Mercer & Hole’s Business blog -

The possibility of tax savings on holiday lettings has fallen following a recent tax case (HMRC v Pawson [2013] UKUT 050 (TCC)). The tribunal determined that inheritance tax business property relief should not be available in relation to the estate’s furnished holiday let property. The decision held that only at the far end of the spectrum of possible letting businesses will the business also involve the provision of services so extensive as to override the investment element.  In any standard case, even an actively managed property letting business, would be considered as an ‘investment’ business; and furnished...

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Following its two year pilot, HMRC is moving the alternative dispute resolution (ADR) for small and medium enterprises (SMEs) and individuals into standard practice from April 2013. HMRC believes that ADR is a fair and even-handed way of resolving tax disputes that saves time and helps reduce costs. More details on ADR can be found on HMRC’s website. ...

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In the latest development of HMRC’s dispute with Rangers over the club’s use of Employee Benefit Trusts (EBTs), HMRC has lodged an appeal against the First Tier Tax Tribunal decision.  You may recall that HMRC had claimed PAYE on the sums, over £40 million, paid to players and staff in the form of tax-free loans.  At the last hearing, a majority of the judges concluded that the EBT payments were loans, not earnings, and therefore not liable for income tax. HMRC has now been granted leave to appeal against this decision and the case...

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Looking at a recent query, I thought a quick reminder on this may be useful.  The problem we had was that a company had bought shares in another company with part of the price being in the form of an issue of standard loan notes (in tax tech speak - qualifying corporate bonds (QCBs)).  HMRC clearance was obtained such that the gain was deferred until the QCBs were redeemed or disposed of, when the capital gains tax would be due.  The business has not done well and is being closed down. None of the QCBs have been...

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The draft Finance Bill includes several areas where the government is seeking to bring legislation in line with EU law.  The key measures are on: Group relief – Currently, a non-resident company can surrender losses realised by its UK permanent establishment to other UK resident group members only if there is no possibility of relief for the loss elsewhere.  From 1 April 2013, such losses will only be denied to the extent that they are actually used in another territory. Unfortunately, when it comes to the losses of overseas subsidiaries, there has been no change of stance. Exit charges ...

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The Office of Tax Simplification (OTS) has undertaken a review of the tax position on unapproved employee share schemes.  Its conclusion is that the legislation needs a  thorough overhaul – I whole heartedly agree. The law on share transfers, incentives, etc. that do not fall within the approved schemes is complicated and puts barriers in the way of share ownership. The OTS made a number of recommendations, including: • Aligning the tax regime on shares with the taxation of general earnings; the default position would be that no tax charge arises until the security can be sold for...

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Businesses that have failed to submit VAT returns will be targeted by HMRC this month with warnings that their overall tax affairs will be closely scrutinised. The campaign is aimed at businesses that have one or more VAT returns outstanding, and have already been told to submit their returns but have failed to do so.  These businesses are being given an opportunity to get up to date and pay the tax they owe by 28 February.  After that date HMRC will take a much closer look at their tax affairs.  By coming forward voluntarily they may receive better...

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I have been following with interest the twists and turns in the attack on tax avoidance (which is starting to feel like a personal attack on tax professionals) and have also been following the email traffic / chat comments.  There seems to be a growing view, particularly from the USA, that the UK is seeking to increase its share of the tax take at the expense of the rest of the world.  The view seems to be that there is, broadly, a finite tax take and if the UK increases its share the take elsewhere will go down.  ...

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There seems to some concern over the fact that accountants are using perfectly legitimate tax breaks (e.g. the patent box) as an aid for tax planning.  According to some, this is apparently particularly offensive when people who have worked with the Treasury on developing legislation then advise companies on how to benefit from the new law.  The committee feel that the Big 4 in particular have an unfair advantage over smaller firms.  Is this a real issue? To be honest not really in my experience.  The draft legislation is available and the information generally available is...

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The draft finance bill has relaxed the requirements for entrepreneurs’ relief on shares acquired under EMI options.  Such shareholders do not have to own at least 5% of the shares and can count the option period toward the required years’ ownership. There are some details to consider but generally this should make EMI options even more attractive. ...

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