In Greenspace (UK) Ltd v HMRC [2023] EWCA Civ 106, the Court of Appeal (CoA) found that insulated conservatory roof panels were not insulation for the purposes of VAT-reduced rating. 

Matchmaking service is not a consultancy for VAT 
In Gray & Farrar International LLP v HMRC [2023] EWCA Civ 121 the Court of Appeal (CoA) found that a dating matchmaking service was not a supply of consultancy for VAT purposes. This meant the services were within the scope of UK VAT when supplied to clients outside of the UK and EU.

Tax Queries?

UK Agent for registration of Overseas Entities
Do you require assistance in the registration and verification of an overseas entity that owns UK land or property?

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.  

Missed last time's Web-update?

Nichola's SME Tax W-update 9 February 2022 

• Increase in HMRC interest rates  
• Review National Insurance records by 5 April 2023 
• Offshore Entities miss registration deadline
• Tax Planning & Tips: Tax Year End
• Annual expenses for employees: How to claim
• Supreme Court's Tooth obiter dicta sets precedent on staleness
• No higher rate SDLT relief, property not main residence
• VAT TOMS: No repayment for negative margin 
• Extension ineligible for DIY Housebuilder scheme  
• Airbnb: Tax Overview
• LBTT: Additional Dwelling Supplement
• Property profits & losses: Toolkit (2022-23)
• Tax-efficient extraction of company profits: toolkit (2023/24)
• Overpayment Relief
• Alternative Dispute Resolution for SMEs
• Discovery Assessments
• CPD: Directors Tax Update 2022-23 ...More

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