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...

With the offer of quality accommodation at a cheap price and a convenient online booking system, Airbnb has become a very popular choice for those looking for somewhere to stay during a weekend away or even an extended holiday. The increased popularity of the site has created a great opportunity for those with an apartment or spare room to easily generate some extra income. However, these people may not have earned money in this way before and they may therefore not be aware that this is taxable rental income that they may need to report to HMRC. Airbnb has just announced that it will provide HMRC with the details of the individuals who let out property on the site and the rental income that they have received. The information provide...

Last month, the Chancellor of the Exchequer Rishi Sunak announced that as part of the Government’s ‘Winter Economy Plan’ taxpayers who complete self-assessment tax returns can now defer their tax liabilities using HMRC’s formerly established Time to Pay self-service facility. Following the announcement, HMRC have now confirmed more details about the practicalities of the scheme. One of the Government’s previous measures was that taxpayers who were required to make payments on account for 2019/20 following submission of their 2018/19 tax returns (i.e. those with a tax bill of above £1,000 or those who had paid less than 80% of all tax owed) in July 2020 could defer this payment until January 2021 if they have been affected b...

Making Tax Digital (MTD) represents a series of efforts by the government to make it easier for individuals and businesses to keep on top of their tax affairs and get their tax right. The rules will mean that individuals and businesses will need to keep digital records, and send regular updates to HMRC. Certain announced changes have been postponed by the government in the past. This article provides an update of the latest position for businesses and individuals. VAT Since 1 April 2019 (1 October 2019 for some more complex businesses), MTD for VAT has required that businesses with turnover over the VAT threshold (£85,000 in 2020/21) keep their records in a digital format, and submit their VAT returns using software. In practice t...

Private residence relief (PRR) provides relief from capital gains tax (CGT) on the disposal of a property that has been used as your main home during the period of  ownership. In the recent First Tier Tribunal (FTT) case of Hashmi v HMRC, the tribunal found that Mrs Hashmi (the taxpayer) had failed to satisfy the burden of proof required to show that the properties that she lived in were her private residences, and therefore eligible for private residence relief. The case provides insight into the level of proof that is required to support a claim for private residence relief for a property. Background Between 2013 and 2015, the taxpayer lived in the following properties, for the following periods:  132 Shaggy Calf Lane unt...

In the Spring Budget it was announced that new legislation would be introduced to clarify the computation of Top Slicing Relief (TSR) for gains made on or after 11 March 2020. HMRC have since announced that these new rules will apply by concession for all gains arising in the 2019/20 tax year. What is Top Slicing Relief? In the absence of TSR, a taxpayer who has historically paid income tax at a lower rate could be catapulted into the higher and/or additional income tax rates on insurance policy gains. This is because whilst the gains accrue over a number of years, they are only subject to income tax in the year of a chargeable event (such as the death of the life assured, or surrender of the bond). TSR therefore mitigates this hig...

Parents and caregivers can claim for Child Benefit, which is a tax-free payment calculated by reference to the number of eligible children in the household. Since the introduction of the High Income Child Benefit Charge (HICBC) in 2012, many taxpayers have been caught out by the charge, resulting in the issue of penalties by HMRC. Indeed, the failure to notify HMRC of the liability was so widespread that last year HMRC reviewed the penalties and confirmed that they would be cancelled if they met a number of conditions. Ramsdale v HMRC (2020) In the recent case of Ramsdale v HMRC (2020), the First Tier Tribunal considered whether being unaware that your partner was claiming Child Benefit was a reasonable excuse for failing to notify...

On 26 March 2020, the Government announced a much awaited support package for self-employed individuals and partnership businesses that have suffered a loss of earnings due to COVID-19. Eligible individuals will receive a grant of up to 80% of their average monthly trading profits, up to a cap of £2,500 per month. Initially the scheme was set to run for a 3 month period (March to May). However, as this scheme is designed to match the support given to furloughed individuals, it is thought that it will be extended to end of October to match the extension of the Job Retention Scheme announced by Rishi Sunak on 12 May 2020. So far, only those who work in the construction or manufacturing industry have been encouraged to go back to wor...

In this ‘pause from normality’ it is important to keep your tax compliance guard up. The period we are going through is not a ‘tax holiday.’ If the quality of your tax compliance drops, then the existence of Covid-19 will be no excuse for inaccuracies or negligence later down the line when faced with an HMRC enquiry, nor is it likely to be an excuse for late returns unless you become seriously ill. The reality of this is exemplified by the fact that people are still receiving loan charge settlement letters (which require a response in 30 days) during this time. Our advice: Understand the specific tax payment holidays and reliefs that exist through Covid-19 and apply them to the best of your ability. Prepare cash-...

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...