The IR35 anti avoidance provisions are contained in ITEPA 2003. The provisions impose employment taxes on those using a Personal Service Company (PSC) to enter into a contract for services (and thus pay corporation tax on profits) who in practice are engaged under a contract of service (and therefore should pay income tax and NICs on income). Recently, there has been a string of cases involving HMRC challenging well known TV presenters on the basis that they are caught by IR35. The most recent judgement of which was Eamonn Holmes v HMRC (2020). The Facts TV personality Eamonn Holmes set up a PSC in 2001 called Red, White and Green Ltd (RWG). From 2006 onward he has been presenting This Morning on ITV. During this time, RWG has been...

The case of Reneaux and Another v HMRC (2019) provides guidance on the level of business activity required to be treated as “trading” for Entrepreneurs’ Relief (“ER”) purposes. In this case, the First-Tier Tribunal (“FTT”) held that the occasional use of business premises and the letting of those premises were not sufficient to amount to a trade. Entrepreneurs' Relief  ER is a valuable relief which can reduce the rate of Capital Gains Tax (“CGT”) on the sale of business assets to 10%. In brief, in order for sole traders or partners of partnerships to qualify for relief they must have sold whole or part of their business, or disposed of an asset used in a business at the time the business ceases to be carried on ....

The long-awaited independent review of the controversial loan charge has now been published, along with the government's response. These documents provide some much-needed clarity for taxpayers caught up with the charge. Background The 2019 Loan Charge broadly imposes a tax charge on disguised remuneration loans from 1999 that remain outstanding at 5 April 2019, effectively bringing years of disguised remuneration into charge in 2018/19. Therefore, the loan charge had the punitive effect of up to 20 years' tax becoming payable in one year. HMRC argued this was justified as a strong stance needed to be taken against tax avoidance schemes. However, MPs and various action groups have stated the charge was retrospective in nature and ...

Liquidation Liquidation or the winding up of a company is a process whereby the assets of a company are realised and distributed to creditors in satisfaction of any debt owned in the order of priority set out in the Insolvency Act 1986. Following this, the company is dissolved. In the case of a members’ voluntary liquidation (“MVL”), a company is likely to have surplus assets to be distributed to its shareholders. Tax Treatment Generally, when undergoing an MVL, distributions to shareholders (who have last priority in liquidation) will be treated as capital distributions and therefore will attract the more generous capital gains tax rates (10% for gains falling within your basic rate band, and 20% on the excess). Furthermo...

Private residence relief (“PRR”) was first introduced over 50 years ago and is one of the more widely known tax reliefs, providing relief from capital gains tax ("CGT") on the sale of your home. That said, there has been contention over the definition of the terms “period of ownership” and “periods of occupation”, both of which are crucial for determining if PRR can be applied. Last year we wrote a blog on the case of Higgins v HMRC where the Upper Tribunal held that the period of ownership for PRR purposes starts from the date the contract for purchase was signed, even though the property in question had not yet been built. Mr Higgins has appealed his case to the Court of Appeal who has now reversed the Upper Tribunal�...

In March 2018 we published a blog on the case of Christa Ackroyd Media Ltd v HMRC at the first-tier tribunal (FTT). In short, the FTT found that former BBC ‘Look North’ presenter Christa Ackroyd was caught by the IR35 anti-avoidance rules and was therefore an employee rather than a freelance contractor through her personal service company, Christa Ackroyd Media Ltd (“CAM”). The FTT stated that where individuals are engaged through an intermediary (in this case CAM) under hypothetical contract terms that would represent employment by the end user if engaged directly, the intermediary must treat their monies received as income and operate PAYE. The FTT asserted that a test of overall control and mutuality of obligation were r...

Determining a company’s residence status is crucial when considering its liability to UK tax. There are two important tests to consider when deciding a company’s residence: the Incorporation Test, and the Central Management and Control ("CMC") Test. Incorporation Test The incorporation test set out in 2009 CTA s.14 is simple; a company incorporated in the UK is regarded as resident in the UK for tax purposes. If a company does not fall into this test, the second test must be considered. “Central Management and Control” Test The CMC test is derived from case law.  As the name suggests, this test seeks to determine where the central management and control of the company vests. This involves looking at where the orde...

Domestic Reverse Charge Implementation Delayed In a move described as a ‘victory for common sense’ by the Federation of Master Builders (FMB) chief executive, the implementation of the domestic reverse charge which was due to take effect on the 1st October 2019 will now come into effect on the 1st October 2020. The domestic reverse charge means that customers receiving a service in the constructing and building sector may have to pay the VAT to HMRC instead of paying the supplier. Some 150,000 businesses will be affected by the change. Reasons for the delay HMRC announced the delay on the 6th September 2019 citing concerns from industry representatives and the desire to avoid the changes coinciding with Brexit as the reasons...

The Government has announced that an independent review will be held into the April 2019 Loan Charge with the results due in mid-November 2019. The review will consider the impact of the loan charge on taxpayers who have entered into disguised remuneration schemes and provide recommendations. In particular the review and recommendations will consider: Whether the Loan Charge is an appropriate response to the tax avoidance behaviour in question Whether changes to the Loan Charge already announced address any legitimate concerns raised regarding the impact on individuals (for example in relation to affordability) The impact on wider taxpayer fairness HMRC’s ability to tackle tax avoidance effectively in the future In ...

The 2019 Loan Charge The 2019 Loan Charge was introduced by the Finance (No 2) Act 2017. The charge means that all employment related loans entered into on or after the 5th of April 1999 which remain ‘outstanding’ (i.e. no settlement agreement has been reached with HMRC) on the 5th April 2019 will be chargeable to tax as employment income in the 2018/2019 tax year. Employment loans were most common in the late 1990s and early 2000s and the vast majority involved employers providing funds to employee benefit trusts ("EBTs") that would then loan the money to the employee on the understanding that it would never need to be repaid. In the Rangers case, the Supreme Court largely dismissed the effectiveness of these types of schemes ...