Wishing a Prosperous New Year to all our subscribers and readers.

This is an update that covers our essential reading highlights of 2017. We have picked the top cases and legislative amendments that we think matter most to SME owners and advisers.

2017 was something of a nightmare for anyone trying to stay up to date in tax: we had two finance acts, the budget was moved to Autumn and this created a new finance bill. Brexit dominated the headlines however its tax effects will not be fully known until we know the actual deal available. 

2017: at a glance

Making Tax Digital (MTD)

Sole traders and landlords were due to be mandated into quarterly online reporting under MTD from 2018. This was postponed as it was just asking too much too soon: we may have had the brains, however the technology was lacking. Software could not do what it was required to do, not all taxpayers have fast broadband or the necessary IT skillsets, and agents do not have the capacity to assist some 5 million taxpayers file even more returns per year

Public sector contracting and the move to IR35

Penalties excused for late non-resident capital gains tax return

Restricting mortgage interest relief

One of the biggest methodology changes to occur was the idea that mortgage interest should not be treated as a deduction when calculating profits from the letting of residential property for income tax purposes.

Non-UK domicile status and tax

Credit card payments to HMRC stop on 13 January 2018

Corporate Criminal Offence: failure to prevent tax evasion

UK residential property brought within the charge to IHT

 

Devolution

Cases

Share issue overturned
In Power Adhesives Limited v Stephen James Sweeney & Others [2017] EWHC 676 the High Court set aside the decision by a company’s board to convert a directors loan into shares by applying 'the Hastings Bass principle' (that allows the correction of a fiduciary's mistake). An intriguing result: the court got involved in a private company's transaction and allowed it to be reversed. 

Company loss scheme: controlled and managed from the UK
A radical change in the way that 'control and management' of offshore companies is determined. In Development Securities (No 9) Ltd & others v HMRC [2017] TC06007 a Jersey company was held to be UK resident: it undertook transactions (part of a tax scheme) engineered by its UK parent. The combination of the lack of the commerciality of the transaction and the lack of benefit to the company meant that the tribunal took the view that the Jersey board of directors was acting like a puppet of its UK based parent.

Car or Van?

Court of Appeal finds no legitimate expectation in Mansworth v Jelley loss claim

No negligible value claim for Executors

Football and tax

Football clubs and their players have been under close scrutiny by HMRC ever since journalists started to add up and publicise the numbers. It is unclear just why HMRC allowed some clubs to build up massive tax debts and how PAYE avoidance became so popular that players and managers regarded it as 'the norm' the whether via image rights, disguised transfer fees or player loans. We can speculate that this may be due to the fact that some inspectors were such big football fans that their failed to 'see the wood for the trees'. The situation may be brighter fo taxpayers, during 2017 HMRC claimed that it was recovering some £80m per year as a result of enquiries into the tax affairs of the industry. 

Ranger's EBT was a disguised remuneration scheme
The football-tax highlight for 2017 was that the 5 year battle over between HMRC and Rangers Football Club was decided by the Supreme Court in July. The court found that loans made to employees under the club's EBT loan scheme were in fact remuneration and so subject to tax and NIC.

Another win for Spurs
In HMRC v Tottenham Hotspur Limited [2017] UKUT 0453 (TCC), the Upper Tribunal (UT) considered whether termination payments to two football players (Peter Crouch and Wilson Palacios on their transfer to Stoke) should be subject to tax and NIC as earnings “from an employment” rather than under the special rules.

HMRC’s search of Newcastle United valid
In Newcastle United Football Club Ltd and Ors v HMRC [2017] EWHC 2402 (Admin), the High Court considered a judicial review of HMRC’s decision to apply for search and seizure warrants. The case concerned enquiries into the alleged concealment of transfer fees. 

Further highlights of 2017 and a look at 2018?

See Subscriber guides: 

Finance Acts 2017: tax update and rolling planner
What's hot for the 2017/18 tax year.

Finance Act 2018-19: tax update and rolling planner
What the 2018/19 tax year has in store.

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