From today (4 May 2020), businesses that have been affected by the coronavirus pandemic can apply for a loan under the Bounce Back Loan Scheme (BBLS). As noted in our previous blog, the BBLS was introduced to help smaller businesses that were struggling to obtain finance under the previously announced Coronavirus Business Interruption Loan Scheme (CBILS). The key features of the BBLS are as follows: Small and medium sized businesses can apply for a loan from £2,000, up to 25% of the business' turnover (capped at £50,000). The loan will be guaranteed 100% by the government (as opposed to 80% guaranteed under the CBILS). The government will pay interest and fees for the first 12 months, and the interest rate for the facility i...

In line with government guidelines, large swathes of UK workers are currently working from home.  Whilst there are a range of expenses you may be able to claim depending on your specific circumstances, this blog is aimed at those of you who own a limited company and are running the business from home. Rather than claiming the flat rate of £6 per week (£26 per month) under the simplified expenses rules, it may be more beneficial to instead rent out the personal work space in your home to your limited company. Under this arrangement, where the rent charged is equal to costs (see below), then no taxable rental profits will arise. Furthermore, provided that the rent is charged at no more than the market rate then the rental payments ma...

On 27 April 2020, Chancellor of the Excheuqer Rishi Sunak acknowledged that many smaller businesses were struggling to obtain finance under the previously announced Coronavirus Business Interruption Loan Scheme (CBILS). In light of this, a new Bounce Back Loan Scheme was announced which will be 100% guaranteed by the government (as opposed to 80% guaranteed under the CBILS). The Bounce Back Loan Scheme will launch on 4 May 2020 and will allow small and medium-sized businesses (SMEs) to borrow between £2,000 and £50,000. It has been confirmed that loan terms will be up to 6 years and there won't be any fees, interest, or repayments to pay for the first 12 months. Eligibility You can apply for a loan if your business: is based...

In these uncertain times, surplus cash not required for working capital and other prized assets held by a company are potentially being left at risk. Therefore, a company may wish to implement an asset protection strategy to help limit liability risks arising from the coronavirus crisis. Holding Companies & Shielding Company Assets A holding company (“HoldCo”) is a limited liability company that acts as the parent of a trading company (“TradeCo”). HoldCo does not carry out any trade activities itself and will instead own the shares in TradeCo along with any other assets that the owners would like to protect. The basic steps to implement the planning are as follows: The shareholders of TradeCo incorporate a new c...

Betting and gambling does not constitute a trading activity, and as such, any winnings are not taxable profits for income tax purposes. Nevertheless, if you make substantial sums of money in betting then care should be taken to ensure that you are able to prove the source of these funds. If betting activities cannot be evidenced, then you run the risk of having these winnings treated as trading profits by HMRC. This is what happened to a successful gambler in the case of Simon McMillan v HMRC (2019). In this case, the cards were stacked in McMillan's favour as he had several credible witnesses who could attest to his gambling activities.  The First-Tier Tribunal accepted his explanations, holding that based on the evidence his substa...

On 11 March 2020, Chancellor of the Exchequer Rishi Sunak announced a number of key spending pledges and tax changes. Here are some of the tax highlights: Personal Tax  The personal allowance will remain at £12,500 in 2020/21. The basic rate band will also be frozen at £37,500, so individuals will typically be able to earn £50,000 before paying tax at the higher rate in 2020/21. The Primary Threshold and Lower Profit Limit for National Insurance Contributions (NICs) will increase from £8,632 to £9,500 from April 2020, benefiting employees and self-employed individuals. The flat rate deduction for working from home will increase from £4 to £6 per week. From April 2021, there will be National Insurance holiday for emp...

NOTE: The changes to IR35 as described in this article have been delayed until April 2021   The off-payroll working rules (commonly referred to as IR35) were introduced in April 2000 to prevent individuals/contractors from providing employment services to clients through an intermediary (e.g. limited company or partnership) in order to reduce or avoid PAYE and National Insurance contributions (NICs). The intermediary comes within the scope of IR35 where the worker would be treated as an employee of the client but for the existence of the intermediary. IR35 is therefore designed to catch ‘one-man’ companies who contract almost exclusively for one major client. When IR35 applies, the income of the intermediary is regarded...

Discussions regarding the development of the HS2 train line have been plagued by controversy and uncertainty. However, with phase 1 of the HS2 line seemingly ploughing full steam ahead from London to Birmingham, one thing is certain: it’s going to be a bumpy ride for the HS2 developers. With homes, businesses, and nature reserves located along the entire proposed line, HS2 has already caused a large amount of disruption. Those who are affected should receive compensation from HS2 for their loss; indeed, some have already received payments of over £1million. The receipt of this HS2 compensation is taxable on the recipient (albeit reliefs may be available). This is something that many of those affected may not be aware of. The tax...

If a sole trader makes a loss from their business, it may be possible for them to offset this loss against their other income in the same year. This would lead to a reduction in their taxable income and therefore less tax payable. A reduced tax bill is obviously a very appealing prospect. However, as David Cliff (“DC”) (in the case of D Cliff v HMRC [2019]) recently found out in his appeal to the First Tier Tribunal, there are strict rules in place that dictate when a sole trader is allowed to offset their losses against other income; failure to adhere to these rules may result in a discovery assessment by HMRC and hefty penalties. Loss Relief Rules The legislation states that in order for loss relief to be claimed against the...

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...