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Spring Statement 2019: Maintaining the tax system

Making Tax Digital (MTD)
Mandatory digital record keeping for VAT for businesses over the VAT threshold (with turnover over £85,000) comes into force from 1 April 2019. This is an important first step in this modernisation of the tax system to which the government remains committed. In the WMS, the Chancellor confirmed the government’s ‘light touch approach to penalties in the first year of implementation’. Where businesses are doing their best to comply, no filing or record keeping penalties will be issued. The focus will be on supporting businesses…

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Spring Statement 2019: Tax avoidance, evasion & non-compliance

The government has previously stated its ongoing commitment to keeping the tax administration framework under review to ensure that it ‘continues to strike the right balance between robustly challenging tax avoidance, evasion and other forms of deliberate non-compliance, and treating all taxpayers fairly’. Finance Act 2019 subsequently contained provisions introducing statutory reporting requirements by the government on certain anti-avoidance measures (FA 2019, s 92 and 93).

HM Treasury and HMRC have published a joint policy paper setting out the government’s approach and achievements in tackling tax avoidance, evasion and…

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Spring Statement 2019: Summary

Chancellor Philip Hammond has delivered his 2019 Spring Statement to the House of Commons. A supporting Written Ministerial Statement (WMS) provides more detail on some of the announcements in the Spring Statement, and sets out details of other forthcoming government policies.

Mr Hammond opened his Statement by acknowledging that the most urgent task at present is to ‘lift the uncertainty’, but he also added a positive note, stating that the ‘economy itself is remarkably robust’.

The Chancellor indicated that if the UK does leave the EU with a deal,…

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Employer responsibilities for tips

The tax and NIC treatment of tips will depend on how they are paid to the recipient.

Cash tips handed to an employee, or say, left on the table at a restaurant and retained by the employee, are not subject to tax and NICs under PAYE, so there is not responsibility for the employer to keep track of them and deduct tax or NICs. The employee is however, obliged to declare the income to HMRC and pay the tax and NICs due.

By contrast, if the employer passes tips to…

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Voluntary disclosures

HMRC have updated their online guidance on disclosing unpaid tax to include information on authorising an agent to deal with a disclosure made through the Digital Disclosure Service (DDS).

The DDS gives individuals and companies a chance to bring their affairs up to date in a simple, straightforward way. Anyone who owes tax on your income you must tell us about any unpaid tax now. Anyone who owes tax on income or gains must tell HMRC about any unpaid tax. They will then have 90 days to calculate and…

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Checking directors’ expenses

As 31 March approaches, many companies will be getting ready to tie up tax matters for their financial year-end. Now is a time to ensure that everything is in order regarding directors’ expenses and review loan account record-keeping procedures. This is particularly so as HMRC report that they commonly find errors in relation to directors’ loan accounts when making routine reviews of company tax returns.

The statutory rules for computing taxable profits exclude companies from deducting expenditure unless it is incurred ‘wholly and exclusively’ for the purposes…

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HMRC reaffirm income tax charge on winding up

HMRC have published Spotlight 47, which provides guidance on tax avoidance schemes that try to avoid the income tax charge on distributions when a company is being wound up.

In recent years, HMRC have endeavoured to prevent schemes being used by shareholders to take advantage of more favourable capital gains tax rates when extracting value from their company.

Until 6 April 2016, under arrangements known as ‘phoenixism’, an individual shareholder who intended to carry on the company’s activities could arrange matters enabling them to wind up the company and receive…

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FTT examines juicy VAT case

The First Tier Tribunal (FTT) were recently called upon to examine whether fruit and vegetable juices sold as meal replacements were beverages and therefore standard-rated for VAT.

The case (The Core (Swindon) Ltd [2019] TC 06874) concerned a juice bar and health café which supplied juice cleanse programmes (JCPs) consisting of fresh drinkable products made from juicing raw fruits and vegetables. Customers would participate in a programme over multiple days, for example a 5-day programme might be taken where meals were replaced by JCP juices and smoothies for five…

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The ‘section 455 charge’

For accounting purposes, cash transactions between a director and a personal or family company are recorded through the director’s loan account. At the end of an accounting period, if the director owes the company money (i.e. the account is considered overdrawn), and the company is close (broadly, one that is controlled by five or fewer shareholders (participators), there will be tax consequences to consider.

A tax charge will arise under the Corporation Tax Act 2009, s 455 where a director’s loan account is overdrawn at the end of…

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Maximising the benefit of Gift Aid donations

The government’s Gift Aid scheme aims to maximise the value of donations made to charities whilst allowing most UK taxpayers to benefit from tax relief on the gift. Since the scheme allows payments to be related to a previous year, the end of the tax year is a good time to give the matter a review.

The Gift Aid scheme allows individuals to claim tax relief on making one-off or regular gifts to charity and there are no lower or upper limits on donations. When a payment is made,…

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