With less than 6 weeks to go until most VAT registered businesses are required to comply with MTD, there is still concern that not enough progress has been made on making business owners aware of the new rules. Only 1 in 200 eligible businesses have already signed up to MTD, and HMRC has published research indicating that as at December 2018, 1 in 5 businesses required to join hadn't even heard of it. Adrian Rudd, Chair of the joint CIOT/ATT Digitalisation and Agent Strategy Working Group has said "We note that by far the most common way those who are aware of MTD have been made aware is by their tax adviser or accountant. We and our members will continue to do what we can to raise awareness over the months ahead but it is likely tha...

The taxation of charities differs from that of other types of organisation. In addition to being subject to specific tax obligations, charities are also eligible for a number of tax reliefs. This blog will offer an insight into the obligations that exist, the reliefs that are available, and how to make a claim. What is a charity for tax purposes? According to HMRC, in order to be able to claim for tax relief a charity must be: Based in the UK, EU, Iceland, Liechtenstein, or Norway; Established solely for charitable purposes. HMRC defines this as being for the public benefit and relevant activities include education, saving lives, and relieving poverty; Registered with the Charity Commission or another regulator; and Run ...

Here are some of the highlights from the Chancellor of the Exchequer's 2018 Budget (published on 29 October 2018): Personal Tax The Personal Allowance will be raised to £12,500 and the Higher Rate Threshold (i.e. the amount that an individual can earn before paying higher rate tax) to £50,000 in April 2019 – a year earlier than planned. These levels will remain the same in 2020/21, and then increase by CPI going forward. The final exemption period for Principal Private Residence Relief (PPR) which provides Capital Gains Tax relief on the sale of your home will be reduced from 18 to 9 months. Under the current PPR rules, where you have let a property which at one point was your home Lettings Relief may be available to reduc...

On 13 March 2018, the Chancellor of the Exchequer published the Spring Statement 2018. As promised in his Autumn Statement 2016, the Spring Statement did not contain details of new major tax or spending changes, however the government has published a list of calls for evidence and consultations currently taking place which set out its approach to adapting the tax system going forward. Brief descriptions of the consultations and links to the relevant documents are below: Allowing Entrepreneurs’ Relief on gains made before dilution. The government intend to introduce legislation in the Finance Bill 2018-19 to allow individuals who no longer own 5% of the share capital of a company as a result of an issue of new shares to claim Entr...

In Queen's Club Ltd v HMRC [2017], the First-Tier Tribunal held that the taxpayer was allowed to claim back input tax incurred on the renovation of a café which was available only to members of the sporting club. Background Queen's Club Ltd (the "Club") is a sports club which provides its members with the opportunity to play a number of different sports using its facilities. The Club's premises comprised four buildings, one of which (the "Pavilion") included a café and two bars. In order to encourage greater usage of the bars and café (and increase revenues), the Club refurbished the building by upgrading the café to a full-service restaurant. The Club received a number of goods and services with respect to the renovations...

In the case of Redwood Birkhill Ltd v HMRC, the First-Tier Tribunal found that a scheme whereby a third party arranged discounts on behalf of other business in return for retaining a portion of the discount received was a taxable supply on which VAT was due. Businesses using similar arrangements may wish to examine their own VAT responsibilities in light of the Tribunal’s decision. Background Redwood Birkhill Ltd (“Redwood”) negotiated on behalf of different types of public houses which can be broadly divided between (a) Redwood’s own establishments which it managed, and (b) public houses run by tenanted publicans or which Redwood only part invested in (“the Publicans”). Redwood negotiated with two major brewers ("the Brewe...

In the case of The Master Wishmakers Ltd v HMRC, the First-Tier Tribunal considered whether VAT should be charged at 0% or 20% with respect to the construction of “Challis Island”, a man-made island with 5 buildings/structures, themed upon a 18th Century Caribbean pirate oasis.  The Law VAT is chargeable at 0% on the supply of certain goods and services that are ‘zero-rated’.  Even though a business making a zero-rated supply will not collect any VAT on their sale, they are still deemed to be making a taxable supply and can normally claim back the VAT they have paid on their own purchases. This situation can be very advantageous for business that make large amounts of zero-rated supplies. The construction of a ‘build...

The second-hand goods margin scheme is available to VAT registered traders who typically buy goods for sale from members of the public. The scheme was introduced to account for the fact the goods have already borne VAT when first purchased and operates by charging VAT on the ‘value added’ amount only (i.e. the profit on sale) rather than on the full value of those goods. In order for a business to elect to use the scheme, the following conditions must be met: The business must not have been charged VAT on the sale of the item; The goods must be ‘eligible’ goods; and The goods must be tangible moveable property suitable for further use. Little Rascals Pets Ltd v HMRC In the recent case of Little Rascals Pets Ltd v HMRC, the...

Update -  the proposed changes to class 4 National Insurance for self-employed individuals have now been dropped. See here for further details.  A summary of some of the changes anounced by the Chancellor of the Exchequer in the 2017 Spring Budget, published on 8 March 2017. Income and Personal Tax Personal Allowance and Higher Rate Threshold The personal allowance is increasing from £11,000 in 2016/17 to £11,500 in 2017/18. The basic rate band will increase from £32,000 for 2016/17 to £33,500 in 2017/18. Individuals will therefore be able to earn up to £43,000 before paying higher rate tax. Dividend Allowance Reduction The current tax free allowance of £5,000 for dividend income is to be reduced to £2,000 fr...

In the Autumn Statement 2016, the Chancellor announced the introduction of a new 16.5% VAT flat rate for businesses with limited costs. The new rate will take effect from 1 April 2017, and will affect traders using the flat rate scheme where VAT inclusive expenditure is less than 2% of their turnover, or £1,000 per annum. Background The flat rate scheme is a simplified accounting system which enables businesses to calculate their VAT liability as a flat rate of total VAT inclusive turnover, thereby reducing the administrative burden of keeping detailed records. This is in contrast to the standard method of calculating VAT payable, whereby the input VAT on business expenses is offset against the output VAT charged. Those on the flat rat...