We have our enhanced version of HMRC's Agent Update for you this time and several topical case decisions and news, including three cases on claims about share disposals, two on employment taxes and one on selling off a garden to a developer.

SME tax news 4

I try to avoid giving in to requests from friends and neighbours for 'quick advice' on Capital Gains Tax (CGT) when selling off their excess residential land. It is one of those topics that can be extraordinarily complicated and full of traps. We have created a handy summary which you can use as a Client Briefing on this subject. You can find it in this week's Editor's Choice.

How do you deal with conflicts of interest? We feature a cautionary tale from the Institute of Chartered Accountants in England and Wales (ICAEW) in which an accountant was found to have been overly biased towards one party when acting for clients who were divorced. Notably, the rules on such conflicts are different for accountants compared with say, legal representatives.

Our team are busy updating our guides and we expand them as queries come in via our Virtual Tax Partner (VtaxP) support site. Our handy updates this time are on ever-topical Loan Relationship rules and Basis Year Reform. New questions are just starting to roll in on the latter. HMRC has "launched a full package of online interactive guidance" which includes a facility to obtain details of past overlap profits. The ICAEW says that HMRC is now reporting 'an increase in demand for the service' and there may be delays. It's annoying, if all the systems joined up, this kind of information could be automatically provided for each client in the "Information to help complete your tax return" section of HMRC's SA online.

HMRC is asking us to put clients into the Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) pilot. As mentioned in a previous week our tax software stopped working and there is no danger of getting close to signing up for a pilot as yet.

Dates for the diary: come and see us at Accountex, at Excel in London on May 15/16. I am doing a talk there on the 16th. Lots of CPD and updates below, so do keep on scrolling down!

Back soon

Nichola & the Team


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

Quick News (Freeview)  

Agent Update Issue 119 
HMRC published Agent Update 119 on 17 April 2024. This is our summary of the highlights in direct and indirect tax announcements affecting SME owners and advisers.

Hospitality sector needs to prepare for 'fair tips' rules
The Department for Business and Trade has published the government's response to its consultation 'Distributing tips fairly: draft statutory code of practice' including the implementation of the Code of Practice, and the Employment (Allocation of Tips) Act 2023. Workers in tipping industries will be protected from unfair employers pocketing money meant to go to them in recognition of good service. 

MTD for Income Tax testing has now re-opened
On 22 April 2024, HMRC issued updated guidance on Making Tax Digital (MTD) for Income Tax. After a pause in the pilot in February 2023, HMRC has now confirmed the expansion of the pilot from April 2024.

Accountant should have avoided conflict of interest
A Norfolk-based accountant has been severely reprimanded, excluded from membership of the ICAEW,  and ordered to pay costs of £55,645 for favouring one party over another in a dispute following a divorce.

Improving the effectiveness of the Money Laundering Regulations
HM Treasury's consultation, 'Improving the effectiveness of the Money Laundering Regulations' explores a wide range of steps for improving the quality of Anti-Money Laundering (AML) due diligence as well as filling gaps in disclosure of trust and land ownership as well as joining up gaps in information sharing. It also includes a survey.

Tax Cases (Freeview)

Garden development date of disposal dilemma
A decision to sell off part of a garden to a developer resulted in the owner unwittingly becoming a developer, a fact not missed by the tax tribunal which found his favour terms of Capital Gains Tax (CGT) Private Residence Relief (PRR).

Entrepreneurs’ Relief allowed on 4.99998% shareholding
The First Tier Tribunal (FTT) found that a shareholder with a 4.99998% shareholding qualified for Entrepreneurs’ Relief (ER). A spreadsheet rounding error meant that 5% was not held, but the FTT decided that the High Court would have rectified this mistake, meaning that ER was available. 

Negligible Value claim rejected
An attempt to claim negligible value relief was rejected by the First Tier Tribunal (FTT). It was found that the shares were already of negligible value at the time of acquisition.

Capital loss allowed on loan converted to shares
The First Tier Tribunal allowed relief for a capital loss on an irrecoverable loan to a trader, despite the loan having been converted into shares before the loss relief claim was made. 

FTT told to revisit issue of mutuality of obligation 
In HMRC v RALC Consulting Limited [2024] UKUT 00099 (TCC), the Upper Tribunal (UT) overturned a 2019 decision by the First Tier Tribunal (FTT) about the intermediaries legislation commonly referred to as IR35 which originally found in favour of the taxpayer. The case has been remitted back to the FTT which must now reconsider the arguments.

Significant victory for HMRC in Remuneration Trust 
HMRC appealed a decision by the First Tier Tribunal (FTT) relating to a tax avoidance scheme. They won on two of three grounds with the result the loans made are taxable as earnings but not deductible for Corporation Tax.

Editor's Choice  

Gardens: selling or developing
UPDATE: What are the tax consequences of selling a garden for development purposes? What if the owner develops the garden? An indispensable guide for advisers and clients.

Salary v dividend 2024/25
UPDATE: This includes Scottish Income Tax rates too!

Tax Tools & Calculators

Tax tools & calculators
UPDATE: 2024/25 versions available now. We have a suite of useful tax tools that help agents, business owners and sole traders calculate their taxes. 

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 (subscription content)


Basis Period reform
UPDATE: What is basis period reform? Who is affected? What is the new basis year for tax? What are the transitional rules?

Badges of Trade: Are you trading or not?
UPDATE: Are you trading, running a business, or just buying and selling investments? Is your 'side-hustle' taxable? The 'Badges of Trade' are a set of indicators, built up over time by the courts, to decide when an activity is a trading or investment activity.


LLPs and loan to participator rules
UPDATE: a trap for the unwary where LLPs, Partnerships or even Sole Trade businesses are run in tandem with a close company.

Directors & Companies  

Loan relationships: Connected Companies
NEW: How do the loan relationship rules apply to connected companies? What are the special rules? When do they apply? What are the exceptions to the special rules? What are deemed releases? 

Losses: Carried forward loss relief restriction
When are claims for carried forward (c/fwd) loss relief restricted? Who is impacted by these restrictions? What are the compliance obligations associated with these restrictions? 


Agency Workers: Employment intermediaries rules (subscribers)
What are the tax rules for Employment Intermediaries and Agencies? Are agency workers subject to PAYE?

Employment Status: mutuality of obligation 
What is mutuality of obligation? Why is mutuality of obligation not considered by HMRC's Check Employment Status for Tax tool?

Private Client & Estate Planning

Online filing exclusions for 2023-24 tax returns 
NEW: Some taxpayers will be unable to file their Self Assessment returns online for the year ended 5 April 2024, due to software specification issues from HMRC. Lists of filing exclusions for individuals, partnerships, trusts and estates have recently been published. 

High-Income Child Benefit Tax Charge
UPDATE: What is the High-Income Child Benefit Charge? Who pays it? Can you appeal against an assessment? Are there any useful cases from the tax tribunals? 

Capital taxes round-up: 2024-25
NEW: A round-up of developments in capital taxes for 2024-25 including some topical Capital Gains Tax (CGT) and Inheritance Tax (IHT) cases. 

Land & Property

Annual Tax on Enveloped Dwellings (ATED)
What is the Annual Tax on Enveloped Dwellings (ATED)? Who does ATED apply to? What relief is available and how is it claimed? What are the ATED return filing dates?

SDLT: First-time buyers
What Stamp Duty Land Tax (SDLT) relief is available to first-time buyers? What qualifying conditions must be met?


Named tax avoidance schemes, promoters, enablers
UPDATE: HMRC publishes a list of named tax avoidance schemes, promoters, enablers and suppliers. It is not recommended that taxpayers use any of these schemes, as HMRC does not consider that they work and you may end up with a significant tax liability if you engage with the scheme suppliers.

HMRC Tax Settlement Facilities 2024-25  
HMRC provides special tax settlement facilities and opportunities to allow taxpayers to notify undeclared income or gains over a range of different taxes. Facilities are provided via special links to enable taxpayers to settle unpaid taxes.

VAT News & Cases

Revenue and Customs Brief 4 (2024): Interpretation of VAT and excise law from 1 January 2024 
HMRC have published Revenue and Customs Brief 4 (2024): Interpretation of VAT and excise law from 1 January 2024 following post-Brexit legislation that came into effect on 1 January 2024.

Revenue and Customs Brief 5 (2024): Tour Operators' Margin Scheme for B2B wholesale supplies
HMRC have published Revenue and Customs Brief 5 (2024): 'Tour Operators' Margin Scheme (TOMS) for business-to-business (B2B) wholesale supplies' and confirm these supplies are within the scope of the TOMS.

Fuel scale charges (VAT)
UPDATE: What is the VAT fuel scale charge? What alternatives are there to the VAT fuel scale charge? Does the VAT fuel scale charge apply to vans?

CPD for Lunch

Byte-sized chunks of lunchtime CPD for subscribers 

More at CPD Index

CPD Workouts

Two hours of CPD: Unravelling the diverse tax rules over a range of topical subjects

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 18 April 2024

  • New penalty regime applies for MTD volunteers
  • Tax Administration and Maintenance Day 2024: At a glance  
  • VAT treatment of private hire vehicles consultation
  • R&D undertaken overseas: Externally provided workers and contractors
  • Further HMRC letters concerning Pandora Papers
  • Money Laundering Regulation fine windfall
  • Retired partner still entitled to partnership share
  • No SDLT magic for rented residential paddock ...More

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