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Discovery assessments: time limits, the staleness concept, and Finance Bill changes

The discovery assessment provisions in s. 29 of TMA 1970 permits HMRC to make an assessment for underpaid tax in certain situations. The time limit for raising the assessment depends on the behaviour that led to the underpayment. The standard time limit is four years from the end of the relevant tax year, but this increases to six years in cases of carelessness. Where there has been deliberate behaviour leading to an underassessment, the time limit is 20 years.

A discovery assessment is a valuable tool in HMRC’s arsenal,…

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Partial exemption and B2B services from overseas

When a supply of services is from one business to another, i.e. a B2B supply, the general rule is that supply is treated as taking place wherever the customer is located, rather than the supplier. As an example, if a website design business is located in Belgium and they provide services to a VAT-registered business in the UK, it does not charge Belgian VAT as the supply takes place in the UK. This has always been the case, so the situation has not changed following Brexit, but some…

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Latest news round-up

The 2021 Autumn Budget was relatively quiet in terms of tax-related announcements, and the Finance Bill 2021/22 published on 4 November was similarly thin on new changes, consisting to some extent of measures that had already been announced, e.g. the abolition of basis periods.

Part 2 of the Bill introduces the draft legislation for the new Residential Property Developer Tax (RPDT). Businesses falling within the remit of the new tax will pay 4% on relevant profits, subject to an allowance of £25 million (or a pro-rated amount where…

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Buying a commercial building

When buying a commercial building, the price may include VAT if the vendor has opted to tax the property. If the buyer is VAT registered and will be using the building wholly for the purposes of the trade it will be able to reclaim this input tax. However, this can mean that a large amount of money needs to be lodged with HMRC temporarily, which can affect working capital in the short term. In addition, the claim for input tax could be restricted if the business is partially…

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Freeports – the tax breaks

Eight new Freeports were announced earlier this year, with each offering operators within the sites a number of tax incentives. The sites are:

– East Midlands Airport
– Felixstowe & Harwich
– Humber Region
– Liverpool City Region
– Plymouth & South Devon
– Solent
– Teesside
– Thames

A Freeport requires a primary customs site located near an air, sea or rail port. A number of special customs rules apply within the zones, including duty deferral, inversion,…

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Preserving FHL status for 2020/21

A qualifying furnished holiday let (FHL) enjoys a number of favourable tax breaks – including business asset disposal relief, and the ability to claim capital allowances and rollover relief – when compared with non-qualifying properties.

FHL status is subject to occupancy conditions. The main two rules are that the property must be available for occupation as furnished holiday accommodation letting for at least 210 days in the year, and that it must actually be let commercially as furnished holiday accommodation to the public for at least 105…

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Latest news round-up

Health and Social Care Levy

Rumours of an imminent rise in NI rates started to circulate at the beginning of September, and were confirmed on 7 September with the publication of the government policy paper Build Back Better: Our Plan for Health and Social Care. The increase will initially take the form of a 1.25% increase on certain classes of National Insurance from April 2022, before becoming a separate ring-fenced charge from April 2023. The affected classes are:

– Primary and secondary Class 1 Read More

Inheritance tax – why giving away money can mean more for the beneficiaries

In most cases, it doesn’t make sense to simply give away money to save tax during a person’s lifetime. For example, a higher rate taxpayer can claim tax relief to offset their income tax bill on qualifying donations made via the gift aid scheme. However, the cost of the donation will always exceed the relief, so it doesn’t make sense to make additional donations purely from a tax perspective, though they can be useful for helping to avoid things like the high-income child benefit charge.

However, when it comes…

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HMRC enquiries: is it in time?

The self-assessment system includes the right for HMRC to make enquiries to ensure the correct amount of tax is collected. However, these rights and the underlying time limits etc. are often a source of confusion. They have changed since self-assessment was introduced in the 1990s, which some taxpayers are completely unaware of.

Previously, HMRC had one year from the filing deadline to open an enquiry if the return was filed on time. It didn’t matter if the return was filed early. The problem with this was that it provided…

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Loss relief for companies ceasing a trade

Companies are able to relieve losses for tax purposes, subject to certain restrictions. These restrictions have been relaxed slightly in recent years, e.g. allowing companies to claim trading losses against other profits for future trading years.

However, COVID19 has seen many businesses, including companies, closing down. It is also anticipated that further insolvencies will occur once government assistance, such as furlough, ends, and companies are required to start making repayments on the various loan programmes introduced during the pandemic. As a result, terminal loss relief may prove more important…

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