Showing posts with label hmrc. Show all posts
Showing posts with label hmrc. Show all posts

Tuesday, August 6, 2019

HMRC asking for records of Crypto Exchanges

With Bitcoin looking like it's here to stay, HM Revenue & Customs, is now pressuring crypto-currency exchanges to reveal customers' names and transaction histories, in a bid to claw back unpaid taxes, industry sources said. Letters requesting lists of customers and transaction data have landed on the doorsteps of at least three exchanges doing business in the U.K. – Coinbase, eToro and CEX.IO – in the last week or so, the sources said.

The move is following a pattern set by the U.S. Internal Revenue Service (IRS) and other governments. Last month, the IRS began sending warning letters to over 10,000 Americans who it says participated in virtual currency transactions but did not report them properly.

HMRC is looking to get up to 10 years worth of historical data but that might prove difficult to achieve. Still, even if the administration manages to go back 3 years, it would mean serious tax bills for those who thought trading virtual currencies was a tax free endeavour! HMRC published in 2018 a policy paper explaining the tax treatment of crypto-assets. As described in the paper, for most people, capital gains tax will be due on any gains they might have realised. But doing the calculation of the gain might prove more complex than with other securities. Indeed, transferring bitcoins in or out of an exchange is not a taxable event per se. And conversely, buying something with Bitcoin or receiving income in crypto-currency is a taxable event!

This is why it's crucial to keep records or all transactions and refrain from using crypto-currencies as a payment currency, at least until there is a de minimis exemption like with other currencies. As, even if your gains are below the annual allowance of £12,000 (for 2019/20), you still need to declare the sales if they total more than 4 times the annual allowance, i.e. £48,000. For people who don't already do a tax return, it means registering for Self Assessment. And if you are aware of gains that you have failed to declare in the past, it's a good idea to come forward and call HMRC to avoid steeper penalties.

Thursday, December 20, 2018

Tax treatment of cryptoassets: an update from HMRC

HMRC published this week a new policy paper on the tax treatment of crypto-assets. The previous paper was from 2014 (see our previous article on the subject) and this one goes into further details  but only concerns the individual taxpayer. The government has promised a further update for corporations at some point in the future.

In the paper HMRC defines 3 types of assets: Exchange Tokens (such as Bitcoin and most crypto-currencies and that can be used as payment rails), Utility Tokens that provide the holder with access to specific goods or services (such as those issues during an ICO) and Security Tokens which provide the holder with interest in a business (either debt or equity).

Essentially, individuals will be liable to pay either Capital Gains Tax (CGT) if investment is casual or Income Tax (IT) if they are actively involved in the trading of the cryptoassets. The paper goes into quite a lot of details and specifies many possible scenarios and their tax treatment but here are a few points that are worth noting:

Tuesday, July 24, 2018

Clothing costs tax deductibility

Our clients often ask if purchase, rental or even cleaning of clothes is an allowable expense for their business when those are used in a business context. Unfortunately, the answer is most often no.

To begin with, only protective clothes or uniforms are allowed (be it their direct cost or their cleaning cost). A TV presenter will therefore be unable to claim the cost of his wardrobe used to go on air, even it it has never left the studio. As a matter of fact BBC Breakfast host Sian Williams lost such a case with HMRC. The taxpayer, claimed deductions for a ‘professional hairdo’, professional clothing and laundry in her 2004/05 tax return and HMRC did not allow the claim. The taxpayer appealed but the judge found for HMRC, arguing that the taxpayer’s clothing was ordinary everyday wear and not restricted to work. It was irrelevant whether or not the clothing was worn when away from work; it was enough that it could be.

In cases where the clothes are protective or clearly branded, ie. cannot be used outside of work, their cost is an allowable expense and accordingly, their cleaning as well. However HMRC has put limits in place as to how much those expenses can be. They even put up a detailed page with a maximum cost one can deduct based of the type of occupation. For example, the armed forces can claim £100 per year whilst a firefighter can claim £80. Whilst for other employees £60 per year that can be claimed by employees in general where they can meet the statutory test outlined below.

Friday, June 1, 2018

Another IR35 lawsuit: this time HMRC loses!

A judgment providing another IR35 victory for the taxpayer has just emerged, although the case was heard at the First Tier Tribunal (FTT) over 18 months ago. The case concerns Armitage Technical Design Services Ltd (ATDSL), the personal service company of Mr Armitage. John Hill represented Armitage at the hearing and both he and Armitage are happy for this case to be reported.

The case took around four years to reach the tribunal. Although the taxpayer and his advisers were convinced that the contracts were not within IR35, they didn’t want the case to drag on, so they offered to settle the tax and NIC due for the two in date years with no penalty. But HMRC refused as it wanted a penalty for negligent conduct on the basis that the taxpayer had not discussed IR35 in sufficient detail with his accountant before the P35s were submitted.

Armitage is an electrical control and instrumentation designer who has worked in the nuclear industry for decades. He contracted through ATDSL and two different employment agencies to provide his services to Diamond Light Source Ltd (DLS).

HMRC asserted that the work Armitage performed over the four years 2009/10 to 2013/14 fell within IR35. During this period Armitage completed several separate projects for DLS and also worked for other customers. The judge examined various indications of employment and self-employment set down in case law and highlighted the following points:

Substitution

DLS would accept a reasonably qualified substitute in the place of Armitage, but this was never tested in practice. The tribunal was satisfied that there was not an absolute requirement for Armitage to personally perform the tasks.

Tuesday, August 15, 2017

I make no money: do I still need to file a tax return?

Quite often people assume that, because they make no money, or because they don't make enough to pay tax, they don't need to make a Self Assessment tax return. Unfortunately that is not the case and failing to do a tax return when you have to exposes you to serious penalties. While for most employees, there is no need to file a tax return since tax is taken at source through the PAYE system, they are many instances where you will have to do a tax return, even if failing to do so does not impact the HMRC coffers.

Obviously, one can understand that if you have additional income that generates additional tax, you will in most instances be required to file a tax return. There are instances however where, even if there is no additional tax due, you will have to file a tax return anyhow. Here are a few examples:
  1. You are a director of a Limited Company. Even if the company has not distributed any dividends, you are required to file a tax return every year. 

Thursday, August 10, 2017

HMRC to stop sending SA302 for mortgage applications

Today accountants as well as their clients still have to call HMRC for a paper copy of the SA302 form which is the tax calculation for a given tax year.

It's because lenders will not accept the self-serve copy printed from the HMRC online account or the commercial software used to file the self assessment return, or their commercial software does not print an acceptable version.

HMRC has been in discussion for a while with UK Finance (formerly the Council of Mortgage Lenders) and their members to understand lenders’ requirements and make the necessary changes so that they will accept self-served copies of the tax calculation from the HMRC online account or the commercial software used to file the self assessment return.

Wednesday, May 18, 2016

New HMRC SA302 procedures slow to take effect

HMRC has decided to tighten security and is now refusing to fax copies of SA302 (tax calculation summary) to mortgage providers when self employed people apply for a mortgage when acquiring a property. As a potential solution, HMRC has persuaded the Council of Mortgage lenders to propose acceptance of alternative documents printed from accountants’ software, meaning that for self employed people with an accountant, the change should be seamless.

In other words, most mortgage providers should now accept instead of the HMRC SA302, the tax year overview confirming the tax due on the return submitted. It is also possible for the mortgage providers to cross check the tax due as per the accountant's calculation against the tax paid as displayed on the HMRC web site.

The institutions that have agreed on the new process at the time of the article publishing date are the following:

Wednesday, November 5, 2014

UKTI Export Week starting next Monday

UK Trade & Investment will be holding its 6th Export Week during the week of 10-14 November. Across the week there will be a varied series of events all over the UK, aimed at businesses to either start their export journey or increase their international business. Previous Export Weeks have seen over 17,000 companies in the UK attend exporting focussed events. This week we will again have over 70 events across the UK; there will be at least one event per day in every part of the UK.

The flagship road show, ExploreExport, will be touring the entire country at 11 venues across England, Scotland, Wales and Northern Ireland. Over 120 UKTI Trade Officers worldwide will be available for 1-2-1 meetings on their dedicated markets to help companies “explore” the possibilities of exporting to their countries. The aim is to bring the world to all parts of the UK.

Tuesday, May 20, 2014

When doctors need to charge VAT

Medical services are VAT exempt in the UK. Which means that a locum doctor providing medical services either as a sole trader or a limited company typically will not charge VAT. However, if an agency is involved, i.e. the doctor provides services to the agency which in turns bills the hospital, then both services (between the doctor and the agency and between the agency and the hospital) will attract standard rated VAT.

Friday, December 6, 2013

Taxing Bitcoins

Because of Bitcoin skyrocket increase this past year from $17 to over $1,200, you cannot escape hearing about those cryptocurrencies and how they will change world commerce for ever. While the Federal Reserve gave tacit approval, stating “virtual currencies like bitcoin have legitimate uses and should not be banned,” and while it's been acknowledged by the Chinese authorities as a valid currency (even though Banks have yet to gain authorisation to use it) there is still a lack of guidance from the tax authorities as to how those new currencies should be treated. There are basically 2 possibilities on how Bitcoins should be treated for tax purposes: either as an intangible asset or as a foreign currency. If a Bitcoin is considered an asset, profits will be taxed as capital gains, i.e at either 18% or 28% depending on your tax band. However if it's considered a foreign currency, then profits will be taxed as income, and therefore as high as 45%.

The problem with saying that it’s a currency is that it is not issued by a government, and traditionally currencies are legal tender issued by governments. In California Bankers Assn v. Shultz, the Supreme Court stated (in a non-tax context): “‘Currency’ is defined in the Secretary’s regulations as the coin and currency of the United States or of any other country, which circulate in and are customarily used and accepted as money in the country in which issued.”

Thursday, March 21, 2013

HMRC finds it hard to police IR35 Compliance

Despite a six-fold increase in IR35 investigations during the first half of this tax year, HM Revenue and Customs has failed to turn up any compliance failures by contractors, according to data obtained by tax and accounting group Bloomsbury Professional. HMRC ramped up its investigation into "disguised employment" after it was alleged that a number of senior public sector figures had illegitimately received income through personal services companies to avoid liability to personal income taxes and national insurance contributions.

During the first six months of the tax year, 193 new investigations were launched but these have yet to yield a single penny for the tax man. This is despite a massive hike in enforcement activity, up from 59 investigations for the full tax year 2011/12. Martin Casimir, Managing Director at Bloomsbury Professional, commented: “HMRC has been stung into action by a handful of very high profile cases where individuals and employers may not be IR35 compliant. Ordinary contractors and freelancers are now dealing with the fallout.”

Tuesday, March 12, 2013

Closing down a solvent business

When you close down your company, and if there are significant reserves left, you would have been able in the past to to apply for the Extra-Statutory Concession (ESC) C16 with the HMRC and get the distribution taxed as capital instead of income. This would have carried significant tax advantages if you are a higher rate taxpayer since dividends are taxed at 25% or more in that case whereas capital treatment would have potentially allowed access to CGT Entrepreneurs Relief with a tax rate of just 10%.

Saturday, September 29, 2012

Automatic pension enrollment starts

With life expectancy increasing, millions of people are not saving enough to have the income they are likely to need in retirement. Pension saving has fallen across all age groups, with less than one in three adults contributing to a pension, although its steepest fall is among those aged 22-29, falling from 43% in 1997 to 24% today.

To force people to start saving now, the Government has come up with a scheme that automatically enrolls those working in both the private and public sectors into a workplace pension. The scheme starts next week and you'll be automatically enrolled into a workplace pension if you:
  • Are not already in a pension at work.
  • Are aged 22 or over.
  • Are under the state pension age, which is currently 65 for men and 61 and two months for women, although this is gradually rising to 65 by 2018.
  • Earn more than £8,105 a year.

Wednesday, May 30, 2012

Business owner? Don't forget tax credits!

Tax credits are something that most accountants don't like to deal with. They are often considered as social benefits and therefore something that is outside of the scope of their offering. It is difficult however to advise properly on the tax affairs of an individual or a company without taking child and working tax credits into account. Indeed, many decisions you can take as a business owner will have consequences on eventual tax credits and your bottom line.

It is often assumed that tax credits are only available to the unemployed or the very low earners. What people forget is that there are some instances where your earnings can be very low for a limited period (say you start a new business or you incur exceptional capital expenses). In that case there is no reason not to claim this extra government money. Especially since, because tax credits are based on income and not capital, it is possible to be in a situation where you have significant capital gains, inheritance income or just savings and where you are still entitled to those subsidies.

Sunday, May 13, 2012

HMRC publishes new IR35 test

HMRC has begun the process of overhauling its operation of the IR35 regime for personal services companies with new guidance that sets out some basic risk factors that will affect a contractor’s chances of being investigated. This overhaul will mean an increase in the number of IR35 investigations, the tax department confirmed.

The new guidance includes 12 business entity tests, each one receiving a different score, and they are designed to build up a picture of how a contractor’s business works and how they provide their services. These tests and their individual scores are:
  1. Business premises test - Does the business own or rent business premises separately from the contractor’s home or end client’s premises? (10 points if yes)
  2. PII test - Does the contractor need professional indemnity insurance? (2 points if yes)
  3. Efficiency test - Has the business had the opportunity in the past two years to increase its revenue by working more efficiently? (10 points if yes)
  4. Assistance test - Does the business employ any workers who bring in at least 25% of the yearly turnover? (35 points if yes)

Friday, May 11, 2012

What is the P35? Do I need to do one?

When you operate a payroll (you have employees), you are required to file an annual return every year. It's done by filing a Form called P35 (even though it's now done electronically). The deadline is May 19th and if you fail to do it in time you will you incur steep penalties. The penalty is £100 per month late and per 50 employees. Moreover, HMRC tends to be very slow in issuing those penalty letters which means that when you receive the first letter, it will most probably be months later and the penalty will have already accrued in the hundreds of pounds.

Sunday, February 12, 2012

Missed the tax deadline?

If you are yet to file your self assessment tax return help is still available! But don’t delay as the new HM Revenue & Customs (HMRC) penalty regime will mean that the penalties increase the longer you postpone filing your return. An estimated 1 million taxpayers are expected to receive an automatic late filing penalty of £100 so if you have missed the deadline you are by no means alone. What's different this year however is the new penalty regime.

If you've missed the deadline you'll have to pay a penalty of £100. You should send your tax return online as soon as you can to avoid further penalties. Don't send a paper tax return as the penalties will be even higher. The longer you delay, the more you'll have to pay. When your tax return is three months late, you'll have to pay a penalty for each additional day it is late. When it's six months late, you'll have to pay a further penalty and another final penalty when it's 12 months late. Together these can add up to a penalty of £1,600 or more.

Tuesday, November 15, 2011

Dividends: dos and don'ts

Distributable profits

Dividends must be paid out of distributable profits and directors must prepare relevant accounts to confirm the position. If it later transpires there are not enough distributable profits and relevant accounts were not prepared then the dividend is illegal and repayable, and should be disclosed as such.

Sunday, October 9, 2011

EIS Changes approved by the EU

The European Commission has approved for State aid purposes the increase in the Enterprise Investment Scheme (EIS) income tax relief rate to 30 per cent in respect of investments made in EIS qualifying companies on or after 6 April 2011. It has also approved the individual investment limit from £500,000 to £1 million in respect of investments made on or after 6 April 2012. Both changes were announced in Budget 2011 and the rate increase was included in Finance Act 2011. The intention is to include the increase in the individual investment limit in Finance Bill 2012.

Sunday, October 2, 2011

UK expats at risk of being caught by residency test changes


As the British government seeks ways of supplementing its tax take, the British residency test will be changing from April 2012. If you are a British citizen who’s working in Dubai, Hong Kong or Singapore because you want to pay less tax, this could be a big issue. The new rules are very complex but in a nutshell, you could put yourself at risk if you visit the UK for more than 10 days per year. Coming back to the UK for more than that makes you fall into the connections tests and at risk of being classified as UK resident.

These connections tests look at various things, including whether you still have a house in the UK, whether your family are based in the UK and whether you have financial ties to the UK. Although children at boarding school are not counted as being ‘family in the UK’ during term time, they will count as ‘family in the UK’ if they remain in the country staying with grandparents or friends during school holidays. Equally, when the new rules come into effect in April, there will be a look back over three years at people’s previous visits and connections.