VAT – Flat Rate Scheme

The recent case of ICAN Finance shows the importance of identifying the entity that is registered for VAT purposes.

In the case of a sole trader, it is the individual and not the business that is VAT registered. 

In terms of the VAT flat rate scheme, the First Tier Tribunal heard that the flat rate should be applied not only to the taxable supplies relating to the trade but also exempt supplies such as rent from a lettings business.

This is a potentially unexpected pitfall which advisers of small businesses should be aware of.

Tax Amnesty (Plumbers)

HMRC have recently issued another amnesty opportunity for UK tax payers. This time plumbers.
The main feature of the amnesty is the limitation of the rate of penalties to 20%.

What is interesting is that HMRC’s guidance has to some extent hinted that the terms of the amnesty might be available to all UK tax payers.

Acceptance of other taxpayers to the scheme might depend on how their misdeclarations have come about

Ending Soon – End of Tax Year planning for 10/11

With the end of the tax year 2010/11 fast approaching there are several opportunities that will be gone come 2011/12.

Here are some of these opportunities:

  • Pension Contributions: As of 6 April 2011 the annual allowance for pension contributions will be reduced to £50,000 as opposed to the £255,000 in 2010/11. If you are considering making lum sump contributions to a scheme then it is important to take advice as soon as possible because other factors may affect your planning
  • Trusts & Estates: There is still a possibility for Capital Gains taxable on the settlor to be charged at the old rate of old rate of 18% even if the gains are realised after the 23 June 2010.
  • National Insurance Contributions: With an increase of 1% due in 2011/12, a bonus paid before the end of the tax year will make an effective saving, compared to the bonus being later.

If you require any help with your tax planning, please contact Eaves & Co at either our Leeds or Southport offices for an initial consultation.

New 200% Penalty Rate

The maximum penalty for failure to disclose income or capital gains has traditionally been 100% of the underpaid tax.

HMRC have recently published a list of more than 50 jurisdictions. Taxpayers will face penalties of up to 200% of their tax liabilities for non-disclosure of income or gains of assets invested in these countries.

The level of penalty is based on the perceived transparency of the jurisdiction and their willingness to share information. HMRC have categorised The Isle of Man and Guernsey as more transparent than Jersey or Gibraltar, for example.

This change in the maximum rate of penalties makes the ongoing Liechtenstein Disclosure Facility (LDF) even more attractive given that it attracts a fixed penalty rate of 10% – which could make a significant difference compared to a 200% penalty.

Please see our latest newsletter for further details on the LDF by clicking the link or by visiting our website directly.

ESC A19 – HMRC Acting Late

2010 saw HMRC in a high profile exercise to gain more tax from individuals in the PAYE system.

There is evidence of assessments now being raised by them in order to claw back tax which the PAYE system hasn’t managed to collect.

If you receive a bill now, then a couple of checks are relevant:-

1) Is the assessment correct, based on your actual income and reliefs for the tax year in question
2) Is it possible for a review to be requested under ESC A19, that HMRC acted on information too late

We dealt with a case recently where HMRC acted late on receipt of form P46 from the individual’s employer.

Call Eaves & Co on 0113 2443502 for a free initial consultation

Changes to ESC C16

Extra Statutory Concession  C16 has long been an extremely beneficial and straightforward way to deal with the tax implications of the striking off of a company.

Under the concession, Capital Gains Tax rather than Income tax, is payable and the cost of an expensive liquidation is avoided – as long as conditions are met.

However, a proposed amended law sets out the new condition that any payment at the time of the dissolution will be liable to income tax if it exceeds £4,000.

So  the favourable tax implications of ESC C16 are going to be heavily restricted. If you are conisdering striking off your company to release capital and assets it is better to do it sooner rather than later.

If you are considering potential liquidation of your company please get in touch for a no cost initial discussion.  

Company Restructuring

We have recently been dealing with a project in our Leeds office involving a company restructuring.  The client was required to reduce his shareholding in the company as part of the arrangement for a seperate sale of shares in another company.

The situation was complicated by the fact that the company’s other shareholder did not want to obtain outright control of the company.

We proposed a restructuring that would enable the shareholdings to be equalised at 50:50 between the shareholders, thus achieving the desired reduction and commercial objectives.  Importantly, we received clearance from HM Revenue & Customs for the proposed transactions and as such they should be achievable at a very low rate of tax with a significant saving over any other options for restructuring.

Eaves and Co Specialist Tax Advisors can help you with advice tailored to your specific needs. 

Wikileaks Offshore Bank Details

The news that WikiLeaks has been provided with details of Swiss bank accounts by a former bank employee may be of concern to UK taxpayers who have foreign banking undisclosed to HMRC.

The fact that information can be leaked from banks coupled together with mutual agreements between governments, highlights the importance of voluntary disclosure before being “caught” by HMRC. 

The Liechtenstein Disclosure Facility (LDF) currently represents an excellent way to make a voluntary disclosure.  Individuals with assets in any other offshore location may be able to participate in the LDF by moving some assets into Liechtenstein.

The LDF can provide a significant reduction in the level of penalties and a reduced window of reporting requirement: usually unreported income from 20 years ago must be disclosed, however this is reduced to 10 years under the LDF.

Eaves and Co Specialist Tax Advisers have successfully completed robust disclosures under the LDF and are in the process of preparing a number of other disclosures.  If you require advice in confidence regarding such matters call our Leeds office on 0113 244 3502, asking for Paul Davison.

Update: Tax Residence, HMRC6

HM Revenue and Customs have updated the guidance on residence, domicile and the remittance basis contained in HMRC6.

Since 6 April 2008, in determining how many days a person has spent in the UK for the purposes of the 183 day test and 91 day test, taxpayers have been able to exclude days in which they were not present at midnight.

However, the new guidance in HMRC6 suggests that where a person spends substantial time travelling to and from the UK, HM Revenue and Customs may seek to look at all the days in which a person was in the UK even where they were not present at midnight.   This appears to build on the recent case of Mr Gaines-Cooper.

The 91 day test is now discussed comprehensively in the coming to the UK section and rather limitedly in the leaving the UK section (in fact it is only referred to here where a person leaves to work abroad full-time), thus the implication is that HM Revenue and Customs now see the 91 day test as a way of bringing people within the UK tax net rather than a way of letting people out of it.

Please call Eaves & Co, Specialist Tax Advisors if you have any UK tax residence issues.

Double Tax?

Eaves & Co Leeds, have advised recently on two areas where tax might have been paid twice on the same income:-

  1. A FURBS which paid tax on its income and the trustees suffered PAYE on the same income. Tax credit relief and ESC A68 may be available.
  2. Two cases where profits have been taxed in the US and our UK client wishes to avoid double tax by also paying UK tax.

If you have a case where tax may be payable twice we would be pleased to discuss how relief may be available.