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View the related Tax Guidance about Money laundering

Employee trusts ― implications of disguised remuneration and where are we now?

Employee trusts ― implications of disguised remuneration and where are we now?Employee benefit trusts (EBTs) are commonly used to support employees’ share schemes and to provide other benefits to employees. For example, EBTs were used to provide additional benefits where the previous reduction of the pension lifetime allowance resulted in employees having significantly less tax efficient pension provision than was intended. Many employers established employer financed retirement benefit schemes although the trusts were in fact an EBT that permitted the provision of retirement benefits. EBTs were also used to provide what was believed to be ‘tax efficient’ bonuses ― contributions to an EBT would be held for an employee’s (or a class of employees’) benefit. The EBT would either invest for the benefit of the employees, or more widely, the EBT would provide a loan to the employee. The employee would have the benefit of the loan and not suffer the tax liability of a payment made outright to the employee.The use of EBTs has been significantly affected by the introduction of the disguised remuneration rules. For further information, please see the Disguised remuneration ― overview guidance note. There are statutory exclusions from those rules to cover many of the share scheme-related activities of EBTs. However, providing loans or opportunities for wealth creation through long-term investment schemes, has declined due to the tax and NIC treatment as a result of the disguised remuneration legislation.Legislation introduced in Finance Act 2014 promoted employee ownership of companies. Employee owners who dispose of

Professional valuations

Professional valuationsThe accurate valuation of the company’s assets and shareholdings may be required for commercial reasons, for example as a measure to evaluate the price offered for the business. It may also be required in order to establish a taxpayer’s tax filing position. For guidance on tax valuations in particular, see the Fiscal share valuations guidance note.Undertaking a valuation exerciseValuation work is specialist, and requires knowledge of methods which are not tax based. As such it is high risk work which is generally tackled later in a tax professional’s career. Most larger firms have ‘badged’ valuation specialists, who are the only people permitted to undertake valuation work. Even in smaller firms, consideration should be given as to whether valuation work is permitted under the scope of the practice’s Professional Indemnity Insurance, and whether under general good practice the person has the relevant knowledge and experience to undertake a valuation exercise.That said, it may be beneficial to have a valuation for tax purposes agreed with HMRC Shares and Assets Valuation (SAV). It gives clarity and certainty, and once HMRC agrees a valuation in a post-transaction valuation check, this is binding on both parties.When undertaking a valuation exercise, well-drafted engagement terms are essential. In particular it needs to be clear that without full information provided by the client, the valuation may be incomplete. An asset’s value is essentially what a purchaser will pay and what a seller will accept and as such the process of estimating a value, possibly in absence

Let property campaign and voluntary disclosures to HMRC ― benefits of making a disclosure and risk management considerations

Let property campaign and voluntary disclosures to HMRC ― benefits of making a disclosure and risk management considerationsIntroductionCampaigns are targeted disclosure opportunities for selected groups of individuals, traders and professionals to make declarations of any undeclared income and / or over-claimed expenses. HMRC charges financial penalties in relation to disclosures that give rise to additional tax.HMRC began introducing campaigns in 2010. Early campaigns included medical professionals, plumbers, internet traders, landlords, employees with a second source of income, credit card sales and individuals who have sold properties that are not their main residence. For a list of the previous campaigns run by HMRC, see the GOV.UK website (archived). Often HMRC offered beneficial penalty terms to encourage uptake. Where individuals that fell within the parameters of the campaign failed to make a disclosure, HMRC would treat the failure as deliberate when determining penalties on any subsequent enquiry or compliance check.Most of these campaigns ended before 2016 and only one campaign remains open: the Let Property Campaign. This is targeted at individuals with tax to pay in relation to residential property income. See ‘Making a disclosure under the Let Property Campaign’ below.Where a taxpayer is not eligible to make a disclosure of arrears via the Let Property Campaign, a voluntary disclosure can be made via the digital disclosure service. Note that different disclosures must be made depending on whether the arrears relate to UK or non-UK matters. See ‘How can a disclosure be made outside of a campaign?’ below.Irrespective of whether the

Digital platform operators ― reporting on platform users

Digital platform operators ― reporting on platform usersThis guidance note sets out the requirements for digital platform operators to collect, verify and report information to HMRC about the users of their platform on websites and mobile apps.From 1 January 2024, certain UK digital platforms are required to collect, verify and report information to HMRC about the sellers of goods and services using their platforms. HMRC will then exchange the information with other participating tax authorities for the jurisdictions where the sellers are tax resident. The platform operator will also provide a copy of the information to the taxpayer to help them comply with their tax obligations. HMRC has also issued guidance to users of online platforms to check if they need to report their income to HMRC, this is under ‘Check if you need to tell HMRC about your income from online platforms’.The first reports are due by 31 January 2025 at the latest and platform operators should, in the interim, draft an internal strategy for complying with their obligations. They may also need to consider whether changes are required to their terms and conditions to include requirements for users of their platforms to provide certain information and to verify its accuracy if requested. The rules are set out in The Platform Operators (Due Diligence and Reporting Requirements) Regulations, SI 2023/817 as allowed under F(No 2)A 2023, s 349(f).The measures implement the following OECD model rules:•the Model Rules for Reporting by Platform Operators with respect to Sellers in

Tax agents and VAT

Tax agents and VATThis guidance note examines the role of a tax agent within the context of VAT, and sets out the steps required in order to become a registered professional tax agent.What is a tax agent?A business may appoint someone else to deal with HMRC on its behalf. This person will be acting as a tax agent. An agent can be:•a professional accountant or tax adviser•a friend or relative•someone from a voluntary organisationAppoint someone to deal with HMRC on your behalfThe agent must meet HMRC’s standard for agents which sets out that agents must act with integrity, professional competence and due care, and behave in a professional manner. This guidance note focuses on the role of a professional tax agent.Appointing a tax agentA tax agent can be appointed using the business’ VAT online services account or via a 64-8 form. Businesses should be aware that when completing the 64-8 it is important to ensure all the relevant taxes are authorised, so that if a business wants a tax agent to deal with VAT, the VAT section must be completed on the 64-8 form. This will allow the agent to:•discuss VAT with HMRC on behalf of its client•sign paper documents on behalf of clients•view, change and submit VAT details•view VAT payments and liabilities•cancel a VAT registration•appeal a late submission or late payment penalty•access VAT registration details, submitted VAT returns, VAT return calculations and amounts owed or paidNote that if

Fact finding ― inheritance tax planning

Fact finding ― inheritance tax planningPreliminary mattersAn essential first step of any estate planning exercise is to get to know the client and find out all the relevant information about his circumstances (past, present and future), as far as these can be determined.The adviser will first need to complete the necessary identification procedures to comply with money laundering regulations. The usual client acceptance (on-boarding) procedures will need to be followed as well.The adviser will then need to take instructions from the client. These should be recorded in writing and form part of the client care agreement so that the scope of the work to be undertaken is clearly understood by both adviser and client. The extent of the work may develop into other areas as the matter progresses and this should also be agreed on both sides.What are the relevant questions to ask the client?Once the client’s objectives are clear, the adviser should carry out a detailed fact-find. The nature of the information required will be determined by the type

Making disclosures of irregularities

Making disclosures of irregularitiesDisclosure of irregularitiesIn the course of a client relationship, advisers may become aware of irregularities in the client’s tax affairs. These could be errors made by the client, the adviser, HMRC or a third party. They may range from innocent errors to fraud.Advisers should always be mindful of the money laundering regulations and the duties imposed upon them by these rules. Any requirements under the money laundering regulations should be the first consideration of an adviser. See the Money laundering (as relates to compliance checks) guidance note for further details.The existence of an irregularity does not override the duty of confidentiality. Advisers must still ensure that they have client authority to disclose to HMRC.The client may have authorised disclosure in routine circumstances, for example by inclusion of a clause in the engagement letter authorising correction of HMRC errors without recourse to the client. This should be checked before any disclosure, no matter how apparently minor, is made.When an irregularity is found, clients should be encouraged to make a timely disclosure and advised of their obligations under the relevant tax legislation. There are, of course, consequences of non-disclosure and benefits of voluntary disclosures, not least being the likely reduction in any penalty subsequently levied. However, whether the client follows your advice is ultimately the client’s decision.For the impact on penalties, see the Penalty

Weekly tax highlights ― 17 June 2024

Weekly tax highlights ― 17 June 2024General election manifestos: key tax pledgesKey tax points from the main parties’ general election manifestos are highlighted below (covering the parties in alphabetical order).ConservativesPrincipal tax rate commitments: no increase in corporation tax or capital gains tax. Commitment to ‘not raise the rate of income tax or VAT’. Pensions tax guarantee (not to introduce any new taxes on pensions). No increase in the ‘rate or level of stamp duty to support homeowners’ (presumably the residential rates of SDLT).On business taxes, full expensing would be expanded to leasing when finances allow. The oil and gas levy would remain in place until 2028–29 ‘unless prices fall back to normal sooner’.For SMEs, a 10-point support plan includes exploring options to smooth the cliff-edge effect of the VAT registration threshold, retaining existing tax incentives including the venture capital schemes and business asset disposal relief. Existing R&D tax reliefs would be maintained and the creative sector reliefs would ‘remain competitive’.On CGT, a new two-year temporary relief for landlords who sell to their existing tenants would be introduced.On personal taxes, there would be a further two percentage point cut in NICs for employees, taking the rate of primary Class 1 contributions to 6% ‘by April 2027’, and the main rate of Class 4 NICs for the self-employed would be abolished ‘by the end of the next Parliament’.For individuals at or above state pension age, the income tax personal allowance would be unfrozen, in effect re-introducing an age-related personal allowance which

PAYE healthcheck ― scope

PAYE healthcheck ― scopeWhat should a PAYE healthcheck cover?A healthcheck can include:•a review of the employer’s PAYE benefit and expenses procedures•interviews with the relevant members of staff and completion of a questionnaire•review of internal documentation and correspondence•examination of a representative sample of the employer’s records•preparation of feedback, identifying any areas of non-compliance ― see the PAYE healthcheck ― outcomes guidance note•practical recommendationsThe employer may have an idea of what they want reviewed and may therefore limit the review to a particular area of risk, such as status of workers, termination payments or provided accommodation.The scope of the review therefore depends on what areas it is designed to cover and the depth required.Scale of healthcheckAlthough the nature of the work being carried out might be the same, the scale of the work and depth of any review will differ depending on the organisation.It is advisable that any work must be agreed in detail between the organisation and any external specialist and business terms or an engagement letter agreed so that there can be no doubt as to the work being undertaken, the depth of the review and the protection the organisation can expect.Scope of the reviewIn determining the scope of the healthcheck it is important to consider:•budgetary constraints•materiality ― ie the importance / significance of an amount, transaction or discrepancy•timescale•size of organization•area risk•disclosure requirementsIt is important therefore to ensure the employer understands any limitations on the scope of

Corporation tax self assessment (CTSA) requirements

Corporation tax self assessment (CTSA) requirementsThe corporation tax self assessment (CTSA) regime applies to companies and deals with the administration and payment of corporation tax. Corporation tax may be due on profits from undertaking business as a limited company, a foreign company with a UK permanent establishment, a club, co-operative or other unincorporated association such as a community group or sports club. The key administrative points are set out below.For details on the payment of corporation tax, see the How to pay corporation tax guidance note.For information on UK tax filing requirements as they apply to overseas companies, see the UK filing requirements guidance note.An index of HMRC forms that may be encountered by companies and their advisers during the compliance process can be found at COM150.Corporation tax returnsA company or association must file a corporation tax return (CT600) if they receive a 'notice to deliver a Company Tax Return’ (CT603) from HMRC. A CT600 should be submitted to HMRC for an accounting period and must include information, accounts statements and reports relevant to the tax liability of the company. A limited company may file accounts with Companies House at the same time as filing its tax return. The CT600 contains a declaration that the return is correct and complete to the best of the knowledge of the person submitting it (an authorised signatory of the company). In practice, the CT600 is accompanied by:•a set of signed financial statements for the accounting period, which includes the signed directors’