Fri 20 May 2016
Whilst taper relief (TR) is long gone its effects still surface occasionally, so it is worth noting the Case of Stolkin v HMRC ([2016] EWCA Civ 447) which concerned the order in which reliefs are applied.
Stolkin is only relevant to cases involving the interaction of TR with other reliefs because of perceived ambiguities in the provisions of the Taxation of Chargeable Gains Act 1992 as they applied to TR: the interaction of reliefs applicable today is clearer under entrepreneurs’ relief which replaced TR on 6 April 2008. Therefore the case is of relevance only in the relatively few cases that remain unsettled and may apply if it becomes necessary to quantify a held-over gain.
The Court of Appeal confirmed HMRC’s contention that where EIS relief is claimed on disposal of an asset that qualifies for partial business TR because of mixed business and non-business use, EIS relief takes priority over TR and must always be applied first.
For further information please contact Chris Williams
A tax change that the Chancellor didn’t mention in the House of Commons today will increase tax on shareholders of quoted companies that make a return of capital or pay a special dividend. These groups often give shareholders the choice of receiving the cash in income or capital form. Many shareholders don’t use their annual […]
Will the Autumn Statement change entrepreneurs’ relief? There is widespread speculation about the possibility of the Chancellor making further changes (restrictions) to entrepreneurs’ relief (ER) when he makes his Autumn Statement next Wednesday, 25 November. His previous reforms have not all gone down well because they hit not only their intended targets of those abusing […]
The Budget introduces changes to Capital Gains Tax: entrepreneurs’ relief that will affect individuals who wish to benefit from entrepreneurs’ relief (ER) on capital gains tax (CGT) without holding at least a 5% stake directly in a company carrying on a trade. This new measure will deny ER on a disposal of shares in a […]
The Budget introduces changes to Capital Gains Tax entrepreneurs’ relief that will affect individuals and members of partnerships who sell personal assets used in a business but do not, at the same time, dispose of a significant holding of shares in the company carrying on the business or of a significant share in the assets […]
Rules will be introduced to simplify and to prevent manipulation of pre-existing rules to reduce tax payable on disposal of carried interest. On disposal of carried interest, certain amounts were excluded from capital gains tax where they related to a previous disposal of assets before specific dates. These were known as transitional provisions and applied […]
There is an old and bad joke that says that the difference between HMRC and a rabid Pit Bull terrier is that, if you batter a rabid Pit Bull Terrier long enough, it might eventually let go, whereas HMRC… But now and then, and against all odds, after successive and repeated batterings by the Courts, […]
The Upper Tribunal (Lands Chamber) reviewed the basis of apportioning the sale price of land between CGT exempt and taxable parts. They decided HMRC’s approach was fundamentally flawed. Despite the taxpayers neither appearing nor being represented at the UT hearing, in Oates v HMRC the UT agreed with the taxpayers’ apportionment allocating a far higher […]
It’s often asserted that one of the easier entrepreneurs’ relief (ER) conditions to meet is that the owner of a qualifying shareholding must be an employee of the company throughout the year preceding the disposal of the shares or cessation of trading. But a shareholder can’t simply claim he was an employee throughout the relevant […]
The First Tier Tribunal (FTT) in Nicholas Trigg v HMRC found in favour of an appellant who held ‘future proofed’ bonds that would convert to euros if the UK adopted the euro. Trigg bought the bonds second-hand at a price he believed to be low. He believed they were qualifying corporate bonds (QCBs) so his […]
Background In March 2014, HMRC issued a consultation document about implementing a capital gains tax charge on non-residents. Historically, non-residents, whether they be individuals, companies or trusts, have not been liable to CGT on gains on residential properties. However, in April 2013 the Annual Tax on Enveloped Dwellings (ATED) was introduced, and with it ATED-related […]
The UK Government has introduced a raft of legislation to address tax evasion and latterly tax avoidance. This has included; The Requirement to Correct legislation which has introduced punitive offshore penalties and extended assessing time limits for Income Tax, Inheritance Tax and Capital Gains Tax to 5 April 2021 and, Enhancing automatic exchanges of information […]
HMRC have announced their view that a scheme that its promoters claim converts earnings of the owner/managers of trading companies, in particular personal service companies (PSCs) from income to chargeable gains which attract only the 10% entrepreneurs’ relief rate of CGT is “highly contrived” and ineffective. The scheme seems to be based on the premise […]
In the First Tier Tribunal (FTT) case of Rice v HMRC a car trader successfully appealed against HMRC’s refusal of entrepreneurs’ relief (ER) on the sale of his business premises. Mr. Rice had traded for years from a showroom and site selling high performance cars. His site was in town and depended on passers-by being […]
HMRC has added guidance to its CIRD manual on the new 6.5% per annum writing down allowance (WDA) in respect of goodwill and related intangibles (referred to collectively as “relevant assets”). To qualify for the relief, relevant assets must either be created on or after 1 April 2019 or be acquired by a company as […]
Capital Gains Tax (‘CGT’) charged on gains realised on most assets will fall by 8% to 20% (10% for basic tax payers) from 6 April 2016. Long-term investors will be able to claim investors’ relief on gains realised after three years on disposals of new shares in unlisted trading companies resulting in many only paying […]
It seems that HMRC is immune to the very behavioural techniques which it has so enthusiastically adopted (such as the use of “nudge letters”) to influence taxpayers’ behaviour in complying with the UK tax legislation. In our blog on nudge letters, we highlighted that HMRC were hoping to make recipients of the letters feel uncomfortable […]
From 6 April 2020, UK taxpayers who dispose of residential property, will be required to report the disposal and pay the relevant Capital Gains Tax (“CGT”) liability within 30 days from completion. How are residential property disposals reported currently? At the moment, UK taxpayers report any disposal on their Self-Assessment tax return and pay any […]
The payment window for capital gains tax (CGT) due on the disposal of residential properties will be reduced dramatically from April 2019, but little is known as to how this will work. The Chancellor has announced that from April 2019, the CGT due on the disposal of residential property must be paid within 30 days […]
The changes to the taxation of dividends from 6 April 2016 will see the differential between the rate of income tax on a distribution (up to 38.1%) and that of capital gains tax (as low as 10%, where entrepreneurs’ relief is available) at its greatest in recent years. In anticipation of this, a number of […]
HMRC have won their appeal against the decision of the First-tier Tribunal that a scheme contrived to turn CGT-taxable non-QCBs into non-taxable QCBs was effective in Hancock v HMRC [2014] UKFTT 695 (TC) Mr. and Mrs. Hancock exchanged shares in their company for non-QCB loan notes (the ‘Sale non-QCBs’) plus an entitlement to further non-QCB loan […]
The unfortunate case of John Kenneth Moore v HMRC [2016] TC04903 in the First Tier Tribunal (FTT) shows how important it is to structure transactions correctly to take account of the poor drafting of the entrepreneurs’ relief (ER) legislation. This is not a new problem: the anomaly has been present since ER was introduced in […]
In Finance Act 2015 measures were introduced to amend the definition of a “trading company” which restricted the availability of Capital Gains Tax Entrepreneurs’ Relief where the claimant did not hold a 5% stake in the trading company in its own right. Those changes look set to be amended so that their impact may not […]
The Office of Tax Simplification (‘OTS’) has published the first stage of its highly anticipated review of Capital Gains Tax (‘CGT’)...
The Finance Act 2015 introduced a number of significant changes to the application of Entrepreneurs’ Relief with effect from 3 December 2014, and in particular, restrictions to its availability on: associated disposals certain disposals of goodwill to companies, and the application of the joint venture provisions The Chartered Institute of Taxation (CIOT) […]
On 6 April 2017 a simplification will be made that, for once, doesn’t flout the Trades Descriptions Act. The new deemed domicile rule will apply for all personal and trust taxation purposes unless something goes seriously wrong in the consultation process. New deemed domicile rule The Budget speech announced that non-domiciled individuals who have been […]
In recent years we have witnessed cross-party political support for employee ownership in the UK. The current Conservative and Liberal Democrat coalition have, for example, introduced a number of very welcome changes, notably in Finance Acts 2013 and 2014, which have enhanced and improved many share plans (Enterprise Management Incentive, Share Incentive Plans and Save […]
We consider the impact of the budget on Investor’s Relief and Capital Gains Tax, Flexible use of losses, Directors’ Loan Accounts and the changes Corporation Tax rates. Investor’s Relief and Capital Gains Tax (CGT) The news of reduced capital gains tax and the introduction of Investor’s Relief will have been received positively. Investor’s Relief in […]
Some have greeted National Audit Office (NAO) report “The effective management of tax reliefs”, issued on 21 November as if it creates a threat to certain tax reliefs, including entrepreneurs’ relief (ER) from capital gains tax (CGT). That is not what the report says: it focuses on how HMRC goes about policing tax reliefs and […]
This was in effect an employment status case but in the context of entrepreneurs’ relief (ER) where the taxpayer needed to establish that he was an employee or office-holder, as opposed to the more usual scenario where the taxpayer claims to be self-employed.
When a business is transferred to a company in exchange for an issue of shares TCGA 1992 s162 provides that gains that would otherwise arise are rolled over by being deducted from the market value of the shares issued. In the recent FTT case of Paul Roelich the taxpayer had an unusual business.
The Government’s consultation about taxing non-residents on their gains derived from UK-residential property goes further than simply extending UK CGT to make non-residents taxable on disposals of UK residential property in the same way as UK residents. The new rules will only apply to gains arising after April 2015. What will be chargeable? The extended […]
The automatic exemption from capital gains tax for the final period of ownership of former principal private residences (PPRs) will be halved to 18 months from 6 April 2014. This change may affect people who still own a property which has previously been their main residence but which they ceased to occupy before 6 October […]
The automatic exemption from capital gains tax for the final period of ownership of former principal private residences will be halved to 18 months from 5 April 2014. Individuals who have already moved out of their former residence may now find that they have an unexpected tax liability. This change may affect people who own […]
Shareholders also owning assets personally qualify for the reduced CGT rate of 10% when disposing of those assets alongside a disposal of their shares as part of a withdrawal from the business. Legislation introduced in Budget 2015 unintentionally removed this treatment in respect of the gain on the asset where the share disposal was to […]
A First Tier Tribunal (FTT) case that would have looked unpromising at first sight has been decided in the taxpayer’s favour (John Lewis v HMRC[2016] UKFTT 0254). John Lewis (John) represented himself in appealing against an HMRC closure notice refusing him any relief in respect of shares in his son’s (Dominic’s) company that he had […]
Non-UK assets can be rebased to market value at 6 April 2017 for those non-UK domiciles who become deemed domiciled in the UK for all taxes from 6 April 2017. As previously announced, non-UK domiciled individuals will be deemed domiciled in the UK for all taxes from 6 April 2017 where they have been UK […]
The Treasury have published the results of the Consultation on Financing Growth in Innovative Firms (it was more commonly called the Patient Capital Review). A two page Action Plan has also been published. The ambition of the document was to unlock more patient capital to enable smaller businesses to scale and become large businesses. The […]
In the case of Development Securities plc (DS) the Upper Tribunal (UT) has held that DS’s Jersey incorporated subsidiaries set up on 10 June 2004 were Jersey resident until 20 July 2004. This decision overturned the First tier Tribunal (FTT) decision, with the result that losses arising from acquisition of group companies at an overvalue […]
The Taxes Acts allow taxpayers to ask for an independent review of an appealable decision by HMRC. The review is carried out by an independent officer within HMRC’s Appeals and Reviews teams. However, recent evidence suggests that many taxpayers remain ignorant of their right to seek such a review, how to go about it or […]
Less than a week to go before the Requirement to Correct (RTC) deadline of 30 September 2018 elapses. RTC requires taxpayers to make a disclosure of any undeclared tax (Income Tax, Capital Gains Tax and Inheritance Tax) arising before the 6 April 2017 from offshore matters or transfers. The 30 September is also a significant […]
Included in the draft finance bill legislation issued on 6 July 2018 on those measures affecting tax administration, were provisions relating to extension of offshore time limits for assessing certain taxes, extension of the security deposit regime, and profit fragmentation. HMRC has requested comments on the draft legislation by 31 August 2018. There were also […]
In a backbench revolt on 1 May 2018 the UK Government was forced to back new legislation which will introduce public ownership registers in Britain’s 14 overseas territories. The concept of public ownership registers was originally proposed by David Cameron and George Osborne back in 2013 and was to apply to non-UK companies following the […]
In its pursuit of stamping out tax avoidance HMRC complained to the Advertising Standards Authority (ASA) about misleading tax claims by the promoter, CDP Tax & Wealth Limited, which trades under the name Fiducia Wealth and Tax (FWT). FWT’s website advertised a tax planning scheme which it said could reduce Stamp Duty Land Tax bills […]
Banking entrepreneurs’ relief when new investment dilutes a shareholding– “immediate” action means wait until next year Shareholder/directors or employees of trading companies can face a tough decision when they have grown their company to the point where it is ready to take the next step but needs new external investment to do so. The problem […]
The announcement of a different higher rate threshold in the Scottish rate of income tax (SRIT) for 2018/19 has caused people to ask what effect this has on the rates of capital gains tax (CGT) payable by Scottish taxpayers. The answer is “none”: the effect of section 4 of the Taxation of Chargeable Gains Act […]
The Government has used the Autumn Budget to again send a clear message of its commitment to tackling tax avoidance and tax evasion especially in relation to offshore structures. The Government will soon be publishing the responses to a consultation document on the proposed requirement for designers of offshore structures that could be misused for tax […]
The documentation supporting the Chancellor’s 2017 Autumn Budget included confirmation that the draft anti-avoidance legislation published in September will come into effect from 6 April 2018, with only a few very minor updates. The purpose of the legislation is to tax payments from an offshore trust that are intended for UK individuals that may otherwise […]
Following the introduction in 2015 of a new capital gains tax regime for non-UK resident individuals who dispose of UK residential property, it is perhaps unsurprising that the Treasury published a consultation document as part of the Autumn Budget proposing new measures to tax UK immoveable property owned by non-UK residents. The new regime would […]
There is more in the Budget about poor productivity in the UK with the OBR revising down productivity growth projections, but seemingly no recognition of the fact that the UK tax framework completely undermines productivity growth in the all-important mid-market corporate sector. Very broadly the top rate of tax on dividends paid from a mid-market […]
The First Tier Tribunal (FTT) has held that deferred shares carrying no dividend rights and other special conditions but entitled to a share of the company’s assets in a winding-up were ordinary shares for entrepreneurs’ relief (ER) purposes in Castledine v HMRC ([2016] UKFTT 145 (TC)). The Castledine case involved a company in which there […]
HMRC have failed on all counts to impose CGT on the disposal of a house bought for use as the taxpayer’s principal private residence (PPR) in Bailey v HMRC ([2017] UKFTT 658 (TC)). The disposal of the house had been omitted from Mr. Bailey’s return and HMRC had also sought penalties for deliberate omission. There […]
One of the less well-known and sometimes overlooked tax exemptions is the conditional exemption (CE) from inheritance tax (IHT) and capital gains tax (CGT) for buildings of outstanding historical or architectural interest. For this exemption to apply you don’t have to put the property into a special vehicle such as a trust: it can still […]
The Court of Appeal has ruled in the Hely-Hutchinson judicial review that Mr. Hely-Hutchinson was not entitled to rely on HMRC’s 2003 ‘Mansworth v Jelley’ guidance for his open returns relating to tax years ended before HMRC withdrew that guidance in 2009. Hely-Hutchinson’s contention was that he had relied on HMRC guidance but was not […]
As most affected people will be aware there is a new relief proposed for anyone who has claimed the remittance basis in the past due to having a non UK domicile of origin and who becomes deemed domiciled in the UK from 6 April 2017. This will give them the opportunity in 2017-18 and 2018-19 […]
We now know that inheritance tax benefits previously associated with the use of corporate structures to hold UK residential property will be removed with effect from 6 April 2017. The new rules treat the interest in the holding entity as subject to UK IHT. Previously it could be exempt in the hands of a non-UK […]
The multi-faceted case of Ritchie and Ritchie v HMRC doesn’t quite cover all the bases in principal private residence (PPR) relief but it does present an interesting and wide-ranging case study as it involved: • land purchased but not immediately developed to include a dwelling; • acquisition of the land in two tranches; • consideration of the permitted […]
It is said that the real sign that a ship is in trouble is not when the rats jump overboard but when the officers abandon it mid-voyage. If that’s the case, HMRC appears to be sinking because a number of its most Senior Members have departed in recent months. That well known magazine Private Eye […]
An innocent error has cost investors in X-Wind Power Limited their Seed EIS (SEIS) relief and forced them to settle for the lesser advantages of EIS. The First Tier Tribunal (FTT) refused X-Wind’s appeal against HMRC’s refusal to let the company treat a compliance certificate application on the wrong form (the EIS form) as made […]
For non-resident corporate landlords gains on all UK property (whether residential or not) will be subject to corporation tax on chargeable gains from 6 April 2019. From 6 April 2020 non-UK corporate landlords of UK property will be within the charge to UK corporation tax on their rental profits, instead of income tax. This will mean […]
Following extensive correspondence with the CIOT, HMRC has indicated a change of view in its approach to the availability of TCGA 1992 section 162 relief where a ‘mixed partnership’ (LLP) ie one including both individuals and a corporate member incorporates the partnership business into the existing corporate member. FA 2014 s 74 and Sch. 17 […]
[This post from May 2016 has been updated in September 2017 to reflect the appeal decision] The Upper Tribunal (UT) has now decided (HMRC v McQuillan [2017] UKUT 344 (TCC)) that s 989 was not ambiguous and a dividend entitlement of £0 could not be regarded as a fixed dividend. Therefore the shares in question in […]
The recent case of Julian Blackwell v HMRC considered whether the cost of getting out of an agreement could be treated as enhancement expenditure for capital gains purposes. Mr Blackwell’s holding of “A” shares in the eponymous publishing company (“BPH”) was sufficient to block a special resolution. Thus his approval was required for any sale […]
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