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The CGT relief available when a loan to a trader becomes irrecoverable (TCGA 1992, s 253) only applies if the borrower is located in the UK. This was ruled as being an unjust restriction to the free movement of capital guaranteed by article 63 of TFEU.

In January 2019 the European Commission issued a reasoned opinion asking the UK to change the law on this point. The Finance Bill 2020 will amend the existing law to allow loans provided on and after 24 January 2019 to qualify for the loans to trader CGT relief wherever the borrower is located. Loans made before 24 January 2019 will only qualify for this relief if the borrower is in the UK.

Share loss relief can transform a capital loss into an income tax loss (ITA 2007, s 131). The loss must arise when shares, which were subscribed for in an unquoted company, become worthless. If the shares were not issued under the EIS or SEIS, the company must meet additional conditions such as trading wholly or mainly in the UK. That geographical restriction was ruled as being an unjust restriction to the free movement of capital guaranteed by article 63 of TFEU.

The European Commission asked the UK to change the law on this point. For share disposals occurring on and after 24 January 2019, share loss relief can apply irrespective of where the business of the company is carried on.

Written by the Tax Advice Network

Welcome to our monthly newswire. We hope you enjoy reading this newsletter and find it useful.

Hybrid cloud technology

Many businesses are starting to realise that having all their data in the cloud may not be the best option.

Due to cyber-security concerns, many firms are migrating applications and data away from the public cloud in favour of a mix of on-premises and private cloud environments.

Hybrid cloud technology is therefore becoming a more popular solution. A hybrid cloud is a combination of on-premises and off-premises (or cloud-based) IT infrastructure platforms. The hybrid solution allows a business to run applications on multiple platforms. This increases efficiency and allows more flexibility as some software may only be available as a cloud based product.

In addition to allowing firms to choose the right platform for the right systems, a hybrid cloud platform can also create cost savings as well as improved IT performance. These days employees or even your customers may require a cloud based IT solution, however you may want to keep your company financials and client data on-premises, rather than in the cloud, in order to reduce cyber-risks.

Cloud based solutions also enable your team to be more productive.

It can be hard to access systems and files when out on the road. A hybrid cloud solution can allow your mobile team members to access the data they need when they are out and about – essential in today’s “always online” business environment.

In some ways, the shift to a hybrid cloud solution is a no-brainer. However, it does have its challenges. For example, your business may be used to working with a single, on-premises IT solution which is serviced by a single IT support company that looks after your network, your hardware and your various software systems.

Moving to a hybrid cloud solution may mean that your business needs to work with multiple external IT companies in order to support, manage and protect your on-premises and cloud-based systems. This adds complexity and needs to be carefully managed in order to make it work.

However, if you manage the implementation properly, your firm will benefit from having a more flexible IT infrastructure. As your business grows, you can use your cloud-based technology to scale up without the expense of buying in additional on-premises servers. This can also help you to keep your operational costs in check.

Scaling up your business

How do you scale up your business and take it to a new level?

A scale-up business is any firm that is looking to grow in terms of market access, revenues, and number of employees, adding value by identifying and realising new opportunities.

Scale-up businesses are the engine of growth for the UK economy, creating wealth, opportunities and employment in a competitive environment.

Organic versus inorganic growth Firms can scale up in one of two ways. They can focus on organic growth – growing gradually thorough increased sales and market share. Alternatively they can scale up through inorganic growth strategies such as through an acquisition or a merger with another business.

Commit to growth

Scaling up a business takes a huge amount of time and effort so you need to ensure that your management team is committed to growing the business. You and your team will need to create realistic growth targets and develop plans and concrete actions of how growth will be achieved.

Upskill your team

Your management team will have a given level of expertise. However, delivering a growth strategy may require an expanded skillset. Take the time to identify the skills required to realise your growth strategy. Do you have people with good management experience, an understanding of the relevant technology, good financial skills and a background in change management? If not, you will need to upskill your current team or hire in experienced professionals to help drive growth.

Collaborate

In order to scale up your business you will need to create partnerships with people and firms outside of your business. Consider your routes to market and identify potential service providers, sales channel partners, suppliers and key clients who you can work with in order to form alliances which will drive the growth of your business.

If you are focused on expanding into new markets, you will need to create collaborative business relationships with sales partners and suppliers in those countries, and may need to create formal agreements with these new business partners.

Creating an employer brand

The businesses that attract the best talent all have one thing in common – a great employer brand.

All businesses have an employer brand – it’s what your employees, customers, suppliers, peers and potential employees say about your business. A strong employer brand can help your business to compete for the best talent and can even have a positive impact on your firm’s overall brand reputation in the market.

Define who you are first

Before you can begin to create your employer brand you need to decide what you want that brand to be. Start by considering what the most appealing things are about your firm. Why do good people want to work in your firm? What do you stand for and who are your customers? For example, do your employees get to work in an entrepreneurial environment, that encourages flexible working and allows them to work with international clients?

Identify your target market

What type of people do you want to hire into your business? Do you want to hire energetic, tech savvy millennials or solid, experienced, dependable generation X? If you’re trying to attract a completely new breed of employees (who are quite different to your current staff) then your actual company culture, vision and values may need some work – especially if they are at odds with the type of people that you are hoping to attract.

Build a strong company culture

You need to build your firm’s culture around your company values and hire people who fit with those values. Encourage your staff to think outside the box, to try new things and to innovate. Engage your people in building a great place to work. Ask them for their ideas and empower them to implement those ideas.

Publicise your culture

If you create a firm and a culture that your staff are proud of, they will tell people about it. The more participation from your employees, the stronger your employer brand will be. You can help them to publicise your firm’s culture by creating posts on social media sites such as LinkedIn, Twitter or Facebook. If your staff are proud of the firm that they work for, they will like and share these posts.

Celebrate what makes your firm unique

Whether it’s a casual dress policy or office sporting events on a Friday, take time to have a bit of fun in your firm. Maybe you have the best people or you work as a team to help a local charity or community group. Whatever it is that brings your team together in a positive way and makes your company unique should be celebrated. The more you do so, the more engaged your people will be and the more they will tell everyone about the great firm that they work for.

Managing employees who have a side hustle

A recent study suggests that 25% of employees in the UK are running at least one business project alongside their day job.

A side hustle is defined as a secondary business or job that brings in, or has potential to bring in, extra income. It is particularly popular among millennials, who tend to start a side hustle as a hobby or in order to explore a new challenge. Millennials tend to have different attitudes towards work and technology.

 

They are used to being able to work from anywhere, using a smartphone or a tablet.

 

Various studies have shown that employees who have a side hustle report feeling happier and more content. However businesses / employers seem to view a side hustle as a negative distraction from their employee’s day jobs.

 

The truth is that many of the best employees have a side hustle and employers need to be more supportive. A side hustle can actually be a good thing as long as it doesn’t involve working for a competitor or doing anything that might damage the main employer’s business.

 

Employees can learn new and useful skills from running their own side hustle.  They can gain real-life experience of customer service, project management or budgeting that can be applied when they are working their day job. From an employer’s perspective, their employees are gaining new skills that can make them better at their jobs and the employer doesn’t have to pay for any training.

 

Research from numerous studies has found that an employee who has the drive to work a side job is more likely to be innovative, proactive, and organised. They are also more likely to come up with new ideas, which they have gained through their own new experiences.

 

A survey from a well-known careers website recently revealed that over 70% of employees with a side hustle want to remain in full time employment. They don’t want their side hustle to become their full time job, as it’s more of a hobby / passion that just happens to create an income.

 

It seems that the side hustle is here to stay and employers need to shift their view – a side hustle is a positive thing. However, employers should consider adding a non-compete clause to contracts just to ensure that there is no temptation for employees to side hustle in any way that could damage the employer’s business.

Welcome to our monthly newswire. We hope you find this newsletter useful. Please contact us if you would like to discuss any matters further.

 

A STAFF SUMMER PARTY CAN BE A TAX-FREE BENEFIT

Your organisation may have an annual Christmas party for staff, but the tax rules also allow staff parties at other times of the year which are a tax-free benefit if certain conditions are satisfied.

The exemption applies to an annual party (for example, a Christmas party), or similar annual function (for example, a summer barbecue), provided for employees and is available to all employees or available to all employees at that location, where the employer has more than one location.  If the employer provides two or more annual parties or functions, no tax charge arises in respect of the party, or parties, for which cost(s) per head do not exceed £150 in aggregate. For each function the cost per head should be calculated. The cost per head of subsequent functions should be added. If the total cost per head goes over £150 then whichever functions best utilise the £150 are exempt, the other is taxable.

MAKE SCHOOL HOLIDAYS EASIER WITH TAX-FREE CHILDCARE

Did you know there is a government scheme available that can help contribute towards childcare costs which may mean fewer of your employees will need time off at the same time this summer.

Tax-Free Childcare is a scheme available to working parents with children from 0-11 years and many parents are not taking advantage of the scheme. HMRC would thus welcome help from employers in changing that, so please tell your employees about Tax-Free Childcare and how it can reduce their childcare costs.

Eligible parents can get up to £2,000 per child, per year to spend on qualifying childcare (effectively a 25% top up). Note that Tax-Free Childcare isn’t just for everyday childcare costs, such as childminders and nurseries, parents can also use it to pay towards the cost of:

• after school clubs
• summer camps
• school holiday activities

 

USING A PAYE SETTLEMENT AGREEMENT TO PAY SOME OF YOUR EMPLOYEE’S TAX

PAYE settlement agreements (PSAs) are arrangements under which an employer can settle the income tax and National Insurance liabilities on benefits in kind and expenses payments provided to employees and officeholders.

Setting up a PSA avoids passing on an unexpected, and potentially demotivating, tax charge to employees. Where a PSA has been agreed with HMRC, this will obviate the need for any reporting on the individual’s P11D.

The items that can be included in the PSA must meet one of three criteria: minor, irregular or impracticable to apply PAYE or apportion between the employees receiving the benefit.

Although reporting will eventually go online, applications for a PSA are currently made in writing to HMRC. The Revenue will then issue a P626 contract, which states that the employer will pay the tax and National Insurance liability on agreed benefits.

BUT NOT TRAVEL COSTS FOR NON-EXECUTIVE DIRECTORS IN PUBLIC SECTOR

Until recently, HMRC allowed taxable travel expenses to be included in public sector PSAs in respect of normal commuting costs for Non-Executive Directors (NED). The Department of Business (BEIS) wrote to the bodies it oversees on 30 May 2019 instructing them that any payments for commuting made to non-executives and other office holders, will now have to be paid through payroll, with tax and National Insurance deducted at source.

Note also that fees for NED roles in the public and private sectors are always required to be subject to tax and NI through the payroll, as this is income for the holding of an office so it cannot be invoiced and paid gross to the NED.

MORE COMPLICATED PENSION RULES

Last month we highlighted the restricted annual pension allowance for those with high income, such as doctors. Note that the deadline for requesting for the additional tax to be paid out of the fund for 2017/18 is 31 July 2019.

There is a further complication for those individuals who have started drawing income from certain money purchase pension schemes. A new £4,000 limit introduced from 6 April 2017 restricts the amount that they can save in their pension and receive tax relief. Our concern is that many taxpayers may unwittingly trigger a tax charge due to this rule change.

NEW VAT RULES FOR THE CONSTRUCTION SECTOR

Under new rules due to come in on 1 October 2019 builders, sub- contractors and other trades associated with the construction industry will have start using a new method of accounting for VAT.

Under the new rules, supplies of standard or reduced-rated building services between VAT-registered businesses in the supply chain will not be invoiced in the normal way. Under the reverse charge, a main contractor would account for the VAT on the services of any sub-contractor and the supplier does not invoice for VAT. The customer (main contractor) would then account for VAT on the net value of the supplier’s invoice and at the same time deduct that VAT from the payment to the sub-contractor.

This is intended to ensure that VAT is correctly accounted for on supplies by sub-contractors.

The new reverse charge will apply to a wide range of services in the building trade, primarily those activities covered by the construction industry (CIS) payment rules. Note that normal VAT invoices will continue to be issued to domestic customers.

Please contact us if you are likely to be affected by these changes and we can work with you to ensure you are ready for the new system.

ADVISORY FUEL RATE FOR COMPANY CARS

These are the suggested reimbursement rates for employees’ private mileage using their company car from 1 June 2019. Where there has been a change the previous rate is shown in brackets.

 

Engine Size	Petrol	Diesel	LPG
1400cc or less	12p (11p)		8p (7p)
1600cc or less		10p
1401cc to 2000cc	15p (14p)		9p (8p)
1601 to 2000cc		12p (11p)
Over 2000cc	22p (21p)	14p (13p)	14p (13p)

 

Note that for hybrid cars, use the equivalent petrol or diesel scale charge. However, it may be more beneficial to compute the actual cost. You can continue to use the previous rates for up to 1 month from the date the new rates apply.

DIARY OF MAIN TAX EVENTS

JULY/ AUGUST 2019

Date	What’s Due
01/07	Corporation tax for year to 30/9/18 (unless pay quarterly)
05/07	Deadline for agents and tenants to submit returns of rent paid to non-resident landlords and tax deducted for 2018/19
06/07	Deadline for forms P11D and P11D(b) for 2018/19 tax year
19/07	PAYE & NIC deductions, and CIS return and tax, for month to 5/7/19 (due 22/07 if you pay electronically)
31/7	50% payment on account of 2019/20 tax liability due
01/08	Corporation tax for year to 31/10/18 (unless pay  quarterly)
19/08	PAYE & NIC deductions, and CIS return and tax, for month to 5/8/19 (due 22/08 if you pay electronically)

HMRC has recently challenged the employment status of several journalists and commentators who work for the BBC and other broadcasters. It won in the case of Christa Ackroyd, but Lorraine Chase and Kaye Adams successfully defended their right to be taxed as independent contractors (see our newsletter 18 April 2019).

Paul Hawksbee is the latest presenter to be subject to an IR35 challenge in respect of his work for Talksport Radio, where he has co-presented a live daily show for the last 18 years. However, this was put in context of Hawksbee’s professional writing career which extend over 34 years.

In the three tax years under review in this case the fees from Talksport represented around 90% of the income of Kickabout Productions. He was contracted to present at least 222 shows per year, at £575 per programme plus expenses, but he was only paid for the shows he presented.

At the heart of case was whether the radio station exercised control over Hawksbee’s work. HMRC argued that it was enough for the right of control to exist and that it was not necessary for control to be exercised in the relationship, but Judge Scott disagreed. He noted that this area of evidence was apparently well rehearsed by both Hawksbee and the Talksport programme director.

The FTT concluded Talksport had control over where and when the work was performed but the radio station did not control how Hawksbee performed his services or what was included in the programmes. There was no right of substitution mentioned in the written contracts.

Hawksbee was not part and parcel of the Talksport team; he did not attend staff events, had no line manager, received no benefits, sick pay or holiday pay and was not obliged to undertake training or appraisals.

The FTT concluded that the relationship between Hawksbee and Talksport was not one of employee and employer so IR35 did not apply. However, this was a marginal decision as the second member of the tribunal did not fully agree with Judge Scott’s conclusions.

If any clients are freelance contractor in any sector, it is worthwhile reading the full judgment in this case, including the dissenting view in the appendix.

Written by the Tax Advice Network

HMRC aspires to deal with claims for payable R&D tax credits with 28 days, but the R&D team within HMRC appears to be under resourced. The current processing times are as follows:

• R&D tax credits – 87 days
• RDEC claims –186 days

Calling the R&D team won’t speed up your claim, and may just slow down the process for everyone. The best policy is to ensure the payment of the claim is not delayed unnecessarily by following these tips:

• Within the claim clearly and concisely describe the technological advances which the R&D is attempting to achieve.
• Analyse all relevant costs clearly.
• Do not include any costs which don’t qualify.
• If the CT600 has already been filed, submit the R&D claim using the online form.
• Include the banking details for the company.

 

Written by the Tax Advice Network

Working parents and guardians can currently get up to £2,000 per child, per year, towards childcare costs. Under the government’s tax-free childcare scheme, eligible claimants may receive government top-ups of £2 for every £8 that they pay into a tax-free childcare account, up to a maximum of £2,000 per child (or £4,000 for disabled children), subject to an overall maximum limit of £10,000. The scheme is open to all working parents across the UK with children under 12, or under 17 if disabled.

Claims are made by opening an online account, where the claimant can decide how much to pay in and how often, giving flexibility to pay in more in some months, and less at other times. Money can be withdrawn at any time but the government contribution will be lost.

To qualify for the government contribution, account holders will usually have to be in work, expecting to earn at least the National Minimum Wage (NMW) or Living Wage (LW) for 16 hours a week on average, over the next 3 months. Self-employed people who do not expect to make enough profit in the next 3 months can use an average of how much they expect to make over the current tax year. Additionally, the earnings limit does not apply to self-employed individuals who started their business less than 12 months ago.

The Childcare Choices website includes a childcare calculator for parents to compare all the government’s childcare offers and check what works best for their families, including the 30-hour free childcare offer, tax-free childcare or universal credit.

Written by the Tax Advice Network