Tax VAT Briefing November 2018

News Updates

November saw the publication of the Finance Bill 2018-19 which can be found here.

It has already attracted some criticism, not for the content but for the fact that legislation is increasingly being introduced without prior consultation.

Elsewhere in November’s news …


TAX

Stamp Duty Land Tax (SDLT) and Land Transaction Tax (LTT)

HMRC has updated the guidance note What to include in a Stamp Duty Land Tax calculation to include links to current and previous SDLT rates.

The Welsh Revenue Authority updated its guidance on higher rates for residential property three times during November. The latest version can be found here.

High Income Child Benefit Charge

Following criticism of the way HMRC has imposed penalties since 2013, they have announced they will be carrying out a review of prior years and will issue refunds where appropriate. Further details can be found here.

Workers from Abroad

HMRC has updated its guidance on the PAYE and NIC treatment of new employees coming from abroad to work in the UK. It includes further clarification on when employees are exempt from National Insurance contributions.

New employee coming to work from abroad

Corporation Tax

Updated guidance Corporation tax: Trading and non-trading has been issued by HMRC. It explains what is meant by active, both trading and non-trading, and dormant for both new and existing companies.

It also includes advice relating to flat management companies and clubs, associations and other unincorporated organisations.

PAYE Penalties

HMRC has updated the guidance What happens if you do not report payroll information on time.

Self-Assessment Tool

HMRC has launched an online tool intended to help determine whether an individual meets the criteria for being required to submit a 2017-18 self-assessment return. It can be found here.

Annual Tax on Enveloped Dwellings

The section in the HMRC ATED guidance on penalties has been updated.

TAX CASE DECISIONS

PRs of Maureen Vigne [2018] UKUT 0357 (TC) – Business Property Relief

 The Upper Tribunal has dismissed HMRC’s appeal against the First-tier Tribunal’s earlier decision that a livery business qualified for business property relief. The Tribunal decided the FTT did not apply the wrong legal test and did not misapply the test to the facts, which is helpful but does not alter the principle that each case must be decided according to its own facts.

Maureen Vigne


Gadhavi & Ors [2018] UKFTT 0600 (TC) – Compensation Receipts

As result of entering into interest rate hedging products with high fixed rates of interest, the appellants were forced to close their property business following the financial crash. They received compensation from their bank and claimed as was a non-taxable capital payment representing opportunity cost. The Tribunal agreed with HMRC that the compensation was for previous excessive but allowable expenditure and so was a taxable revenue receipt. This reaffirms the general principle that compensation payments follow the tax treatment of the item for which the compensation is paid.

Gadhavi & Ors


Yechiel [2018] UKFTT 0683 (TC) – Principal Private Residence Relief

Once again, the Tribunal has been asked to consider whether the quality of the occupation of a property was sufficient for it to qualify as residence. In this case, it was felt that the three month period of occupation and the original intention for the occupation to be permanent were helpful to the taxpayer. However, the facts that the property contained virtually no furniture apart from a bed, the taxpayer rarely ate at home but instead took most of his meals at his parents’ house, his parents dealt with his laundry and he spent no leisure time at the property led the Tribunal to conclude the property was not occupied as a residence.

Yechiel


Marble Commercial Contracting Limited [2018] UKFTT 0656 (TC) – Default Surcharge

This FTT case was regarding a Default Surcharge. The VAT payment was made electronically to HMRC on the 7th day of the next month following the end of the accounting period. However, the business was registered with HMRC to use the Payments on Account scheme (POA). This meant that the VAT liability must be paid to HMRC by the last day of the month following the end of the accounting period.

The extra seven days permitted for electronic payment is not available to POA businesses. Despite the plausible reasons given by the taxpayer for the late payment, including misunderstanding, staffing issues and that the bank would not allow the payment to be processed on the last day of the month, the taxpayer’s appeal was dismissed.

 Marble Commercial Contracting Ltd



VAT

HMRC Brief 11/2018 VAT changes for Higher Education providers in England

 The brief outlines the continuity of VAT treatment for education providers due to changes in how central funding is distributed.

HE providers can continue to exempt education supplies despite changes to funding.

HE providers must now register with OFS in the Approved Fee Cap sector.

VAT Information Sheet 07/18

 Applying the correct VAT liability to residential domestic charges from 01 November 2018

This brief is relevant to:

  • Property management companies
  • Housing associations
  • Developers
  • Owner of property
  • Landlords

The aim of the document is to:

  • Correctly apply ESC 3.18
  • Account for and pay the correct amount of VAT to HMRC
  • Confirm input tax deductibility rules on costs and overheads

Landlords will normally charge a fee to cover the contractual obligations including repairs and maintenance and upkeep of common areas.

The charges would be exempt to leaseholders as the fee is linked to the underlying supply of rent.

The position changes where the occupier is a freeholder and the charges would be standard rated.

ESC 3.18 1994 allowed by concession the supplies to leaseholders and freeholders to be exempt.

Landlords sometimes establish property management companies to facilitate and deal with the contractual obligations.

The document outlines potential mistakes which may be applicable to your clients.

The correct treatment must be applied from 01 November 2018.


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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Colin began to specialise in tax in 1983. He has previously spent time as a tax partner with two leading accountancy firms and, more recently, as partner in a specialist tax consultancy business providing planning advice and problem solving for successful owner-managed businesses and their owners across the UK.

Julie joined the team in 2007 where she has gained extensive knowledge of many aspects of VAT and advises clients at Croner Taxwise on the VAT advice line, undertakes bespoke consultancy and has editorial responsibility for the team’s journal VAT Voice.