Tax updates: December 2019

In this month’s tax news, Gaines-Cooper returns to court, Higgins wins CGT claim, TV presenter Fospero and IT contractor in IR35 decisions, R&D tax credit claim fails and general election pushes back Finance Bill

Cases

CASE: Gaines-Cooper returns to tribunal over disputed £30m tax bill 

Multimillionaire Robert Gaines-Cooper is back in the tax courts at the First Tier Tribunal disputing a long-running avoidance case centring on tax liability and domicile issues.

In the latest phase of the taxpayer’s decades-long battle with HMRC, which has seen Gaines-Cooper fight the case through all levels of the UK court system, this time he is arguing that his Seychelles residency meant that he was not liable for UK tax as he only spent the statutory 91 days in the country, and therefore was not eligible to pay UK tax.

Jonathan Crow QC is representing Gaines-Cooper, who is not expected to attend the FTT in person for health reasons but will give video evidence from Jersey. The tribunal is likely to sit for up to six weeks with a decision unlikely before the new year.

The case originated in the 1990s over a disputed £30m tax bill where the tax authorities argued that Gaines-Cooper had evaded taxes for a 10-year period from 1992-93 through to 2003-04 tax years, and an intertwined, but separate, dispute over domiciled status over whether he had been permanently living in the Seychelles since the 1970s, which he claimed, but was disputed by HMRC as the tax authority always argued that he had substantial ties in the UK.

He was last at the Supreme Court in 2011 ([2011] BTC 610) where he appealed a Court of Appeal decision issued in 2010. On this occasion five Supreme Court judges dismissed a claim (submitted with two other appellants) for a judicial review of decisions by HMRC that they were not entitled to non-resident status. These were appeals against a decision by the Court of Appeal ([2010] EWCA Civ 83; [2010] BTC 198).

At the Supreme Court, lawyers for Gaines-Cooper and his fellow appellants contended that HMRC had failed to interpret correctly its IR20 (1999 edition) notice, which provided guidance in relation to the residence and ordinary residence of individuals, and had unlawfully refused to apply it. IR20 remained in force until 2009.

Gaines-Cooper argued that in 1976, when he was aged 39, he acquired a domicile of choice in the Seychelles, but this argument was rejected as HMRC said it knew that he remained domiciled in England until 2003-04 despite living a jetset lifestyle with extensive travel.

The Supreme Court heard how he had two substantial homes ‘maintained and to a significant extent occupied by him in Berkshire and in Oxfordshire throughout those years’ and due to the presence in England, following 1977, of the wife whom he was ultimately to marry in 1993 and also, from his birth in 1998 until after 2004, of their son, HMRC inspectors said that from 1992 to 2004 Gaines-Cooper ‘dwelt permanently’ in the latter home in England and that, notwithstanding his residence in the Seychelles throughout those years, he was ordinarily resident in the UK during the years under review.

At a previous appearance over the matter in 2008 at the Court of Appeal, the judge dismissed Gaines-Cooper’s claim as ‘nothing more than an illegitimate attempt to reargue the facts’.

At the time of the 2008 case, Gaines-Cooper had a number of businesses worldwide and a home in the Seychelles as well as a house in Henley in Berkshire and a property in Oxfordshire where he kept various assets, including a collection of Rolls-Royces.

In 2008, HMRC claimed he had never left the country properly and was not entitled to non-domicile status, despite his claims that he observed the 91-day rule. He had been appealing from 1993 through to 2004, claiming he had not been a resident in England since the 1970s. This case was thrown out by the Court of Appeal.

 

CASE: Higgins wins Court of Appeal case over property sale CGT 

The Court of Appeal has ruled that the ‘period of ownership’ for principal private residence (PPR) relief from capital gains tax (CGT) begins when the property purchase is completed, not from exchange, in a ruling which overturns a previous tribunal finding in HMRC’s favour.

The case involved Desmond Higgins, who had challenged a CGT bill of £61,383 on the basis that the property had not been his only or main residence for all of his period of ownership. While he was successful at a First Tier Tribunal (FTT), the Upper Tribunal reversed the decision, finding in HMRC’s favour, and Higgins took his case to the Court of Appeal. [Desmond Higgins and the Commissioners for Her Majesty’s Revenue and Customs, [2019] EWCA Civ 1860]

In 2006 Higgins paid a reservation deposit to secure a two-bedroom apartment to be constructed on the site of the former St Pancras station hotel in London. He exchanged contracts and paid a further deposit in October 2006 (before development had begun), with a second deposit being paid in March 2007, and completed the purchase on 5 January 2010, at which point he became entitled to occupy the property, which had been substantially completed in December 2009.

He occupied the property as his main residence from completion of the purchase until completion of its sale in January 2012 (exchange in December 2011).

HMRC denied full PPR relief on the grounds that Higgins had not occupied the flat for the entire period of ownership, which in its view began on exchange in October 2006 and ended in December 2011.

The Court of Appeal said the central question was the meaning of the words ‘period of ownership’ in s223 of the Taxation of Chargeable Gains Act 1992 (TCGA 1992). If that period did not begin until 5 January 2010, then the apartment was his main residence ‘throughout the period of ownership’ and no CGT can be payable.

If, on the other hand, Higgins’ ‘period of ownership’ began when contracts for the purchase were exchanged, which was much earlier, then s223(2) would apply and Higgins would enjoy relief from CGT as to only part of the gain he made on the apartment.

HMRC sought to argue that the words ‘period of ownership’, on their ordinary meaning, refer to the period between acquisition and disposal. For CGT purposes, s28 of TCGA 1992 confirms that, where an asset is disposed of and acquired under a contract, the time at which the disposal and acquisition is made is the time the contract is made. That meant the date of acquisition was 2 October 2006, when contracts were exchanged, not 5 January 2010, when completion took place.

It did not matter if there were different interests at different times, and this was in fact catered for by s222(7) which stated that the period of ownership began in these circumstances from the date of the first acquisition.

Moreover, HMRC said the FTT’s approach would mean that, contrary to the evident intention of the legislation, someone could enjoy relief in respect of gains made on more than one property at the same time. That could happen if, say, someone sold his existing main residence and moved to a new one that he had just bought pursuant to a contract made five years earlier, by reference to the prices current then.

Responding to this argument, the Court of Appeal stated that it was ‘a striking fact’ that if HMRC was correct, ‘few people buying a new home would be within the scope of s223(1) of the TCGA and so fully relieved of any possible CGT liability.’

The court said: ‘Exchange and completion do not usually take place on the same day. On HMRC’s case, therefore, a purchaser would normally be treated as having acquired ‘ownership’ on a date before completion and before there could have been any question of going into residence.

‘Where such a purchaser re-sold at a profit in a rising market, he would necessarily be entitled to relief in respect of only a ‘fraction of the gain’ even where the property had been his home ever since his purchase had been completed.

‘Parliament would thus have failed to confer complete relief from CGT in what it surely will have considered the paradigm case.’

The court did not accept HMRC’s arguments that this anomaly was effectively remedied by the fact that frequently only small liabilities would arise and in practice short delays are ignored, and considered that the strong likelihood was that HMRC’s interpretation was incorrect.

Instead, the Court of Appeal found that HMRC’s interpretation of ‘period of ownership’ ran counter to the ordinary meaning of the words, as a purchaser would, as a matter of ordinary language, only be described as the owner post completion.

Moreover, it was hard to see how ownership could have commenced before completion of building work, as the apartment did not then exist (and this could be distinguished between purchase of a plot of land and subsequent construction of a dwelling, catered for by ESC 49, as in that case the land existed throughout).

One of the judges said: ‘In my view, the fact that the construction of the provisions that HMRC favour would rarely entitle ordinary home-owners to full relief from CGT strongly suggests that the construction is incorrect.

‘The FTT said at paragraph 6(4) of its decision, “To say the period of ownership begins when a contract to acquire a dwelling is entered into, at which time it would be highly unusual for a purchaser to have a right to occupy, would be perverse in the context of providing relief to individuals for gains realised on the sale of a private principal residence”.’

In the particular case under consideration, the court said it would anyway be hard to see how Higgins’ ‘period of ownership’ of the apartment could have begun before late 2009, since when contracts were exchanged in 2006, the apartment was just a ‘space in the tower’. The apartment did not come into existence until November/December 2009.

The judges did not agree that the taxpayer’s interpretation could enable individuals to obtain relief for more than one property at the same time, as the legislation makes clear that a person cannot claim to have more than one main residence at any one time (see for example, s222(5) TCGA 1992).

In conclusion, the Court of Appeal agreed with the FTT that the period of ownership for PPR relief did not begin until completion of the contract and allowed the appeal against the Upper Tribunal decision.

Stephanie Webber, tax writer at Croner-I, said: ‘There is likely to be much relief at this judgment, as the use of completion dates both ensures most taxpayers will obtain full relief and avoids any need to rely on unpublished HMRC practice. It remains to be seen whether there will be a further appeal.’

Desmond Higgins and the Commissioners for Her Majesty’s Revenue and Customs, [2019] EWCA Civ 1860

 

CASE: TV presenter Helen Fospero wins £80k IR35 case 

In the latest IR35 loss for HMRC, TV presenter Helen Fospero has won her case at the tax tribunal over a disputed tax bill of £80,000 when she was working on a contract basis for ITV.

Fospero works for a number of different broadcasters and corporate clients, but this case centred on a two-year period when she had contracts to work primarily as a presenter on ITV shows including Daybreak and Lorraine.

HMRC argued at the First Tier Tribunal (FTT) that Fospero was not a contractor but employed, and was therefore liable for £80,000 in unpaid taxes and national insurance contributions (NICs) covering tax years 2012-13 and 2013-14. The amount of PAYE income tax in dispute was £80,770.96.

The case hung on how IR35 legislation applied to the arrangements between Fospero’s personal services company (PSC), Canal Street, and ITV; effectively whether payments received by Canal Street from ITV should have been treated for tax and NICs purposes as if they were employment income or earnings for Fospero, rather than the liability of her PSC [Canal Street Productions Limited v The Commissioners for Her Majesty’s Revenue & Customs [2019] UKFTT 647 (TC)].

The tribunal heard that Fospero had set up her PSC in 2002 when she started working on a contract basis for a number of broadcasters, including the BBC, Sky and ITV.

The tax years in dispute covered 2012 to 2014, when she was working primarily for ITV as a guest presenter or news presenter on Daybreak and Lorraine.

Contracts

In making his ruling, tribunal judge Ashley Greenbank referred to three separate agreements, described as the framework agreements, which set out the working arrangements between Canal Street and ITV. This included a letter agreement from ITV which stated: ‘This agreement (the “Agreement”) sets out the terms upon which you have agreed to provide the services of the Individual on a first call basis during the Term for the Programme referred to below, which we intend, but do not undertake, to produce.’

The TV programmes were Lorraine and Daybreak, and the contract included a restriction from working on any competitive programmes during morning hours between 6am and 1pm when the shows were broadcast. This restriction covered Fospero ‘as a presenter, reporter or contributor to any television or other audio visual programme which is broadcast and/or transmitted in the UK’.

Although there were a number of contract changes, it appears that at all times Fospero was free to pursue other broadcast opportunities as long as she ‘sought the approval of ITV before engaging in any new commercial activities’ and must be ‘available on a “first-call basis”’.

The first contract also stated: ‘For the avoidance of doubt, [we] anticipate requiring the services of the Individual for approximately 20 (twenty) News Presenter Appearances per annum or pro rata for any incomplete week or month or year of the Term. You acknowledge that the Individual’s participation in the Programme throughout the Term in the manner set out above is integral to the Programme and a material term of the Agreement.’

HMRC’s lawyer argued that the 20 days indicated a guarantee of specific work, but the judge rejected this, stating ‘the reference to 20 days of anticipated work in the First Contract was nothing more than that. It expressed a hope and expectation that ITV would be in a position to offer work and that Canal Street would accept it’.

Control

On the important issue of control, the judge said that ‘irrespective of the nature of the engagement, Ms Fospero’s evidence, which was not challenged, was that she would often undertake several hours of preparation for an engagement… however, when, where and even if she undertook that preparation was not dictated by ITV or governed by the framework agreements’.

Greenbank said that ‘ITV would have retained sufficient control over the performance of the services within the individual engagements for the arrangements to be a contract of service provided that the arrangements as a whole [we]re consistent with that conclusion. ITV had a right to control the performance so far as there was any scope for control by ITV’. 

Mutuality of obligation

Referring to the mutuality of obligation and whether contractual engagements could be considered as employment contracts, the judge referred to the judgment of Elias LJ in the Court of Appeal in Quashie v Stringfellows Restaurants Ltd [2012] UKEAT 0289/11], stating that it was ‘the most complete statement of the principles which should be applied in these circumstances’.

In his ruling, he stated that ‘there would be no mutuality of work-related obligation between the engagements: Ms Fospero would have no guarantee of work and would be under no obligation to perform work if it was offered. 

‘She would be engaged on an assignment by assignment basis. Those assignments would be very short term, many involving only a matter of hours in the studio, albeit some requiring several hours of preparation in advance. 

‘Although there would be a hope and expectation of further work under the arrangements, for the most part, when she finished work on a particular engagement, Ms Fospero would have no assurance that she would be offered further work.’

Contractual arrangements

He dismissed HMRC’s argument, stating that ‘notwithstanding these continuing contractual arrangements, in my view, the circumstances of Ms Fospero’s case justify the inference that she would be working as an independent contractor rather than an employee under the hypothetical contract’.

‘The contractual obligations which continued between the engagements would not, to my mind, detract from the inference that Ms Fospero was self-employed,’ he added.

Although she was only working for ITV over the two-year period, the tribunal accepted that Fospero’s agents, Roar, were actively seeking other work for her during this time.

Greenbank added: ‘It is also true that, in the period in question, ITV was an important client of the business but Ms Fospero’s business would not be the first small business that was significantly exposed to a particular client in a particular period.’

‘For these reasons, to my mind, it would [be] artificial to isolate the relationship with ITV and that period in time from the remainder of the business carried on by Ms Fospero as would be required to meet the test in s49(1)(c)(i) ITEPA [Income Tax (Earnings and Pensions) Act 2003].’

There were also clear distinctions between Fospero’s treatment as a contract presenter and employed ITV presenters who were provided with laptops, had ITV email addresses, had workstations or rooms at ITV’s studios, and were provided with more generous expenses allowances. Fospero had none of these staff benefits.

The judge ruled in favour of Fospero, stating: ‘If I stand back from the detailed picture that is painted by all of the facts and circumstances, and view the picture as a whole, I arrive at the same conclusion.

‘In the period in question, Ms Fospero was engaged, through Canal Street, in a separate business, she worked under a series of short-term engagements for ITV, she had no guarantee of further work outside those engagements and ITV had no obligation to provide any work. 

‘All of these factors point towards Ms Fospero being regarded as self-employed and not an employee even if she had been engaged directly by ITV.’

HMRC has the right to appeal the ruling. An HMRC spokesperson told Accountancy Daily: ‘We are considering an appeal.’

This is the latest loss for HMRC in a spate of IR35 cases which have been going through the tax tribunals. The only recent exception was the Christa Ackroyd case, which went to appeal at the Upper Tribunal, and HMRC won.

David Goldberg QC and Laura Inglis, counsel, H W Fisher & Company represented Canal Street Productions.

FTT ruling: Canal Street Productions Limited v The Commissioners for Her Majesty’s Revenue & Customs [2019] UKFTT 647 (TC)

 

CASE: Lack of accounting records sinks R&D tax credit claim 

A Coventry-based engineering consultancy has been given a £25,000 penalty after wrongly claiming for research and development (R&D) tax credits on over £390,000 of trading losses.

The First Tier Tribunal (FTT) found that the company had failed to provide sufficient evidence that the costs claimed had actually been incurred.

Emmanuel Quarm, director of Teksolutions-Inc Ltd, was appealing against a closure notice issued by HMRC.

This sought to reduce the company’s trading losses for the period ending 15 January 2015 from £174,025 to nil and for the period ending 20 October 2015 from £224,300 to nil. This also reduced the corporation tax payable for the two periods to nil.

Quarm argued that the losses should be allowed and would form the basis for an R&D credits claim by the company.

The tribunal heard there had been substantial correspondence between Quarm and HMRC about the information needed to process a claim for R&D tax credits under the corporation tax regime.

In November 2015, Teksolutions-Inc Ltd filed a tax return for the period 28 February to 21 October 2015, which recorded expenses of £246,500 and trading losses of £224,300.

The recorded expenses included £75,000 of salaries and wages; £62,000 of subcontractor payments; £30,000 of accountancy and audit fees; £24,000 of consultancy costs; £5,000 for entertaining and £12,000 of travel and subsistence, as well as smaller sums for advertising, light, heat and power, and bad debt.

A second tax return, for the period 28 February 2014 to 30 January 2015 contained similar figures, and gave recorded expenses of £182,825, with trading losses of £174,025.

HMRC subsequently wrote to Quarm asking for a detailed breakdown of the salaries, wages and subcontractor costs, and more detailed documentation to support the other expenditure said to have been incurred. In response, Quarm said that some suppliers had relocated or gone out of business, while the wages, subcontractor and accountancy fees had not yet been paid, but would be settled when funds were available.

He went on to state that he was in the process of ‘making a formal enquiry to eBay if there is the possibility of recovering my old invoices. A breach of security by an unknown user led to my entire account purchasing history being deleted’.

HMRC also requested a copy of the company’s cashbook, which Quarm said had been thrown away during a move, and he replied that this was difficult in the time available as he was ‘at the moment incapable of performing any duties related to the business without any funds..’

By the end of December 2016, Quarm had supplied HMRC with limited documentation including among other items a mortgage statement for residential premises, details of debts and debt collection agencies, a Lloyds bank statement for 14 October 2016 to 24 November 2016, electricity bills for the residential property for the first nine months of 2015, and a lapsed insurance certificate for the residential property.

HMRC said the company had failed to supply the list of names and contact details of suppliers and a copy of the cashbook, as requested, so a £300 penalty was enforced. The tax authority used its powers to request invoice details of the company’s spending directly from eBay. When these were produced, these records showed purchases only of a personal nature including a child’s bike, a pair of trainers and a games console.

HMRC went on to give the company a penalty notice of £25,791, on the basis its behaviour in claiming on its tax returns expenses that were not properly claimable was deliberate and prompted. There was a 15% reduction for the quality of disclosure provided.

For his part, Quarm told the FTT that the company could not have carried out the research it had – which was evidenced by a slideshow presentation – if it had not incurred the expenditure it claimed. HMRC’s case was that the expenses claimed in the R&D analysis and the tax returns ‘did not correlate in any meaningful way’.

The FTT pointed out in its ruling that the bank statements provided for the company showed total incomings and outgoings which were substantially less than the expenses being claimed, suggesting the company did not have the requisite funds available to pay the costs it claimed to have incurred.

Some of the travel to Germany was for personal rather than business reasons, while one of the bad debts related to advice Quarm had given an acquaintance about improving a website for which no fee was agreed and no invoice was issued, but which he said would have provided £7,000 for the consultancy.

The tribunal described Quarm as a ‘deeply unsatisfactory witness’, who was willing to say whatever he thought would assist the company’s case, ‘regardless of whether it was true or not’.

The judges were especially critical of the ‘incredible account’ about why information on the eBay purchases was not available due to the actions of a saboteur, along with similar ‘cyber bullying’ claims that both the company’s PayPal and Companies House accounts had been hacked.

The judges concluded they were not willing to accept assertions the claimed expenses had been incurred wholly or exclusively for the purpose of the company’s trade. As there was no evidence of the claimed expenditure, then there could be no entitlement to an R&D tax credit, and the company’s appeal was dismissed.

[Teksolutions-Inc Ltd and the Commissioners for Her Majesty’s Revenue and Customs, TC/2018/00696].

 

CASE: IT contractor wins £240k IR35 appeal 

HMRC has lost its latest legal challenge on the operation of the off-payroll rules, after a First Tier Tribunal (FTT) found in favour of an IT contractor.

Claims for over £240,000 were disputed in income tax and National Insurance Contributions (NICs), on the grounds that the IR35 intermediary legislation did not apply.

The case concerned Richard Alcock, who had a personal services company called RALC Consulting Ltd for the tax years 2010 to 2015. RALC contracted with Accenture and the Department for Work and Pensions (DWP) for work on the development of the universal credit system.

Subsequently, HMRC raised demands from RALC for £164,482 in income tax and £78,842, on the basis that Alcock had been employed during that period as the contracts represented contracts of service, and not contracts for service.

Alcock challenged the demands, arguing that he was self employed during the period. The tribunal examined several issues which were judged to be critical to determining his employment status under IR35, including the mutuality of obligations, the level of control Accenture and DWP could exercise over Alcock’s work and his ability to supply a substitute if he was not available. 

In its discussions, the tribunal judges noted there was no explicit obligation in the contract between the parties for Accenture to provide Alcock with a minimum amount of work, nor did it specify the number of hours or days in total.

There was also no commitment to offer a renewal of the contract. The FTT noted that ‘the lack of contractual right or any express guarantee of any hours or days of work and that he was to complete a specific project is significant.’

The tribunal also found that the fact DWP provided the laptop on which Alcock worked was not a critical determinant in his employment status, as it was a requirement due to security protocols.

As regards the element of control, the tribunal said that while Alcock was required to hit certain milestones in the project work and achieve specific outcomes, he could decide when he worked, as evidenced by the fact he had worked for other clients during the period under discussion.

On the issue of whether RALC met the substitution test under IR35, the tribunal pointed out that the Accenture contract fettered Alcock’s ability to do this, but said this was not a crucial factor.

It highlighted the fact that Alcock did not have a notice period and, in one instance, had seen a contract curtailed at short notice because a project was cancelled, although it described the lack of provision of holiday or sickness payments as ‘neutral’ in determining his status.

The tribunal said it accepted the submission from Chris Leslie from Tax Networks, who represented Alcock, which stated: ‘There is a very clear distinction here. And Mr Alcock is clearly self-employed, because he fits the latter sequence of events. He agreed the work to be done, and only that work to be done. Then he got to work and worked very hard indeed to meet the outcome goals. And then he billed only for the work done.

‘His contract specifically states that he can only charge for work actually completed. And to top it off, in one instance they did cut the project short at a moment’s notice, and he was not paid.

‘There is no question at all that he could charge just for making himself available, and neither was the client obliged to give him work or allocate work – the work has already been agreed upfront.

‘So, since there was no minimum obligation to provide work and no ability to charge for just making himself available, it is clear that the key elements of mutuality, in the work/wage bargain sense, are missing, and therefore he cannot be considered an employee.’

In its ruling, the FTT found in favour of RALC and dismissed HMRC’s claims for income tax and PAYE. As a result, the tribunal said it did not need to consider a secondary issue raised by HMRC, alleging that RALC’s accountant had been careless in submissions to the tax authority.

An HMRC spokesperson said: ‘HMRC is disappointed with the decision of the tribunal and intends to appeal.’

Compliance

 

HMRC issues early guidance on moving pension holders between payrolls 

HMRC has released an alert advising that it plans to update the guidance on paying a company pension or annuity through company payroll, with preliminary details now available.

Recognising that companies need this information to complete pension payroll moves, HMRC has shared an early version of the amended guidance, stressing that the guidance is not final but ‘any changes will be minor and will not affect the substance’. This guidance is set out in the ‘less common circumstances’ section of the gov.uk pensions guide.

 

HMRC gives limited MTD ‘digital links’ extension 

HMRC has extended the Making Tax Digital (MTD) for VAT compliance date for businesses judged to have complex or legacy IT systems giving extra time to meet the requirement to maintain digital links as part of the new filing regime.

As well as keeping digital records, all VAT registered businesses with a turnover of more than £85,000 are required to have in place digital links between all parts of their functional compatible software.

HMRC has already said it is allowing a period of time, known as the ‘soft landing period’ for this to be achieved, and for the first year of mandation businesses will not be required to have digital links between software programs.

 

US makes first move towards beneficial ownership register 

The US House of Representatives has passed the Corporate Transparency Bill, marking the first stage in a bid to clamp down on shell companies with opaque ownership.

The next stage in the legislative process is Senate approval.

Under the Corporate Transparency Bill, also known as the Maloney Bill, corporations and limited liability companies (LLCs) would be required to disclose their true, beneficial owners at the time the company was set up to prevent people from using anonymous shell companies to thwart law enforcement and hide their illicit activities. 

 

HMRC targets offshore investment fund holders 

HMRC is sending high net worth individuals advisory letters warning them to submit offshore investment returns correctly to avoid tax penalties. 

The letters were due to be sent out early in November by HMRC’s wealthy & mid-sized business unit and are designed to educate customers on offshore investment funds so they comply with their tax obligations in advance of the online self-assessment deadline of 31 January 2020.

HMRC’s compliance crackdown comes after research identified information about overseas investment funds leading the tax attorney to believe individuals may have invested in these types of funds without full disclosure.

 

HMRC sets out tax treatment of cryptoassets for business 

HMRC has issued its first detailed guidance on the tax treatment of cryptoasset transactions, specifically clarifying the rules for transactions at businesses and companies.

The guidance explains what taxes businesses may need to pay, and what records need to be kept, but HMRC cautions that this is a fast-moving sector which is developing all the time, while the terminology, types of coins, tokens and transactions can vary.

As such, HMRC will look at the facts of each case and apply the relevant tax provisions according to what has actually taken place (rather than by reference to terminology).

However, the guidance makes clear that if a company or business is carrying out activities which involve exchange tokens, they are liable to pay tax on them.

 

Bacs dates for 2020 confirmed 

The retail payment authority Pay.UK has issued dates for 2020 Bacs processing deadlines, taking into account bank holidays.

Outlining all of the public holidays throughout next year, the guide also highlights the dates when Bacs payments should be submitted, in order to avoid non-processing days.

The calendar is able to collect bills and salaries paid over public holiday periods, including Christmas and Easter, which can be especially busy times of the year for finance teams, with a higher number of staff traditionally taking annual leave.

 

Australian backpacker tax ruled illegal 

Some 75,000 casual holiday workers may be in line for payouts of thousands of dollars from the Australian Tax Office (ATO).

This follows a legal challenge from a British woman which resulted in a landmark ruling that the so-called ‘backpacker’ tax is illegal.

In 2017, the Australian government introduced a controversial 15% tax rate on two visa categories for working holidaymakers. This meant that any foreigner on a 417 or 462 visa earning less than A$18,200 (£9,728) has had to pay tax, unlike Australians who are not taxed on similar earnings.

British tourist Catherine Addy brought a case to the Federal Court, backed by Dublin-based tax advisory firm Taxback.com. The court decided the tax is a ‘form of discrimination based on nationality’ and was in contravention of a non-discrimination clause in a double taxation treaty between the UK and Australia.

 

Help to Buy ISAs closed on 30 November  

Time has run out to open a Help to Buy ISA which could have add £3,000 to buyers’ first house deposits.

The scheme enabled people saving for their first home to receive a 25% boost to their savings from the government when they buy a property of £250,000 or less (with a higher price limit of £450,000 in London), though savers could only open one Help to Buy ISA.

Although it closed on 30 November, savers can still save for their first-time buyer bonus until 30 November 2029.

 

HMRC urges taxpayers affected by flood to get in touch 

Business owners affected by flooding should contact HMRC’s Business Payment Support Service (BPPS) for help with tax problems, while BEIS is offering help through business recovery grants.

At the same time, households and business owners significantly affected by recent flooding will have immediate relief on their council tax and business rates, the government has announced. They will be eligible for 100% relief on their council tax and business rates for at least the next three months.

 

Politics

Budget push-back delays Finance Bill 

The announcement of a general election on 12 December 2019 meant the Finance Bill 2019-20 was not passed before the parliamentary session was dissolved.

The Budget normally involves four days of debate on the budget resolutions, and is followed by votes before the Act is passed.

Draft legislation for FB 2019-20 was issued in July and closed for comment on 5 September 2019. Due to the attempted prorogation of parliament on 9 September, there was no time for the government to respond to the feedback on the consultation process. There was no response to this draft, which included the off-payroll working regulations for the private sector, for example.

 

Loan charge review delayed by election 

Taxpayers will have to wait until a new government is formed to find out the outcome of the Morse review into the loan charge.

Jesse Norman, financial secretary to the Treasury, informed Sir Amyas Morse, chair of the independent review into the controversial loan charge rules, that the mid-November deadline, originally set out by the Chancellor Sajid Javid, could no longer be observed as parliament had dissolved.

 

Jim Harra takes top job at HMRC 

Jim Harra, a thirty plus year tax veteran, has taken over the top job at the HMRC after acting in an interim role since Sir Jon Thompson moved to the Financial Reporting Council (FRC)

Harra has been at HMRC for over three decades and was previously second permanent secretary and deputy chief executive, the latter role he took up in November 2017. He was second permanent secretary since January 2018, and previously held the dual role of tax assurance commissioner and director general customer strategy and tax design in HMRC.

 

Hancock NHS pension plan could be ‘tax avoidance’ 

The government has signed off a change to pension tax rules for NHS high earners which ‘could constitute tax avoidance’.

The Scheme Pays proposal allows doctors to pay an annual allowance tax charge arising from their pension saving in the NHS schemes for the 2019/20 tax year.

This agreement to reimburse doctors’ pensions would be classed as a change of policy, which is effectively breaking purdah rules during an election period.

Health secretary Matt Hancock said: ‘As you set out, the proposals which you plan to introduce for “Scheme Pays” for the 2019/20 tax year constitutes an example of tax planning.’

 

Consultations

Individual tax accounts need a revamp, says OTS 

The Office of Tax Simplification (OTS) is calling for improvements to HMRC’s individual tax account service to provide an end-to-end tax reporting and payment service for the self employed and buy-to-let landlords.

An overhauled individual tax account would merge the present personal and business tax accounts, so that taxpayers could see information about all their different types of income in separate fields, but in one place, and should also be able to receive and display data from taxpayers about their self employment or rental income.

 

International

Cairn Energy faces further delay in Indian tax dispute 

FTSE 250 oil explorer and producer Cairn Energy has announced another delay in its long-running dispute with the Indian government over a £1bn tax claim, which will now not be settled before next year.

The Edinburgh-headquartered company had previously been hoping that an arbitration panel handling its claim against India under the UK-India bilateral investment treaty would make a decision by the end of 2019.

However, in a regulatory update, Cairn Energy said the tribunal has indicated that, while it is not yet able to commit to a specific award release date, it expects to be in a position to issue the award in the summer of 2020.

The lengthy tax dispute centres on a restructuring Cairn Energy carried out ahead of the flotation of its Indian unit in 2007.

 

Vodafone hit by ‘excessive’ taxes on Indian business 

The telecoms giant is warning that it may review its India business if it is not able to resolve outstanding regulatory issues with the Indian authorities.

An ongoing dispute over the calculation of license fees has impacted the latest half yearly results of the FTSE 100-listed company, forcing Vodafone to issue a warning that an Indian court ruling affecting the whole telecoms market in India would affect the way license and regulatory fees were calculated and taxed.

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