There has not been much in the way of groundbreaking developments from the government in terms of funding and taxation since our last Covid-19 update, rather more specified announcements and clarification of previous measures.

We have decided to give clients access to our latest documents in full so that you can read the announcements tailored to yourselves.

 

C19-Business-News-Update-1-May-2020

C19-Business-News-Update-4-May-2020

HMRC-Release-Details-Of-SEISS-Scheme

Managing-Through-Covid-19-And-The-New-Normal

We have decided to do a brief newsletter on the availability of Universal Credit. Please see below

 

Universal-Credit-Factsheet-for-Clients

This is now our third update on Covid-19 and now there has been an announcement for the self-employed. Please see details in our newsletter

 

Covid 19 Update SE

We are eager to keep all clients as up to date as possible with the ever changing current scenario. We will be rolling out newsletters to help our clients understand the current economic situation and what measures are being put in place to help their business.

 

Please see our latest update below

Update 2

We are here to help you throughout this ongoing pandemic. Please see our useful information on Covid-19 for businesses below.
Please still contact the office or any of our emails for any advice we may be able to give.

In July 2017, HMRC announced that all businesses and individuals will have to file their accounting information digitally.

By April 2019, businesses above the VAT Threshold will need to keep Digital records and from 2020 this should apply to all other businesses who will be updating HMRC quarterly for their corporation tax, Income Tax and National Insurance obligations digitally. It is a significant change for many of us and means the end of the annual tax return to be replaced with a digital tax account where all your information will be stored in one place.

This change in the way HMRC wants information from tax payers means that you may need to move from your existing desktop or manual record keeping and onto an online accounting package.
The good news is we are certified in the installation and operation of Online Accounting software which is digitally compliant and specifically designed for small and medium sized business.

Contact us to see the advantages of going digital.

Case facts. In Warshaw (W) v HMRC, the taxpayer (W) had claimed entrepreneurs’ relief (ER) in respect of a capital gain on a mixture of ordinary and preference shares. One of the qualifying conditions for ER is that a taxpayer holds at least 5% of the ordinary share capital and W would only meet this condition if his preference shares were included. HMRC decided that W’s preference shares did not constitute ordinary share capital based on the definition in s.989 Income Tax Act 2007 and demanded over £1m in tax.

Appeal. W appealed to the First-tier Tribunal (FTT) on the basis that his cumulative preference shares did meet the definition of ordinary share capital because he was not entitled to a dividend at a fixed rate. As the shares were cumulative, W was entitled to a dividend of 10% which was deferred until a later year where there were insufficient reserves. During those years the 10% would be calculated on an increased amount. HMRC argued that the rate was fixed at 10% whereas W argued that the rate was not fixed because it was calculated in reference to any previous unpaid dividends.

Decision. The FTT held that both the percentage element and the amount to which it applies need to be taken into account to identify the rate of a dividend. In this case the articles provided that the percentage rate was fixed, but the amount it applied to may vary and so the preference shares did not carry a right to a dividend at a fixed rate. The shares therefore met the definition of ordinary share capital and the appeal was allowed.

Tip. This decision contradicts HMRC’s guidance which can be found here https://www.tax.org.uk/sites/default/files/180918_OSC%20Aide%20Memoire%20with%20caveats.pdf. This highlights the importance of reviewing the applicable legislation and case law in priority to HMRC guidance.

The full transcript can be found here http://financeandtax.decisions.tribunals.gov.uk/judgmentfiles/j11071/TC07107.pdf

Lorraine. Ms Kelly (K) provided services to ITV via her personal company (Albatel Ltd) in connection with TV programmes “Daybreak” and “Lorraine”. HMRC decided that the IR35 legislation applied to the arrangement between Albatel Ltd and ITV and demanded tax and NI.

Appeal.  Albatel Ltd appealed against HMRC’s decision on the basis that the nature and range of K’s work mean that she should be treated as a self-employed star. HMRC argued that there was mutuality of obligation due to the length of the contract which allowed for holidays in the same manner as an employment contract. It also stressed the point that K was obliged to perform for ITV and ITV was obliged to pay a minimum sum to Albatel Ltd even if the full contract was not fulfilled. Furthermore, K was not able to provide a substitute in her place, took no financial risk and could only work on other projects with ITV’s consent.

Decision. The FTT judgment focused on the circumstances as a whole, rather than isolated features. It found that there was mutuality of obligation but it was not determinative because ITV was not obliged to provide work for K and could drop the show if ratings fell. The FTT then considered the degree of control held by K and found that she was the “jigsaw” as opposed to a piece of it. K decided on the running of the programme, items to feature, vetoed location changes, prepared for the shows and dictated her choice of co-presenter to ITV. K was free to carry out other work and activities without any real restriction such as an expedition to Antarctica for four weeks which interfered with her availability to perform the duties for ITV. The considerable and varied activities of K led to the decision she could not be considered to be part and parcel of ITV. The appeal was therefore allowed.

Importance. This case is important because the fact pattern appears to follow Christa Ackroyd, a BBC presenter. The IR35 legislation was found to apply to that arrangement and the reason is that the BBC could call on Christa Ackroyd to present any show, in any location. Whereas K ran her own show which was based on her personal brand.

Tip. When considering the IR35 legislation it is important to analyse the reality of the arrangement rather than the terms of the contract. As shown in this case, the contract was drafted to provide ITV with some control but in reality, K was able to work on many other projects without restriction.

The full transcript can be found here https://www.bailii.org/uk/cases/UKFTT/TC/2019/TC07045.html.

Making Tax Digital (MTD). The government has confirmed that filing and record keeping penalties will not be charged during the first year of MTD for VAT where businesses are doing their best to comply. The government will not be mandating MTD for any new taxes or businesses during 2020. The pilot scheme for income tax will continue, but will not become mandatory until at least 2021.

Apprenticeship levy. From April 2019 the co-investment rate will decrease to 5%, and the amount employers can transfer to their supply chains will increase to 25%.

As expected, draft legislation, calls for evidence and new tax consultations have been announced. A brief summary of the highlights is provided below:

Structures and buildings allowance. Draft legislation published which introduces a new allowance for investments in non-residential structures and buildings to create a more competitive tax regime for businesses.

NI employment allowance. The government will issue draft regulations to restrict the allowance to businesses with an employers’ NI contributions bill below £100,000.

R&D tax relief. A consultation on preventing abuse of the relief for small or medium-sized enterprises.

Enterprise investment scheme. The government plans to publish draft guidelines outlining HMRC’s proposed policy and practice for approving funds.

Insurance premium tax. A call for evidence on suggestions to ensure that insurance premium tax operates fairly and efficiently.

Capital gains tax private residence relief. A consultation on the changes to lettings relief and the final period exemption announced at Budget 2018.

The full Spring Statement and links to the documents can be found here https://www.gov.uk/government/topical-events/spring-statement-2019.

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