SME Tax News

Employment income - definition of mobile phone (treatment of smartphones): HMRC has changed its view as to what devices are now treated as a mobile phone for the purposes of s319 ITEPA 2003.

Private client expert John Endacott gives his Pre – Budget Thoughts.

As the newspapers get more interested in the taxation of the civil service, fresh revelations of abusive tax practices, apparently sanctioned by HMRC, are emerging weekly.

From last week: it transpires that the Whitehall practice of allowing senior civil servant employees to opt out of the PAYE system to save their tax and so boost their pay and allowances is not just limited to the Student Loans Company and HMRC.  According to reports in the Guardian some 25 health bosses from the Department of Health are effectively “off-balance sheet”.

Those involved are paid via personal consultancy companies, and so even if they do account for tax under IR35 the individuals are also able to benefit on obtaining tax relief on expenses including travel and 5% of income. It seems unlikely from reports that IR35 is applied or enforced by HMRC.

One can speculate why such practices of false self-employment are appealing -  the need for government departments to show reduced levels of employees at management level, or demonstrate staff cuts, all ensuring that the need to show lower wage budgets are met. Clearly, a blind eye has been turned all round.

The papers have so far missed off some of the other practices on-going reported by some of our subscribers. The two which have generated the most discontent amongst accountants and advisers (who do not normally complain too much about these things) in recent months are as follows:

The NHS clinic

Hospital consultants are engaged to work on NHS contracts – as employees and paid a fixed rate. They perform way less than minimum hours contracted, this frees up time to run their private clinics. The private clinic then operates from the same hospital, on the same patients, using the same staff, clinic space and equipment however the consultant is self-employed, or later incorporates the private practice and secures substantial tax relief under Entrepreneurs’ Relief. The objection here is that many consultants are effectively being paid twice.

Ministry of Defence

Technician employments have been greatly reduced in recent years, however the MOD now engages all manner of its ex-employees via umbrella companies, a great number of which have set up exclusively to manage these contracts. The umbrellas operate PAYE and NICs, but the worker obtains tax relief for travel and subsistence, which would not otherwise be tax deductible. The objection here is for the plight of the workers – the umbrella companies’ fees leave them financially no better off than when they were employees however they have also lost their employment rights.

Is there any point in changing the rate of VAT again?

HMRC’s failed attempt to prosecute football manager Harry Redknapp may have cost the taxpayer an estimated £8 to £10 million. An own goal?

From Redknapp to ABC shares, our pick of the week:

Redknapp verdict: not guilty of tax fraud.

ESC C16: HMRC advises to go ahead without clearance.

IHT relief for Furnished Holiday Letting: the Tribunal does not agree with HMRC's manuals.

Dave's investigations blog: undeclared bank accounts HMRC have extended opportunites

Subscribers - don't miss the new guides to ABC or Alphabet shares: employees

Scroll down for more.

Best wishes


Nichola Ross Martin FCA
Tax Director
Your online Virtual Tax Partner: practical support for accountants, tax advisers and their clients

News & quick guides

Redknapp not guilty: HMRC 'no regrets'
Perhaps a surprise result?

ESC C16: the confusion continues
Go ahead without our approval says HMRC, but the ICAEW do not agree about tax relief.

Buying from Germany? New tax requirements
If you have any clients who buy goods from Germany they will need to comply with these new rules.

Business Property Relief & Furnished Holiday Letting
The First Tier Tax Tribunal disagrees with HMRC's IHT manual. An intelligent man would consider this a business for IHT relief.

Rethink on Business Records Checks
HMRC goes back to the drawing board. Are BRC's too expensive to run? HMRC consider double penalties.

How to check your 2012/13 PAYE Code
New guidance from the Low Income Tax Reform Group.

Most read from last week:

Civil servants take advantage of HMRC concession to avoid PAYE
Strange but apparently true.

Subscriber essentials

Liechtenstein Disclosure Facility
UPDATE: extended until 2016

Finance Bill 2012: tax planner
UPDATE: refresher on 2011/12 and what to expect in 2012/13

Tax penalties: SA late filing & payment
UPDATE: this quick guide covers both types of penalty, with examples.

AIA: rules where there is a change of rate
Examples: what happens when the year end does not end with the tax year.

Investigations and enquiries

Swiss bank accounts: to disclose or not?
When an inspector calls - follow Dave William's blog.

New investigation campaigns
HMRC has announced that it is going to target higher rate taxpayers and traders in a series of new campaigns.

Employment taxes

ABC or Alphabet shares: employees
What are the tax and NICs consequences of issuing different classes of shares?

Pensions: carry forward of unused allowances
The mechanics of the carry-forward of deemed allowances from 2008/09.

Directors' loan accounts: toolkit
UPDATE: our version of HMRC's toolkit for advisers but ours is a modified version to include additional planning points.

Collecting Tax Debts through PAYE
From April 2012 debts of up to £2,999 will be added to codes. These will be issued from now on.

When a dividend is subject to NICs (Part 3)
A contrived bonus scheme is taxed as employment earnings (may yet appeal to Supreme Court).

Use of home for business purposes
Tax treat mini guide for your staff.

Plug in car and van grants
NEW: the fleet vehicle of the future?

More Subscribers' Guides

Don't miss:

Capital expenditure allowances - signpost
Quick guide to alternative allowances to plant and machinery capital allowances.

Property profits & losses: toolkit
UPDATE: don't miss this if your are doing rental accounts.

Fixtures: overview
Confused about late claims for Fixtures and changes in 2012? Start here.

Disappearing tax reliefs
UPDATE: tax reliefs and changes that will affect your clients in the next 12 months.

Dividends: index
Start here for our new guide to dividends: minutes, warrants and tax on unlawful distributions.

Legal or unlawful dividends: Companies Act 2006
A mini-guide.


Tax planning for directors
Index to guides and updates

Retirement: a purchase of own shares
A menu and summary

VAT: a whole new section
Toolkits, practical guides, current reclaim opportunities and updates

We all love feedback keep emailing Nichola it all helps.

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