Tax VAT Briefing February 2019

News Updates

The Finance Bill 2018-19 received Royal Assent on 12 February and is now known as Finance Act 2019.

Here is a summary of some other news items from February.


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TAX

Stamp Duty

The consultation period on proposed stamp duty reforms is now finished. The main concern voiced by respondents is that if the market value rule is extended to unlisted securities then the additional costs of valuation and related costs will in many cases be wholly disproportionate to the amounts of stamp duty at stake.

Employer Bulletin

The February 2019 edition of HMRC’s Employer Bulletin has been published and can be found here.

Inheritance Tax

Inheritance Tax account (IHT100) has been updated and can be found here along with accompanying guidance notes and worksheets.

PAYE Codes

Information sheet P9X(2019) has been issued. It explains which PAYE codes must change for the 2019-20 tax year and how to change them.  

Research and Development

The HMRC guidance Corporation tax research and development tax relief for small and medium-sized companies have been updated to include information on how to use the online service to send details in support of a claim for relief.

Employment Taxes

A number of guidance notes and booklets have been updated:

  • CWG2 Employer further guide to PAYE and National Insurance contributions
  • CWG5 Class 1A National Insurance contributions on benefits in kind
  • 480 Expenses and benefits – a tax guide

TAX CASE DECISIONS

PN Bewley Ltd [2019] UKFTT 0065 (TC) – SDLT classification

This case was concerned with whether the higher rates of SDLT were payable on a company purchase of a bungalow. The property was in a state of extreme disrepair and was contaminated by asbestos. HMRC argued that the property was capable of being renovated and so was capable of being a dwelling. The Tribunal dismissed the argument since the test was whether the property was capable of being used as a dwelling at the time of purchase. It was not so the higher rates of SDLT did not apply.

PN Bewley Ltd


Tang [2019] UKFTT 0081 (TC) – Whether assets held in trust

This case concerned discovery assessments and hinged on whether Ms. Tang had beneficial ownership of significant assets or whether she held them as bare trustee for other members of her family. There was no written trust agreement, which is not uncommon within some families, so the case report gives an insight into the factors a Tribunal might take into account.

Tang



VAT

Transitional Simplified Procedures (TSP)

HMRC has written to 145,000 businesses trading with the EU regarding TSP.

From 07 February 2019 businesses can register for TSP providing that businesses:
• Possess an EORI number
• Are established in the UK
• Are importing goods into the UK from the EU
The idea is to make importation easier, in the event of a No Deal Brexit on 29 March 2019.

When businesses register for TSP they will be able to transport goods from the EU without making a full declaration at the border. Businesses will be able to postpone payment of import duties.
Initially, minimal information will be required although full declaration will be required when the goods have crossed the border.

The payment of the duty will be required 1 month after import.

If tariffs apply to the goods imported the tariffs will be paid by direct debit.

HMRC are issuing reminders to businesses to obtain an EORI number if there is a No Deal.

HMRC will monitor TSP within 3-6 months after 29 March 2019 and will consult with businesses.

TRIBUNAL DECISIONS

Darren Vaughan – TC/06910

This case relates to artificial separation of businesses and the difficulty HMRC have in aggregating two separate businesses under a Notice of Direction.

The appellant ran two separate businesses through two different legal entities.

The business activities were plastering and new floor screeding.

The appellant admitted that the businesses were split to avoid VAT registration.

However, as the businesses were separate legal entities and offered different services, the tribunal
ruled against HMRC’s assertion that the businesses should be combined and VAT registered.

Result – taxpayer win


Adullam Homes TC/06921

Adullam Homes provides rental accommodation and care services to vulnerable people.
Previously, the provider was advised it was making wholly exempt supplies and was unable to register for VAT. The business issued corrective invoices to Local Authorities and backdated their VAT registration.

The issue focused on input tax recoverability and Adullam argued that the partial input tax recovery was allowed where accommodation was provided for vulnerable adults and care services provided under the same contract. There was agreement that the rental element was exempt and care services were taxable.

HMRC argued that the costs were directly attributable to exempt supplies of residential accommodation and not the provision of care and as such input tax was irrecoverable.

Result – taxpayer win.

Due to the potential VAT implications across this sector, it is anticipated HMRC will appeal this decision.


The Core Swindon TC/06874

This case related to the confusing rules regarding the VAT liability of certain food products. The business sold juices as meal replacements. HMRC viewed the products as standard rated.  The appellant offered Juice Cleanse Programmes, liquids were created by juicing raw fruits and vegetables. Although in liquid form the products were marketed as meal replacement products rather than drinks. 

The tribunal upheld the appellant’s appeal and decided the products were zero-rated. Several points were considered such as the short shelf life, lack of pasteurisation and that customers were advised to drink water to supplement the liquid products and as such the product could not be considered a beverage. 

The product was akin to a smoothie and was perceived as food which meant the product qualified for zero rating.

Result – taxpayer win.


At Croner Taxwise we have a team of more than 35 Tax and VAT consultants with over 750 years’ experience. Please get in touch with a member of the Croner Taxwise team if you would like to discuss any Tax or VAT issues.


Contacts:

Tax Advice Lines 0844 892 2470 taxadvice@cronertaxwise.com

VAT Advice Lines 0844 892 2470 vatadvice@cronertaxwise.com

VAT & Tax Consultancy 0844 728 0120 consultancy@cronertaxwise.com


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