Hello,
The King's Speech did not reveal anything that we did not really know in terms of the new government's policies, and subsequently it published more detail on the first bills that will go before the new parliament. HMRC is really ramping up the stakes now by sending out 'one to many' letters to Persons of Significant Control (PSC) on the Companies House register as well as to deemed contractors under the Construction Industry Scheme (CIS) rules: watch out for these: they constitute a 'nudge' and need to be acted upon. We have several tax cases which are all topical in their own right, covering Research & Development (R&D), carried interests, tax relief on investment management fees and failure to notify.
We report on a case this week before the First Tier Tribunal (FTT) that featured a company whose R&D project involved trying to reduce human intervention in the Know Your Client (KYC) onboarding process as required by the Money Laundering Regulations. This meant that the tribunal had to consider the use of open source tools. It's only a FTT decision but worth a read if you are involved in research projects.
We know that HMRC struggles when it comes to R&D claims where there is the mere mention of 'open source software' as every instinct will be to deny relief. After all, if something is 'open source' it's freely available, and as such there can be no advance in either science or technology in its deployment, and therefore no qualifying R&D. In our opinion that view should not be entertained because open source (whether code, software or other applications and of course AI models) are all the very building blocks for advances in technology and it would be very rare to conduct any R&D without their use.
We expect that the new government will reform the 'carried interest' rules for investment managers. We found a case to report this week on carried interests; not a well-known area of tax law, but useful to understand these things if there is to be a policy change.
We have more news, cases and updates below, and we also feature a guide 'What is open source software?' if you need to know a little more on that topic.
Back soon
Nichola & the Team
Your Virtual Tax Partner®: online PRACTICAL support for accountants, tax advisers BY accountants and tax advisers.
Quick News
HMRC focus on the Persons of Significant Control (PSC) register
In its latest one-to-many campaign, HMRC is writing to Persons with Significant Control (PSC) who have not filed a tax return or may not have declared all their income
Construction Industry Scheme one-to-many letters
HMRC have issued the latest round of one-to-many letters, this time focusing on Construction Industry Scheme Insurance Sector Registrations.
Authority to act for the personal representatives of an estate
HMRC has made Form P1000 available on gov.uk. Agents should use Form P1000 when requesting authority to act as personal representatives of an estate.
Welsh LTT reliefs: Consultation outcome
The Welsh Government has published a summary of responses to its earlier Land Transaction Tax (LTT) consultation which proposed changes to reliefs, including the abolition of Multiple Dwellings Relief (MDR).
Highlights (for tax and business) of the Kings Speech
King Charles III made his speech on the State Opening of Parliament today. We summarise the bills: 'the big ticket measures' that the new government will introduce in its first term.
Tax Cases
R&D claim: tribunal rules on open source AI modelling
In Get Onbord Limited (in liquidation) v HMRC [2024] TC09238 the First Tier Tax Tribunal (FTT) considered the meaning of R&D as in whether a project heavily reliant on open source coding and software to develop a streamlined and AI automated process for onboarding new clients under the Money Laundering Regulations (MLR) was actually engaged in “research and development” in terms of the BEIS Guidelines. The FTT also offered some advice to future claimants on their approach to case management.
No excuses for landlord's failure to understand joint property rules
In Roy Bevan v HMRC [2024] TC09225, a landlord was unsuccessful in his appeal against tax penalties assessed for his failure to declare small amounts of rental income over 15 years. The tribunal decided that "it was not objectively reasonable" for the Appellant to have failed to consider the ramifications of renting out a property.
Carried interest rules did not apply
In Nicholas Millican v HMRC [2024] TC09239, the First Tier Tribunal (FTT) found that the post-July 2015 carried interest rules did not apply for Capital Gains Tax (CGT) purposes. Although investment management services were supplied, they were not supplied to an investment scheme.
Management expenses disallowed as capital expenditure
In Centrica Overseas Holdings Limited v HMRC [2024] UKSC 25, the Supreme Court (SC) confirmed that professional fees incurred in relation to the disposal of a subsidiary were management expenses. However, the SC agreed with the Court of Appeal (CoA) that these expenses were capital in nature and should therefore be disallowed.
Editor's Choice
Share capital: what is an ordinary share?
What is an ordinary share? Why is it important? When can a preference share be an ordinary share? Is a preference share treated as debt or equity? What do you need to consider when setting up new share classes?
What is open source software?
'Open source', 'coding', it's part of an alien language for so many people. This is a guide to the basics which looks at a (very small) sample of the goodies that are out there to develop.
Guides & Updates
Self-Employed
Side-Hustles & Tax
A handy briefing for your clients: Clarifying the rules on side-hustle tax. Do I need to pay tax on my side-hustle income? Is a side-hustle taxable? Is there a new side-hustle tax? Do I need to register for tax when I sell on eBay, Vinted or Etsy etc
Basis Year Reform
What is basis period reform? Who is affected? What is the new basis year for tax? What are the transitional rules?
Incorporation
Incorporation: Property business/Buy-to-let
What relief can I claim if I incorporate my residential property business? What claims and elections do I need to make? What are the Capital Gains Tax (CGT) and Stamp Duty Land Tax (SDLT) implications?
Directors & Companies
Close Investment Holding Companies (CIHC)
What is a Close Investment Holding Company? When does a close company become a Close Investment Holding Company? What are the consequences for tax? How do you avoid becoming a Close Investment Holding Company?
Associated Companies
What is an associated company? What are the tax effects of associated companies? How do the control tests work? Examples of associated companies. What are the rules for indirect control?
Employers
CIS: Contractors and Subcontractors
What is the Construction Industry Scheme? Who does it apply to? How does it work? The Construction Industry Scheme (CIS) is a scheme created by HMRC for contractors and subcontractors, designed to minimise tax evasion within the construction industry.
Time to Pay agreement
At the end of 2023 HMRC changed the eligibility requirements for PAYE and VAT Time to Pay arrangements. This means that more businesses are now eligible to use them.
Land & Property
Joint property elections
When a property is held in joint names it is mainly taxed according to beneficial ownership. There is an exception where married couples and civil partnerships hold joint property. Trusts are also taxed differently.
Welsh Land Transaction Tax (LTT)
What is Land Transaction Tax? How does it operate? What reliefs are available?
Penalties & Compliance
Discovery Assessments
When can HMRC issue an assessment outside of the normal statutory time limits? What conditions must be met? Can HMRC issue two alternative assessments for the same period? What are your rights of appeal and defences?
Tax Appeals
Start here: Top tips in this vital process.
Private Client & Estate Planning
Trusts & Estates: Ten-year charge reporting requirements
What is the ten year charge (or principal or periodic charge) and when does it apply?
CGT: Residential Property gains
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?
VAT News & Cases
Groups (VAT)
What are the conditions for forming a VAT group? What rules apply once a VAT group is in place?
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.
CPD for Lunch
Byte-sized chunks of lunchtime CPD for subscribers
- NEW: CPD: Change of basis periods: Transitional rules 2023-24 Returns
- CPD: VAT Penalties Update
- CPD: CGT Reporting and payment deadlines
More at CPD Index
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 wide range of expertise: covering direct and indirect tax, as well as accounting, R&D claims, reorganisations and much more.
Missed the Last Tax Update?
Ross Martin Tax SME News: 11 July 2024
- Employer Bulletin: July 2024
- Payment on account deadline draws near
- Round-up of HMRC statistics
- Another CIS telephone service withdrawn
- When a year is not a year
- Paddock not residential for SDLT
- Constructive trust meant earlier CGT disposal
- Collagen drink not a food for VAT
- Company suppressed sales and purchases ...More
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