Scottish taxpayers don’t pay higher CGT
Scottish taxpayers don’t pay higher CGT
Fri 09 Mar 2018
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 1992 is that a Scottish taxpayer’s CGT rates are to be calculated by reference to the rates of income tax she would be subject to if she were not a Scottish taxpayer.
If the Scottish income tax rate bands applied Scottish higher rate and additional rate taxpayers would pay more CGT than their English, Welsh and Northern Irish counterparts.
New 30 days Capital Gains Tax payment deadline for UK taxpayers disposing of residential property.
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 […]
Scottish taxpayer status – HMRC publish draft guidance
HMRC have published draft guidance on how to decide if an individual is a “Scottish taxpayer”. When the Scottish rate of income tax (SRIT) comes into effect on 6 April 2016 it will apply to non-savings, non-dividend income only. Therefore it will apply to: · employment earnings; · self-employed and professional profits; · property income; […]
Succession planning – putting right a 2015 wrong
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 […]
Investors to pay less tax on gains as the Chancellor announces changes to CGT rates and introduces investor’s relief
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 […]
Entrepreneurs’ relief anomaly claims another victim in J K Moore v HMRC
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 […]
QCB conversion scheme fails for the Hancocks at the Upper Tribunal (UT)
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 […]
Entrepreneurs’ Relief: welcome but overdue relaxation of restrictions is late but still welcome!
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 […]
Cash is King for Capital Gains Tax on disposals of residential property
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 […]
What does the Autumn Statement hold for Entrepreneurs’ Relief?
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 […]
Entrepreneurs’ Relief FA 2015 changes – possible relaxation ahead?
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) […]
New domicile rules from 2017
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 […]
Anti-avoidance Clampdown on Entrepreneurs’ Relief – Joint Ventures and Partnerships : measure affects disposals on and after 18 March 2015
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 […]
Light at the end of the tunnel for non-UK domiciles?
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 […]
Restricting Entrepreneurs’ Relief on associated disposals : measure affects disposals on and after 18 March 2015
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 […]
Did someone say ‘election’: Income tax burden falls for both low and middle income earners
The Chancellor announced in the Autumn Statement both increases to the personal allowance and the higher rate tax threshold from April 2015. The personal allowance will rise by £100 more than previously announced to £10,600. The higher rate tax threshold will increase by inflation so that 40% tax will only be payable once income exceeds […]
Autumn statement document sets cat among pigeons on listed companies’ returns of capital
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 […]
Devolved taxes – Smith Commission makes recommendations for Scotland
The report by the Smith Commission proposes that the Scottish Parliament should have the power to set income tax rates and bands for Scottish taxpayers. As regards other taxes, it said that Air Passenger Duty should be fully devolved and half of Scottish VAT revenues should be assigned to the Scottish Parliament (the report does […]
CGT – allocation of sale price on disposal of house and land with development value
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 […]
CGT: Clause for euro conversion did not trigger non-QCB status
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 […]
CGT and Non-Residents Update
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 […]
FTT success shows wide scope of CGT business incorporation relief
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.
Stop and restart gets car dealer entrepreneurs’ relief
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 […]
Non-residents’ CGT on residences could mean the end of PPR elections
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 […]
Changes in Budget 2016 affecting SMEs and Business Owners
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 […]
ER- deferred shares are ordinary shares in Castledine v HMRC but not necessarily other cases
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 ignores its own behaviour on “Nudge Letters”
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 […]
CGT Private Residence Relief: intention, intention, intention says First-tier Tribunal
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 […]
Corporate residence in a CGT avoidance arrangement
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 […]
Corporation tax – goodwill and customer-related intangibles
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 […]
Income tax savings and removal of larger companies from employers’ allowance
Income Tax Changes The Chancellor announced that he would meet the 2017 Election manifesto pledge by increasing the personal allowance and higher rate threshold to £12,500 and £50,000 respectively. This comes into effect from 6 April 2019, a year earlier than previously expected. This should see a typical basic rate taxpayer pay £130 less tax […]
Last Chance – Do you need to notify HMRC of a Requirement to Correct disclosure before 30 September 2018?
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 […]
Finance Bill 2018-19 – tax administration points
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 […]
Yet another nail in the coffin for offshore arrangements?
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 […]
Entrepreneurs’ relief change promises to remove a penalty of success
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 […]
If only “you had one job!”: no employment means no entrepreneurs’ relief
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 […]
Carried interest exclusion from CGT – transitional rules won’t apply after 22 November 2017
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 […]
Scottish income tax rate proposals
As it prepares to set its 2018/19 Budget, the Scottish Government has announced the issue of a paper discussing proposals for the direction of income tax in Scotland. To stimulate debate. It suggests that any income tax change needs to be assessed against four policy aims. These are: Mitigating UK Government spending cuts and maintain […]
Zero-dividend shares ARE ordinary shares for ER says Upper Tribunal in McQuillan
[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 […]
Heritage property IHT conditional exemption for buildings of outstanding interest- opening times
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 […]
Mansworth v Jelley still wobbling after all these years- HMRC win in CA judicial review: R (Hely-Hutchinson) v HMRC
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 […]
De-enveloping properties held in corporate wrappers
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 […]
Ritchie case may “shed” new light on CGT residence relief
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 […]
At last, HMRC takes a reasonable view of a reasonable excuse
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, […]
HMRC warns that ER-based avoidance scheme “doesn’t work” and will be challenged
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 […]
CGT order of reliefs – EIS applies before Taper Relief in Stolkin CA case
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 […]
SEIS your opportunity: the Tribunal rules that SEIS applications must be right first time
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 […]
Share loss relief claim succeeds in Lewis
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 […]
TCGA s 162 – mixed partnerships and CGT incorporation relief
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 […]
Will you now be liable to tax on selling your old home?
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 […]
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