What will the budget have in store for SDLT?

Posted on February 2nd, 2012

Stamp Duty Land Tax (SDLT) concessions granted to first time buyers in the 2010 budget come to an end on 24 March this year. The concession, which meant that first time buyers wouldn’t have to pay the 1% SDLT on properties costing between £125,000 and £250,000 has had a fairly limited impact on the housing market. Employment uncertainties coupled with high mortgage deposit requirements have conspired to keep many first time buyers out of the marketplace.

Ironically, just as the SDLT concession is ending, mortgage lenders have started to move back into offering 95% mortgages. Perhaps spurred on by the Government’s FirstBuy scheme which starts in April, within the last week lenders such as the Ipswich, Newcastle and Leeds building societies have all come out with a 95% mortgage offering. The Government scheme gives first time buyers access to 95% mortgages on new build properties bought from certain developers.

Those within the higher house or commercial building price bracket are awaiting the forthcoming budget with interest. The top rate of SDLT is currently 5% for properties in excess of £1million. Last year’s Budget brought us a change in the SDLT calculation applicable to bulk-buy purchases, effectively putting bulk purchasers on the same footing as individual purchasers. This single change highlighted the importance of carefully planning property transactions not only to avoid paying excess SDLT but also to maximise tax advantages on transfer or disposal.

The pre-Budget rumour mill has already started. Earlier in January Exchequer Secretary, David Gauke, told the London Evening Standard that “people buying high-value properties must also pay their fair share. We’re looking at this area to see what more can be done.” This has led to various speculations about what changes, if any, the Government may bring in as part of the 2012 Budget. In the meantime first time buyers looking to take advantage of the current reliefs have until the 24 March to complete their purchase.

As tax mitigation specialists Newshams are able to give advice on tax matters, how tax may affect any private or business transaction and how to put in place an effective mitigation strategy.

Contact us now on 020 7470 8820 and ask to speak to a tax adviser about how we can mitigate your tax costs or e-mail us at enquiries@newshams.com and we’ll get straight back to you.

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02 February 2012

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Post Cessation Trade Relief – a consultation

Posted on January 25th, 2012

On 12 January the Government via HMRC announced that it was to take immediate steps to counter tax avoidance resulting from post cessation trade relief. This relief arises when costs or bad debts are incurred which directly relate to a trade, profession or vocation which has ceased. Such costs or bad debts may be allowed against income or capital gains for tax purposes. Examples given include the cost of collecting trade debts, the cost of insuring against claims for defective work and legal and professional fees.

The announcement on 12 January by The Exchequer Secretary to the Treasury, David Gauke, effectively put a stop to the relief being available purely in respect of specific arrangements the main purpose of which was to obtain post cessation trade relief. It is understood that the action was taken in response to the Government becoming aware of the existence of a tax avoidance scheme which created overseas “expenses” thereby allowing post cessation relief to be claimed within the UK.

Whilst exact details of the scheme are unavailable, the Treasury statement describes the scheme as “contrived and aggressive” and which could have resulted in putting “at risk substantial amounts of tax.” As with any tax legislation change, there is a need to ensure that the proposed legislation does not impact on the more mainstream post cessation trade reliefs which remain in place. The draft legislation is therefore subject to a consultation period which closes on 12 March 2012. This consultation period does not affect the intention of the legislation which became effective on 12 January.

Once again this action highlights the differences between legitimate tax planning methods and tax avoidance and the importance of taking robust tax advice when considering transactions. As tax mitigation specialists Newshams are able to give advice on tax matters, how tax may affect any private or business transaction and how to put in place an effective mitigation strategy.

Contact us now on 020 7470 8820 and ask to speak to a tax adviser about how we can mitigate your tax costs or e-mail us at enquiries@newshams.com and we’ll get straight back to you.

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25 January 2012

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Beware the one year window

Posted on January 19th, 2012

With the deadline for submitting self assessment tax returns rapidly approaching, we have had a timely reminder of the importance of submitting returns on time. Those wanting to submit a paper return had until last October to do so, leaving on line filing as the only option now open. HMRC will issue a £100 fine to all those who have not submitted their self assessment return by the 31 January deadline and this includes those who are expected to file online even if they have no tax to pay.

In particular HMRC are warning those who have not previously filed on line that they will need to pre-register and then wait for an activation code to be posted to them and this can take up to seven working days. The 31 January is also the deadline for paying tax due in respect of the last financial year.

Once the self-assessment return has been filed, HMRC usually have a period of one year to challenge and investigate it. This leads many into the belief that if there has been no challenge within one year, the return cannot be altered. In fact Section 29 of the Taxes Management Act 1970 allows HMRC to challenge tax returns outside the one year window subject to one of two conditions. These are:
• That due to fraud or negligence on the part of the taxpayer or their agents the full facts were not available to HMRC
• That any HMRC officer conducting an investigation could not have reasonably been expected to have be aware of the true position

This power to review tax after the one year period was recently challenged in the Court of Appeal.* The challenge related to an assessment of tax six years after the tax period had closed, once HMRC had discovered that Mr Hankinson had in fact been resident in the UK in the period in question. The court of Appeal upheld the right of HMRC to issue the discovery assessment letter in this case.

Whilst the judgement was no surprise to those dealing with tax on a daily basis it came as a timely reminder to ensure that full facts are included on tax returns. This was backed up by another recent ruling which went against HMRC in that the Court of Appeal ruled that HMRC did have sufficient information at the time to conclude that insufficient tax had been paid and could not therefore rely on Section 29 to make subsequent enquiries.**

As tax mitigation specialists Newshams are able to give advice on tax matters, how tax may affect any private or business transaction and how to put in place an effective mitigation strategy.

Contact us now on 020 7470 8820 and ask to speak to a tax adviser about how we can mitigate your tax costs or e-mail us at enquiries@newshams.com and we’ll get straight back to you.

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19 January 2012

*Derek William Hankinson v HM Revenue and Customs
**The Commissioners for Her Majesty’s Revenue and Customs v Lansdowne Partners

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A fresh look at property

Posted on January 13th, 2012

Mention devolution and thoughts inevitably turn to Scotland and the question of a possible referendum. Against this background and almost slipping under the radar, Wales is quietly increasing its own devolved powers. For example, from 31 December 2011, Wales took full responsibility for its own building regulations.

One of the first steps announced by the Welsh Government is the intention to raise energy performance standards for new homes with the aim of delivering an improvement of 55% on 2006 standards. It will be fascinating to watch the development of Welsh v English building regulations over the next few years and analyse the influences which are brought to bear on developing regulations within the two countries.

One aspect of property policy which the Welsh Government has no control over at present is the rate of Stamp Duty Land Tax (SDLT). Whilst reports on SDLT have been quiet of late, this is likely to change soon due to the impending cessation of SDLT relief for first time buyers. With no transitional relief, transactions with an effective completion date of 25 March or later will be affected. This could lead to a short term flurry of purchases completing in early March.

Across the UK property prices continue to give a mixed picture with Nationwide reporting rises in 2011 for nine out of thirteen regions. Despite this, a report by Lloyds TSB commercial reveals that businesses which deal in property are generally planning to invest in their portfolios in 2012. As with any property transaction, these businesses are well advised to take strong tax advice at the outset to maximise any tax potential. With the top rate of SDLT alone standing at 5%, not to mention the tax implications of corporate structure, those who invest in property without considering the tax implications do so at their cost.

As tax mitigation specialists Newshams are able to give advice on SDLT and other taxes, how tax may affect any private or business transaction and how to put in place an effective mitigation strategy.

Contact us now on 020 7470 8820 and ask to speak to a tax adviser about how we can reduce the tax costs on your corporate transaction or e-mail us at enquiries@newshams.com and we’ll get straight back to you.

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13 January 2012

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Taxing the perks

Posted on January 6th, 2012

According to the Mail on Sunday, HMRC’s high net worth unit has a new target in their sights, the perks enjoyed by some footballers and their families. Whilst the provision of benefits to employees is a practice which has been around since time immemorial, the regulations on taxable and non-taxable benefits can be complex and the HMRC guidance runs into multiple pages.

Of course, there are some simple regulations which may be sufficient for the majority of smaller businesses. For example, providing an annual employee party is not taxable as long as the cost does not exceed £150 per individual and the event is open to all employees. Similarly the provision of tea and coffee for employees counts as a trivial benefit which is not subject to tax or NI, as does the provision of seasonal flu jabs.

The difficulty arises when the benefit steps outside the “trivial” list. Spend more than £150 per head on a Christmas party, add snacks to the tea & coffee or offer other forms of immunisation and the entire cost suddenly becomes liable to tax and NI. Step up to the perks enjoyed by some footballers and items such as holidays, first class travel, medical care, free meals and gifts can add up to a substantial tax and NI bill. Whilst there is no imputation that footballers and clubs have failed to declare all their benefits within their tax returns, according to the Mail on Sunday an HMRC spokesperson said “We wouldn’t be doing this if we didn’t think it was going to bring in a lot of money.”

As with all benefits, it is worth checking with your accountant or tax specialist before embarking on the expenditure to avoid costly mistakes later. This is particularly important when providing ongoing benefits or exceptional and substantial items such as relocation costs. Where the benefits cross countries it is particularly vital that full advice is taken up front.

As tax mitigation specialists Newshams are able to give advice on how the provision of benefits to employees can impact on a tax planning strategy.

Contact us now on 020 7470 8820 and ask to speak to a tax adviser about the potential tax implications of the provision of employee benefits or e-mail us at enquiries@newshams.com and we’ll get straight back to you.

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06 January 2012

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2011, a taxing time

Posted on December 20th, 2011

As we say goodbye to 2011 and start digesting the many hundreds of pages which make up the draft legislation for the 2012 finance bill; it is perhaps worth taking stock of the year just past and reflecting on what this might mean for the future of taxation.

For many, 2011 was the year of the task forces. HMRC launched wave after wave of special reviews tackling everyone from plumbers to piano teachers and from non-VAT payers to small businesses. In every case the aim was to catch those who were evading taxes but in the process many legitimate businesses had to prove themselves.

For others, 2011 highlighted the extent to which the EU has become embroiled in our tax lives. We have reported on a few of the cases which resulted in appeals to the EU, including a ruling on VAT and compound interest and the EU review of the UK-Swiss tax treaty. Those who say that because we are not in the single currency the EU has no say in our finance and tax decisions are sadly mistaken.

With manufactured overseas dividends, anti-avoidance schemes in respect of tax treaties, stamp duty land tax schemes and other tax planning measures coming under the spotlight in 2011, the Government has signalled its intention to close as many tax loopholes as possible. Whilst the reviews have had the effect of eliminating many tax avoidance schemes the good news is that there is still plenty of scope for legitimate tax planning.

Whether 2012 will be known as the year of the Financial Transaction tax or not is still up for debate with the Government resisting EU pressure in this area. However, we can predict that those planning tax measures in 2012 will need to take extra care to ensure that their plans take account of UK, EU and international law as the rules become more complex in an attempt to catch those who attempt to evade rather than to plan.

As tax mitigation specialists Newshams are able to give advice on how legislation can impact on a tax planning strategy.

Contact us now on 020 7470 8820 and ask to speak to a tax adviser about the potential tax implications of private, business, property or international transactions or e-mail us at enquiries@newshams.com and we’ll get straight back to you.

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20 December 2011

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Property tax evasion taskforce

Posted on December 14th, 2011

Earlier this month, HMRC announced the launch of a task force wit the brief of tackling “tax evasion on property transactions in Greater London”. The taskforce is to target cases where there is a deliberate failure to comply with the Option to Tax regime.

The Option to Tax regime basically allows the supply of land or buildings, normally exempt from VAT, to be subject to the VAT regime. This can have many advantages including the ability to recover any VAT incurred in making that supply. However, in common with many taxation regimes the rules, options and exceptions mean that it is important to review options in depth before making an decision. These complexities include how new buildings constructed on previously opted land are treated as well as the challenges of defining the curtilage of a building on opted land.

As with any taxation regime, there is a difference between the scope of tax evasion and effective tax planning. In announcing the new taskforce HMRC stress that the task force is only designed to catch those who have deliberately broken the rules. They say that honest businesses “have absolutely nothing to worry about.”

It does have to be said though that in effective tax planning the devil is in the detail and it can be this very detail which is initially missed in review. Any business therefore which finds itself under investigation by this or any other HMRC task force is well advised to consult with their accountant or tax solicitor at an early stage.

This property tax evasion team is the latest in a series of task forces being launched to cut down on tax evasion. Although it is initially concentrating on the London area there is a full intention to broaden the scope to take in other areas of the country at a later stage.

As tax mitigation specialists Newshams are able to give advice on how Option to tax can impact on a tax planning strategy.

Contact us now on 020 7470 8820 and ask to speak to a tax adviser about the potential tax implications of property transactions or e-mail us at enquiries@newshams.com and we’ll get straight back to you.

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14 December 2011

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EU Threatens Swiss deal

Posted on December 7th, 2011

At the end of August we reported on the historic Swiss-UK tax deal which was designed to put an end to tax evasion via Swiss investments whilst maintaining the cherished secrecy of such accounts. This deal was structured to include a one-off payment from Swiss banks to the UK followed by a regular collection of taxes by the Swiss authorities with those taxes being repatriated to the UK without revealing identities.

In September Germany signed a similar agreement with the Swiss authorities. However, the EU authorities have threatened the validity of these agreements, saying that they contravene European Law. Essentially the EU position is threefold in that:
a) The agreement is not as tough on tax evasion as the EU expects
b) The agreement is not compatible with EU rules on secrecy
c) The agreement is not in line with the existing EU-Swiss agreement and countermands the EU savings directive

The UK and German negotiators face a stark choice. On the one hand continuing with the treaties as they stand will result in the EU issuing a writ against the countries. On the other, should the Swiss not agree to a further relaxation on matters such as secrecy, the treaties could become void, resulting in the loss of £billions in uncollected taxes.

Earlier this week the EU tax commissioner announced that “The European Union is working with Germany and the U.K. to resolve their tax deals with Switzerland”. The Commissioner, Algirdas Semeta, went on to add “I see a strong willingness of both member states to solve the problem.”

Newshams will continue to take a keen interest in the progress of these negotiations and will advise their clients accordingly. Pending a resolution there may be some constraints on the advice given as to the advisability of investing in or withdrawing investments from Switzerland in view of this fresh level of uncertainty.

As tax mitigation specialists Newshams are able to give advice on how overseas investments may affect a tax planning strategy.

Contact us now on 020 7470 8820 and ask to speak to a tax adviser about the potential tax implications of investing overseas or e-mail us at enquiries@newshams.com and we’ll get straight back to you.

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07 December 2011

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The Autumn Statement

Posted on November 30th, 2011

The Chancellor ‘s Autumn Statement was, as expected, a fairly gloomy affair. Whilst observers were pleased to see the Office for Budget Responsibility still predicting growth (even if just 0.7%) next year; the depth to which we are dependant on Europe and the rest of the world was brought home in no uncertain terms.

From a tax and business planning point of view the statement has brought up a few noteworthy items. Some of these we will explore in more depth in the forthcoming weeks but in summary they are:
• Action to stop large firms from using complex asset-backed pension funding arrangements which meant firms being able to claim double tax relief
• The announcement of two further Enterprise Zones in Humber and Lancashire
• Capital allowances of 100% to encourage businesses into the Enterprise Zones in Liverpool. Sheffield, the Tees Valley, Humber and the Black Country as well as the North Eastern enterprise zone
• The introduction of an “above the line” research and development tax credit in 2013 for larger businesses
• Confirmation that the Corporate tax rate will fall to 25% from April
• New rules on taxation of foreign profits to encourage multinationals to come to the UK
• The end of low value consignment relief for companies in the Channel Islands
• Extending the Enterprise Investment scheme to help new start up businesses – so from April 2012 anyone investing up to £100,000 in a qualifying new business will receive tax relief of 50% regardless of their actual tax rate
• For those investing in a qualifying start up business in 2012 for one year only capital gains tax will be waived on that investment

From a general business perspective these more substantial measures are being implemented alongside more general measures such as:
• Changing TUPE, redundancy and health & safety regulations
• Encouraging businesses to take on young employees or apprentices
• Help with grants and loans for business
• Mobilising savings in pension schemes to help to pay for infrastructure projects
• Subsidising train fare increases
• Cancelling the fuel duty increase planned for January and cutting next August’s increase to 3p.
• Extending business rate relief

As tax mitigation specialists Newshams are able to give advice on how these new measures may affect a tax planning strategy.

Contact us now on 020 7470 8820 and ask to speak to a tax adviser about the potential tax implications of the Chancellor’s speech or e-mail us at enquiries@newshams.com and we’ll get straight back to you.

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30 November 2011

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HMRC targets those with homes overseas

Posted on November 23rd, 2011

The days when overseas property and investments were largely invisible to the UK tax authorities are well behind us. International treaties together with the availability of computerised records mean that HMRC are able to access vast amounts of information about our affairs across the globe.

One of HMRC’s latest targets relates to overseas homes. Initially the focus will be on those with overseas property and assets of between £2.5 million and £20 million. Those investigated will be asked to provide evidence of how overseas properties were financed. In addition, HMRC will be looking for proof that income from letting the property has been declared or that no income has been received.

As with any overseas investment, the tax implications in respect of income, allowances and capital growth vary depending on the countries involved. A simple wording change in a document or transfer of funds at the wrong time could lead to an unexpected tax bill. It is therefore vital that appropriate tax advice is taken at the outset to ensure that the tax implications are fully explored.

Just looking at one issue, those letting two overseas properties will normally be able to offset losses from one property against profits from the other. However, those with one property in the UK and one abroad cannot offset losses from one against the other. Structuring the property ownership appropriately is therefore extremely important when looking to mitigate tax.

Even without the complications of a second property abroad the need to receive appropriate advice in respect of overseas investments has been highlighted this week. HMRC have announced the formation of an Offshore Co-ordination Unit (OCU). With the brief of finding new ways to identify and tackle overseas tax evasion, the unit will bring together “a team of highly-skilled offshore analysts, technical tax experts and experienced investigators.” Initially concentrating on the recently signed UK-Swiss tax agreement, this team represents the first instalment in the appointment of 100 new offshore investigators.

As tax mitigation specialists Newshams are able to give advice on how international investments should be treated as part of an overall tax strategy.

Contact us now on 020 7470 8820 and ask to speak to a tax adviser about the potential tax implications of international investments or e-mail us at enquiries@newshams.com and we’ll get straight back to you.

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23 November 2011

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