Tax VAT Briefing June 2019

NEWS UPDATES

It has been announced that draft clauses for Finance Bill 2019-20 and supporting documents will be published on 11 July.

Here is our monthly selection of tax news items for June …


Tax

Landlord Finance Costs

The basic rate restriction on relief for property business finance costs which will be fully implemented in 2020-21 is generally thought to affect only higher and additional rate taxpayers.

An article published by the Low Incomes Tax Reform Group here explains, with examples, how some basic rate taxpayers, individuals claiming child benefit and taxpayers repaying student loans are also adversely affected.

Relief for Acquisitions of Goodwill

 HMRC has published guidance on the new rules which came into effect on 1 April 2019 in connection with corporation tax relief for goodwill and other intangible assets.

The guidance note, which can be found here, does not in itself contain a great deal of information but instead contains links to the relevant pages in HMRC’s Corporate Intangibles Research and Development Manual.

HMRC Toolkits

 Four HMRC toolkits have been revised and updated. They are:

Company losses

Inheritance Tax IHT400

Capital vs revenue expenditure

Business profits

Charities

HMRC has updated its guidance to charities on how to pay less tax and when to set up a subsidiary trading company.

Offshore Income and Gains

The Chartered Institute of Taxation (CIOT) has published an update about HMRC’s letters to individuals identified as being in receipt of income or gains from overseas.

The update includes guidance to advisers on how to respond to HMRC if a client receives such a letter.

Stamp Duty Land Tax

Recent Tribunal decisions have made it clear that HMRC does not have any discretion over the operation of the anti-avoidance legislation in s.75A Finance Act 2003. If the relevant conditions are met then the legislation applies.

The CIOT has highlighted the fact that HMRC is currently reviewing its technical guidance and give details of how to seek HMRC guidance while the review is taking place. Details can be found here.

TAX CASE DECISIONS 

Davidson [2019] UKFTT 0300 (TC) – Principal Residence Relief

This is the latest in a run of cases which confirm entitlement to relief is determined by the taxpayer’s intentions rather than the length of occupation. In this case, the taxpayer occupied the property as his home for only ten weeks.

Davidson

Development Securities plc [2019] UKUT 0169 (TC) – Company Residence

This case overturns the earlier First-tier Tribunal decision and confirms that when directors of an overseas subsidiary act in accordance with guidance from or influenced by the UK holding company, this does not necessarily lead to the conclusion that central management and control of the subsidiary is being exercised from the UK.

Development Securities Plc


VAT

Revenue and Customs Brief 3 (2019): VAT Zero-Rating of Transport of Disabled Passengers

This brief follows the Jigsaw Medical Services case and helps clarify whether supplies of emergency ambulance services or ambulance passenger transport services qualify for zero-rating or fall under the exemption.

Revenue and Customs Brief 4 (2019): VAT – Domestic Reverse Charge for Businesses Trading in Renewable Energy Certificates

The domestic reverse charge for providing renewable energy certificates came in to force on the 14 June. This is a response to counter MTIC fraud that HMRC have become increasingly aware of in this industry. Those who wish to find out more should read the brief in conjunction with VAT Notice 735: Domestic reverse Charge on specified goods and services

VAT on Solar Panels

Plans to increase the VAT rate of the hardware aspect of solar panels will take effect in October 2019. Installation services on their own will remain subject to the 5% reduced rate. However, installation services together with qualifying materials will qualify for 5% VAT in the following circumstances:

  1. customer is over 60 or in receipt of certain benefits;
  2. customer is a registered housing association;
  3. the building is a ‘relevant residential’ building, such as a care home;

The reduced rate will also apply to supplies made to persons living in dwellings who are not qualifying persons, but where the cost of the materials exceeds the cost of installing the goods (the labour element), the reduced rate will be restricted to the labour element of the supply and the materials or hardware will be standard-rated. Further detail can be found at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/483363/VAT-Changes_to_the_reduced_rate_of_VAT_for_Energy_Saving_Materials_-_consultation__M7000_.pdf

VAT TRIBUNAL DECISIONS

Stanley John Chmiel v HMRC [2018] TC7112

This case involved a Personal Liability Notice (PLN) being issued to the director for failing to register the company for VAT on time. The case illustrates HMRC’s willingness to push for penalties to be attributed to the directors where possible. We continue to find this common place where HMRC get wind that the company may be going insolvent, In such cases, their modus operandi is to charge a deliberate penalty, regardless of how weak the evidence is, which in turn allows them to issue a PLN on the director(s). This ensures HMRC gets some money out of their inquiry.

In this case, it was found that the director kept good records of the company’s turnover, so trying to pass the blame onto the accountant for not advising him was not seen favourable by the FTT.

The case highlights the level of responsibility the directors have for the company’s VAT affairs and the personal dangers of non-compliance.

Anna Cook (TC07149)

This case concerned a sole trader providing dance tuition.  In order for the private tuition exemption to apply the subject in question must be ordinarily taught in a number of schools and universities. The particular style of dance in question was known as ‘Ceroc’. Apparently, this is a style that combines multiple dance styles and as such was accepted as ordinarily taught with the case being ruled in the taxpayer’s favour. This will, of course, be of interest for those who run similar classes or are involved in the private tuition of dance.

It should be remembered that cases are fact specific and First Tier does not set a precedent, but this particular case does seem to show that if one can demonstrate the intention is to transfer knowledge to the pupil and isn’t simply recreational, then the exemption can apply. subject to the condition that the subject is ordinarily taught even where the initial thought may be that the subject seems to push the boundaries of ‘commonly taught’.


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 & VAT Advice Lines 0844 892 2470 Request Callback

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


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