I agree with Terry Hyman. It was clearly uncommercial. He could have just walked away with the £1m. So there was something else going on and was not arguably a normal sale of business.
This case demonstrates once again that it should not make a difference for tax purposes whether you choose to be employed, a sole trader or Ltd Co director for tax purposes. The key is of course amalgamating tax and NI, rationalising travel deductibility and either making owner-managed companies "see-through" for tax purposes or re-introducing rules to deter people from accumulating unnecessary funds within a corporate structure (anyone remember the close company apportionment rules?). HMRC are trying to solve what should be a non-problem.
I would suggest additional hourly penalties of £10 per hour if more than 1 hour late up to a maximum of 90 hours and then further penalties of £300 and £300 if still not in after a further 1 or 2 days. But if the staff have a reasonable excuse..................
I thought Chartered Accountants were supposed to be proficient at Financial Planning and anticipating the knock-on effects of proposed expenditure?
Yes it is. The member contractually agrees as part of membership to submit himself/herself to the Regulatory process with all it entails. So ACCA could sue him for non-payment.
The Clean Car company case is the one to look at. It talks about what a reasonably responsible taxpayer trying to comply with his obligations and having the skills and experience of the person concerned would do. This is basically the test to use and you need to go through exactly what the taxpayer did and how each action/inaction/assumption would stack up on the reasonableness scale. Tribunals will be sympathetic as long as the actions look sensible, logical and reasonably diligent.
Nothing will improve until the politicians stop trying to use the tax system as an instrument of social change or as a way of pretending that people pay 20% tax when the vast majority actually pay 32% (20% tax and 12% NI). The main things that could be done are:
Combine tax and NI;
Replace Capital allowances with a table of allowable depreciation rates;
Remove the lifetime cap on pensions (or at least make it £10m or so to take virtually everyone out of the rules);
Treat anything provided by an employer in any way (nice general description) as taxable to stop all the clocks, bullion etc nonsense.
Scrap tax relief for travel (employers can adjust pay rates to compensate where applicable);
Look critically at lots of other reliefs and exemptions to see whether they are really worth it (EIS,EMI,CSOP,R&D etc);
Scrap IHT and replace with a wealth tax of x% of global assets. Same goes for trusts - just charge them on a % of assets in the trust;
Scrap SDLT. It has as much logic as the window tax.
Rebase CGT assets to 2016 values.
Scrap domicile and tax based on residence.
Cap each Finance Act at 100 pages and require an equivalent amount of legislation to be repealed each time.
Put all the law into one document which is ordered in a more intelligible way.
Any other suggestions?
I can't see why a) this is objectionable and b) why the effect can't be circumvented by proper documentation and structuring. Also the burden of proof is on HMRC to prove "main purpose" rather than on the taxpayer to disprove it. If the taxpayer states that they intended to keep not sell when they bought the property, the circumstances would have to be extremely unusual for a contrary intention to be established.
Maybe some thought needs to be given to what a business would do if it were in the tax-gathering business (we are all customers after all - even if it is a rather captive market). These would be:
A real person picking up the phone (4-5 rings not 30 minutes if at all);
Issuing timely reminders about pay/filing;
Processing documents and electronic communications promptly and accurately;
Making sure all IT systems function properly (even if functionality were slightly limited);
Apologising for mistakes and rectifying them as soon as possible;
Applying adequate resources to "customer" complaints and assuming that the customer was right until proved otherwise.
Communicating effectively rather than by standard letters with the name altered;
When and only when these basic systems and processes are working properly should they move onto (maybe more interesting) areas such as BEPS, yet more new IT systems and anti-avoidance measures etc.
The bigger picture
In all this detail, let us not lose sight of a number of important principles:
1. In a developed democracy, it should be up to the person concerned whether they forego the security of employment for self-employment and the flexibility it brings. Tax should not be a factor in this decision.
2. Unification of tax and NI would make these new rules unnecessary.
3. When a company pays a dividend out of after-tax income it is only logical to allow a credit at the approximate rate of CT paid.
So the answer is to unify tax/NIC, bring back the tax credit on dividends at 20%, alter the tax and employment law rules to allow people to elect for employed or self-employed status and sort out the extremely silly and complicated rules on travel so that, as a minimum, they are the same for the employed and the self-employed. You could then scrap IR35 and the new dividend rules as well as all the NI legislation. A win-win nest-ce pas?