Tax VAT Briefing March 2019

NEWS UPDATES

Here is a summary of some tax and VAT related news items from March.


Tax

It has been widely reported that the TV personality and presenter Lorraine Kelly featured in a Tax Tribunal decision released in March. The Tribunal found that for the purposes of the ‘IR35’ legislation Ms Kelly’s relationship with ITV was a contract for services and not one of employee and employer.

We are pleased to report that our employment tax specialist, Andrew Scrivens, was a key member of the team advising Ms Kelly and her company.

The Tribunal case report can be found here.

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

Stamp duty land tax 

Readers are reminded that the 30 day time limit for making SDLT returns and payments was reduced to 14 days with effect from 1 March. As a result, a number of guides have been updated by HMRC:

SDLT online and paper returns

SDLT compliance checks

Paying SDLT

Employment taxes 

HMRC has updated Booklet 490 “Employee travel – a tax and NICs guide for employers” for tax year 2019-20.

They have also issued Employment Related Securities Bulletin 31.

Annual Tax on Enveloped Dwellings

The HMRC guidance on ATED has been updated to reflect the increased charges applying in the year to 31 March 2020 and can be found here.

Non-UK domiciliaries

The Chartered Institute of Taxation has been seeking HMRC’s comments on queries raised by legislation introduced by Finance (No 2) Act 2017.

An updated version of the discussions on mixed fund cleansing has been released.

The full collection of documents can be found here.

TAX CASE DECISIONS 

Eccles [2019] UKFTT 0095 (TC) – Loans to traders 

Mr Eccles made a payment in respect of a personal guarantee for a bank loan made to his company and claimed a capital loss. His claim for loss relief in an earlier year failed but the decision confirms a formal demand by the lender is not required if it is clear the payment is made ‘under the guarantee’.

Eccles


Villar [2019] UKFTT 0117 (TC) – Goodwill 

Mr Villar was an orthopaedic surgeon who sold his practice for £1m. He declared the transaction as a capital receipt and claimed entrepreneurs’ relief. HMRC argued there was no disposal of a business since Mr Villar was the practice; it was his personal reputation which attracted patients. The proceeds of £1m were the proceeds of a sale of income.

The Tribunal noted that the purchaser carried on the business under Mr Villar’s name and decided the goodwill could be disposed of as it was connected with that name. It also dismissed HMRC’s second argument.

 Villar



VAT

Making tax digital is finally here!

From the 1st April 2019, VAT registered businesses will be required to keep records in a digital format that is compatible with HMRC’s software.

We have heard many things over the last couple of years leading up to this point, but for those that wish to recap the main points, or go over some of the key issues once more, HMRC have updated several guides that were originally published last month.

Making Tax Digital for VAT as a business: step by step guide

This general guide covers when a business should follow the MTD rules, the software needed, how to set it up, and finally the need to have the software authorised.

Sign up for Making Tax Digital for VAT

This has links for a client or agent to sign up for MTD.

Find software that’s compatible with Making Tax Digital for VAT

This is a more detailed guide on compatible software available now and software still in development.

Check when a business must follow the rules for Making Tax Digital for VAT

This guide clarifies when a business needs to be complying with MTD and the differences between the 1st April 2019 and the 1st October 2019 deadlines.

Further updates

Accounting for import VAT if the UK leaves the EU without a deal

HMRC have published new guidance on how to account for import VAT on good brought into the UK in the case of a No Deal Brexit.

VAT Notice 702/36 Insurance

HMRC have updated the notice on specified supplies of insurance related services and the entitlement to recover input tax.

Cases

David Cosham v HMRC [2018] TC6985

This case will be of interest to those who have clients thinking of, or are currently pursuing, a VAT reclaim on a DIY house build.

The case centred around electric blinds and whether they could be classed as building materials under note 22 of Group 5. The taxpayer had built an ‘eco-home’ and contended that the electric blinds were used for temperature control and as a result were ‘ordinarily incorporated’ in such homes.

Unfortunately, the taxpayer was unsuccessful in his attempt to prove to the Tribunal that electric blinds were ordinarily incorporated into eco-homes. However, the Tribunal was willing to review any evidence in support of this and seemed to have accepted that eco-homes could be viewed on their own in regard to certain items being ‘ordinarily incorporated’.

Although unsuccessful for the taxpayer himself, this is promising news for those pursuing the relief, particularly as eco-homes are becoming more of the norm now.


Actegy Ltd [2019] TC 07005

This case involves the disabled relief under Schedule 8, Group 12, item 2(g) that allows for equipment and appliances designed solely for disabled people, sold to a qualifying individual, to be zero-rated.

The appellant was successful in arguing products using electrical muscle stimulation (EMS) technology were designed solely for disabled people. HMRC’s definition of ‘solely’ is very narrow, and this case shows the importance of not taking HMRC’s initial view as absolute.

However, this case was successful because of the amount of data that could be produced, with marketing material and pilot tests showing who the product was aimed at.

This case is important for any accountant who has client’s availing themselves of this relief. Often the word ‘solely’ is loosely applied by the client and overly stringent by HMRC. Clients often put too much emphasis on retaining the certificates showing who the end customer is, but place little emphasis on the nature of the product.

The way the product is marketed can be integral to proving the eligibility of the product, but retaining any results from clinical test or pilots conducted by the developer or manufacturer are also key.

If you are in any doubt as to the eligibility of the product, approach the developer and ask for their view along with any evidence they have to support the assertions. If the developer is unwilling to give you any details, then that is a strong indicator that the product may not qualify.


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

VAT Advice Lines 0844 892 2470

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


Please share this article with your clients


Back to Community
mm

Consultancy
0844 728 0120

PROVIDING SPECIALIST SUPPORT & EXPERTISE

There are times when you might need specialist support to deal with HMRC. Our consultancy service is here to provide you with that expertise and is in addition to our advice lines.

Our Tax & VAT consultancy consists of over 35 highly skilled consultants experienced in dealing with a wide variety of Tax and VAT matters. We can provide technical support during an HMRC investigation, enquiry or visit, at whatever level you feel is necessary.

Our in-house consultants are available to talk through issues, help with planning a course of action, negotiate with HMRC, or even represent your client. You control our involvement as much or as little as you require.

Don’t Forget

If your client has subscribed to the Tax Investigation Service then our costs of dealing with or assisting with their HMRC investigation will be covered by the Policy.