Agenda MTD for VAT starts April 2019 regulations published Other - - PowerPoint PPT Presentation

• MTD for VAT – starts April 2019 – regulations published
• Other HMRC announcements
• “Simple Assessment”
• Salary Sacrifices
• OTS review of depreciation/ capital allowances
• Recent tax cases
• McQuillan case – 5% OSC for entrepreneurs relief

Agenda

• They finally listened!
• 2020 at earliest for quarterly updating by traders and

landlords (IT and NICs)

• But VAT quarterly updating from 2019
• 12 month pilot of new VAT reporting
• More time for testing and software development
• Businesses below VAT threshold now exempt

MTDfB delayed – 13 July 2017

• VAT quarterly updating starts 2019
• Aren’t we doing that already?
• No – just filling in 9 boxes online – 87% are entered

manually

• From 2019 will no longer be able to keep manual

records for VAT if above registration limit

• So digital record keeping for most businesses will

be required from 2019 not 2020

• Property businesses (not VAT registered) in 2020

Quarterly Updating for VAT

• VAT quarterly updating starts 2019
• Also when Brexit happens – EU imports/exports?
• How will we deal with partial exemption?
• Capital goods scheme?
• Need to adjust accounts figures/ apportionments
• Retail schemes?
• Second hand margin scheme?

Quarterly Updating for VAT – Problems?

• Software must be capable of:
• keeping records in a digital form as required by the

regulations

• preserving digital records in a digital form as

required by the regulations

• creating a VAT return from the digital records held in

functional compatible software and providing HMRC with this information digitally

• providing HMRC with VAT data on a voluntary basis
• receiving information from HMRC via the API

platform in relation to a relevant entity's compliance with obligations under the regulations

MTD for VAT – Secondary Legislation

• change of rate credit notes
• adjustments for use of an approved estimation procedure
• retail scheme annual adjustments
• partial exemption annual adjustments
• change of use input tax adjustments
• capital goods scheme adjustments for subsequent

intervals

• bad debt relief claims and associated input tax repayment

where consideration not paid

• Only the total for each type of adjustment will be required

to be kept digitally not details of the calculations underlying them.

MTD for VAT – Adjustments

HMRC Announcements and other developments

8

• Budget 2015 proposal - abolish during (this) Parliament
• Replace with new online tax account
• Pre-populated with data from employers, banks,

pension scheme (RTI) State Pension (DWP)

• “Simple Assessment” starts 2017/18 for many

pensioners and certain PAYE customers

• 60 days to challenge if incorrect

End of Self Assessment tax Returns?

• Where a BiK is provided through salary sacrifice, it will be

chargeable to income tax and Class 1A employer NICs, even if it is normally exempt from tax and Class 1A NICs

• The greater of:
• the amount of salary sacrificed; and
• the cash equivalent set out in statute (if any)
• Note transitional rules – if in place at 5 April 2017
• 5 Exceptions…

New Rules for Salary sacrifices

• 5 Exceptions:
• employer pension contributions;
• employer-provided pension advice;
• employer-supported childcare and provision of workplace

nurseries; and

• cycles and cyclist's safety equipment
• Ultra – Low (< 75g) CO2 emission cars

Limiting tax relief on Salary sacrifices

HMRC beat Rangers at Supreme Court

EBT Loan Scheme

COMPANY TRUST LOANS Sub Trusts Taxable

• HMRC's view is that principle applies to a wide range of

disguised remuneration tax avoidance schemes, no matter what type of third party is used. This includes:

• EBTs – including variants within these schemes where

no loans are made from the EBT but instead the funds remain in, or are invested by, the trust

• disguised remuneration routed through employer-

funded retirement benefit trusts (EFURBS)

• a range of contractor loans schemes

Spotlight 41 – EBTs and similar schemes

• HMRC intends to use Rangers decision to take action

against many of the disguised remuneration schemes

• This will include HMRC considering, in appropriate

cases, whether to issue follower notices and, if relevant, associated accelerated payment notices.

• It will also include accelerating litigation where users

choose to continue challenging HMRC on their scheme.

Spotlight 41 – EBTs and similar schemes

• Consider tax implications of accounting changes:
• Transitional adjustment arising on conversion to

FRS105

• Accounting under FRS105 going forward
• Applies to a/c periods commencing on or after 1.1.2016
• Comparatives to be restated (B/fwd balances)

Tax implications of FRS 105

• HMRC produced useful Overview Paper January 2014
• Consider tax implications of accounting changes:
• Financial instruments/ hedging transactions => Fair

value

• Business combinations – separate intangibles*
• Lease incentives
• Employee benefits - Holiday pay accrual
• Goodwill and intangibles

Tax implications of FRS 102/105

• “Tax legislation for companies requires that the profits of

a trade are calculated in accordance with generally accepted accountancy practice, subject to any adjustment required or authorised by law in calculating profits for corporation tax purposes”

• Section 46 Corporation Tax Act 2009
• Also section 25 ITTOIA 2005

Accounts and tax

• General rule: Tax treatment follows accounting

treatment, GAAP, unless tax law overrides

• Main exceptions/overrides:
• Tangible fixed assets – capital allowances
• Share based payment
• Pension costs
• Provision for bonuses/ commissions

Accounts and tax

• Tangible fixed assets – disallow depreciation
• Claim capital allowances instead - complicated
• OTS review of corporation tax
• Why not allow accounts depreciation?
• Allowed for intangibles
• Only a timing issue
• Small businesses worse off - AIA

Accounts and tax – allow depreciation?

• Charities with trading subsidiaries
• Gift Aid profits up to charity to eliminate CT charge
• Change to FRS 102
• Proposed amendments would allow the tax effects of

gift aid payments from subsidiaries to their charitable parents to be taken into account at the reporting date, where it is probable that the payment will be made in the nine months following the reporting date.

Accounts and tax – Gift Aid

• The Facilitation of Tax Evasion Offences (Guidance

About Prevention) Regulations, SI 2017/876

• From 30 September 2017
• HMRC have produced guidance on the “reasonable

prevention procedures” relevant bodies can put in place to prevent those acting in the capacity of an associated person from committing the

• New corporate offences of failure to prevent

facilitation of tax evasion.

Facilitation of Tax Evasion

Recent tax cases

23

• Shareholder conditions:
• Officer or employee
• 5% of OSC and voting rights
• Company conditions:
• Trading company

Entrepreneurs’ relief – Shares and Securities

Min 1 year

• Mr C held 5% of company’s ordinary shares
• The company had also issued a number of deferred

shares – no rights to dividends, no votes, limited rights to capital on a winding up = worthless

• Should these shares be considered as ordinary share

capital? If so Mr C only had 4.9%

• Held: deferred shares are ordinary shares
• Issued for a genuine commercial purpose
• As < 5% held by Mr C no entrepreneurs’ relief

Entrepreneurs’ Relief – Castledine case

• Mr and Mrs McQ each held 33% of company’s ordinary

shares (total 100)

• The company had also issued 30,000 redeemable non-

voting shares – representing a loan to company

• No voting rights, no dividend rights, redeemable at par
• Should these shares be considered as ordinary share

capital? If so Mr and Mrs McQ held <1%

• FTT: the redeemable shares not ordinary shares
• UTT: consider all shares unless have fixed return
• No entrepreneurs relief

Entrepreneurs’ Relief – McQuillan case

No IHT BPR for holiday cottage business

Services included:

• Laundry facilities on site,
• Free wi-fi,
• Handyman on site,
• Children's sand pit, surf boards, fishing nets, croquet
• OS maps of local area,
• Newspapers/milk delivered,
• Change of bed linen during stay,

No BPR for holiday cottage business

• Executors of Mrs Marjorie Ross
• R owned 2/3 of holiday letting business worth £1.5m
• Cottages in Cornwall used by visitors and staff at Port

Gaverne hotel (formerly also owned)

• Also house in Weymouth
• Extensive services provided in addition to hire of

cottages

• Furnished holiday lets for IT and CGT
• But not BPR for IHT = business mainly of making or

holding of investments

No BPR for holiday cottage business

When is a van not a van?

• Payne and Garbutt and Coca Cola v HMRC [2017]

UKFTT

• Employees supplied with vehicles with two rows of

seats and load carrying capacity

• If van/commercial vehicle lower benefit than cars
• VW Kombi vans – not commercial vehicles
• Vauxhall Vivaro vans were!
• Clear as mud!
• Double cab pick ups?

When is a van not a van?