Member Since: 9th Jul 2015
3rd Dec 2021
Thank you very much for that, especially confirming that Article 7 applies to sole traders. I had always thought as much but got thrown when the Spanish Accountant said it only applies to Corporations.
To be fair to the Spanish accountant, I believe she has another similar client from the UK (another artist) who is resident in Spain and does some work in the UK, but I think this client has a second home in the UK and may be using that as a place of business. Maybe the accountant thought the same situation applied to my client, which it doesn't. Just a guess.
3rd Dec 2021
Thank you again.
I agree that it doesn't sound right for the remote working. And your comment about your French client seems to me to make the most sense in that I should treat work performed in UK as UK taxable and everything else (i.e. remote suff) as Spanish.
Are your Fench res clients deemed to work from a PE in the UK or is that not relevant?
3rd Dec 2021
The location of clients is not important. Where he is performing the work is important. If he is sitting at a desk in Spain and working remotely for clients in the UK, he should probably be registered as a Spanish business. UK sole trade is likely to have ceased effectively, unless he wants to keep it going for the occasional UK visits.
Presumably he should be in the Spanish system and "buying in" to the healthcare system etc?
Many thanks for the reply.
I was a bit unclear about whether his UK businesss has ceased as he will be doing some sessions in the UK in person, although most will be undertaken remotely from Spain I believe.
Even if he comes over to the UK for some sessions, does the DTA not prevent UK tax on this work on the basis that he has no PE in the UK?
His Spanish accountant thinks he should declare his income from UK clients in the UK (and Spain, claiming double tax relief in Spain for the UK tax sufferred) and from Spanish clients in Spain only but I am not sure on what basis they think this is the case.
He will be buying into their social security system I presume, but this si still to be confirmed.
17th May 2021
Thank you for that reply. All very valid points.
The client really deserves to i) pay the class 3 contributions and then ii) still get clobbered with RTI fines when HMRC wake up; he is a nightmare but can't bin him as is a family "friend". [He is used to paying fines; managed to incur a £750 late filing penalty from Companies House for a dormant company even with the COVID filing extention available].
Reclassifying previous entires is hard given how disclosed in accounts and tax comps. I am tempted to get client set up from now as you suggest, establish an annual scheme and then write to HMRC about the previous years.
17th May 2021
Client would have had no clue; he would have paid accountant to just do what was required. But client is a nightmare and my guess is accountant couldn't get him to register as an employer or agree to it, although I don't know why he didn't just register him anyway.
I understand your point on Class 3; it would be cheaper but salaries were declared in the accounts and reported in self assessment returns for years so can I just ignore that and register the co as an employer from now? Doesn't feel right.
Thanks for responding.
22nd Mar 2021
'faxing your request' Welcome to 1983!
I have a client who a few years back had to do down this route, but they couldn't get their faxes to go through to that number. So they phoned HMRC, who advised them to write to that address and tell them their fax machine wasn't working.
They didn't bother.
23rd Sep 2020
Thank you again for this comprehensive answer.
Firstly, my last sentence above was referring to HMRC; I assume it is not possible to know what they will do with questions like this yet?
Based on everyone’s help in this thread, I am quite comfortable that no CGT is payable, but hate having to tell the client that on the basis that this disposal will only be disclosed in the 20/21 return, there is still quite a period to run before HMRC cannot enquire any further.
For certainty, I wanted to file the 30-day return anyway (at least then a return has been filed) but as this is now late, I am assuming that late payment penalties are still charged for the 30-day return even if no CGT is payable?
In other words, just stick with not filing a 30-day return and include in 20/21 return as required?
Thanks as ever.
21st Sep 2020
Thanks again to everyone who has responded.
For simplicity, I have decided to ignore SP 14/80 as the gains attributable to both the room and the annex do not exceed the limits within s223B (because the property is owned jointly). I do think that SP14/80 should apply though to the single bedroom lodger but have decided to keep it simple.
It looks like the 30-day reporting of this gain is therefore not required in this case as there is no gain to report.
On a side note, what would happen if no 30-day return were filed due to no CGT being calculated as due, the SA tax return is filed in Jan 2022 for 2020/21 with CGT calcs enclosed, HMRC dispute calcs and deem CGT is payable. Would that trigger late filing penalties of the 30-day report that should have therefore been made more than a year previously?
Or is there no answer to that one yet?
17th Sep 2020
Thanks for taking the trouble to give that example; that was very useful.
Just to check that my poor brain is getting it, the purpose of 224(2) is therefore to stop a simple straight-line apportionment being used where it would give an inappropriate result?
i.e. in your example, if the £100k gain arose solely due to the building of the annex (not likely I know), S224(2) steps in to say you would need to apply S223B to the £100k rather than just apportion the £100k to the letting by saying, for example, “the letting was 50% of the time for 20% of the property, so only 10% of the £100k needs to be subjected to S223B”?
Sorry to keep bumping this.
14th Sep 2020
Many thanks again for this analysis.
I remain confused about S224(2) as it still seems to read to me that S223B cannot apply to that part of the gain arising after the garage converts to let accommodation that was never resided in by the owner.
Having said that, if they had bought the property with the annex already in place (i.e. no subsequent conversion needed to take place), they would never have therefore resided in that part of the dwelling at all; yet HMRC’s own examples allow S223B relief to be claimed when a percentage of the property was let for the entire ownership period (see CG64736). So, confused still.