When it comes to the UK tax system, HMRC impose various penalties to ensure compliance and to encourage taxpayers to file their tax return by the 31 January deadline following the end of the tax year (or 31 October for paper returns). The penalties for missing the tax return filing deadline can be punitive, with HMRC also issuing the following penalties in relation to tax returns: For the late payment of tax; Failure to notify penalty, where a new source of taxable income or capital gains are received; Errors or inaccuracies on the return; Failing to keep sufficient records. Penalties for Late Filing of Tax Returns HMRC issue standard penalties for failing to submit your tax return on time, whereby these penalties ap...

The UK Supreme Court commented during the recent case of HMRC v Tooth [2021 UKSC 17] that ‘staleness’ is not a concept that can be used against discovery assessments, meaning that a discovery will not lose its quality over time. ‘Staleness’ has previously been argued by taxpayers to state that a discovery needs to be new and the discovery assessment needs to be issued within a certain period of time otherwise the discovery and the discovery assessment will not be valid. The concept of ‘staleness’ has been subject to numerous cases of litigation between HMRC and taxpayers since 2008 and this recent ruling has provided clarity on this matter. What is a Discovery Assessment? The rules for discovery assessments are largely ...

Running a company imposes an abundance of filing obligations, those of common knowledge include accounts and company tax returns. However, there are also additional filing requirements that are often overlooked / incorrectly inputted despite the fact that omission / inaccuracy of these filing requirements can lead to fines and implications down the line. This article will highlight some of these filing obligations and the implications of failing to comply with these obligations. The Confirmation Statement The confirmation statement (annual return) is essentially just a check that the information Companies House has about a company is correct every year. Every company is required to submit one, including non-trading / dormant compan...

What is Domicile? Domicile is a concept of common law in the UK and each individual has only one domicile. Many people are unsure as to what this nebulous concept means; it is not the same as nationality, residence, or citizenship. Your domicile status is best defined as the country where your ‘homeland’ is, whereby the country in which you have a permanent home and where you plan to live indefinitely are two of the predominant contributing factors in determining this. Why is Domicile Important? Many people are internationally mobile; therefore, domicile helps to establish which UK tax rules are applicable to these individuals. The legal system where you are considered to be domiciled works alongside your residence status to ...

HMRC has issued "nudge" letters targeting wealthy taxpayers who: have become deemed UK domiciled for tax purposes in the UK (see below); and received a Notice to File a tax return for the 2017/18 tax year, but did not file it despite having submitted returns for 2016/17 and 2018/19. These letters prompt the taxpayer to review their tax position and respond to HMRC either confirming that their tax affairs are in order, or to commence the disclosure process. Over the last couple of years, we have seen "nudge" letters from HMRC asking taxpayers to review their income from rental properties, their offshore assets, income or gains, and the sale of a second home and/or rental property. Deemed Domicile These letters target lon...

Every tax year, a taxpayer is entitled to accrue pension contributions in accordance with their annual allowance (AA). The standard AA currently stands at £40,000 per year, however if you are a “high-income taxpayer” (i.e. adjusted income of £240,000 or more p/a, and threshold income exceeding £200,000 p/a), this AA will be restricted by £1 for every £2 in excess of the £240,000 limit, to a minimum AA of £4,000 (2020/21). These allowances apply across all schemes a taxpayer belongs to and includes all contributions i.e. those made by the taxpayer, their employer and any third party who pays on the taxpayer’s behalf. Where a taxpayer’s contributions exceed the aforementioned AA (whether standard or tapered) they will no lon...

HMRC plans to send 14,000 "nudge" letters to individuals it believes may have made a taxable residential property disposal in 2018/19 but did not report it on their self-assessment tax return, thereby encouraging taxpayers to come forward and bring their affairs up to date. On the sale of residential property, capital gains tax may become payable on the gain. The taxable gain is calculated by taking the sale proceeds and deducting the original cost, the associated costs of disposal/acquisition, any costs incurred on enhancing the value of the property, and the annual exempt amount (£11,700 for 2018/19). If the taxpayer had lived in the property as their main residence throughout their period of ownership, then Principal Private Resid...

The recent First Tier Tribunal (“FTT”) case of Szymusik v HMRC [2020] raised some interesting questions about the eligibility criteria for claiming Seafarers’ Earnings Deduction (“SED”) – But what is SED? And who can claim it? This article will answer these questions, whilst also discussing what we can learn from Szymusik’s case. What is Seafarer’s Earnings Deduction?  The SED is an amount which employed seafarers can deduct from their employment earnings when calculating their UK tax liability - it is not available to seafarers who are self-employed. Who can claim it? In relation to the SED, a seafarer is someone whose employment consists of the performance of duties on a ship, including tasks which are incid...

The Coronavirus pandemic has not only endangered the health of the UK, but it has also had a huge impact on the economy. This financial strain has led to many people choosing to give up/use some of their income to support: 1) Businesses or employers; or 2) Charities. But what are the tax implications of these acts of generosity? Supporting a business or an employer People are showing support for a business or an employer in several ways such as: 1) waiving salary or bonuses before they are paid; 2) waiving dividends; or 3) giving salary or bonuses back to a business or employer after they have been paid. The tax treatment of this support depends on which route is taken (i.e. 1, 2 or 3). 1. Waiving salary or bonuses before they are...

It is common for business/financial decisions to be guided by the tax treatment of the transaction. However, in light of the tax legislation's complexity taxpayers may seek advance assurance before the event takes place to guarantee that the expected tax implications will indeed apply. In light of this, it is possible to write to HMRC to request advance clearance of the tax treatment of certain transactions. The tax legislation provides for clearances for certain arrangements (i.e. statutory clearances), and HMRC also provides a non-statutory clearance service for areas where the rules do not otherwise provide for it. The most common transactions that we as a firm seek clearance from HMRC include: Share-for-share exchanges Pu...