Member Since: 4th Jan 2002
6th Jul 2020
What I was trying to say that, in the absence of any "muddying of the waters", such as a simultaneous employment, your client would, IMO, be entitled to rely on the High Court dictum in Horton vs Young, referred to in the link I gave. The other decisions were all at FTT and UTT level and so do not "outscore" Horton vs Young.
Clearly, and as others have commented, one must, after weighing up all the factors, make a highly subjective judgement on whether the self-employment really is carried on from home. If one concludes that it is (AND a simultaneous employment is not in play to complicate the issue) then I see no reason why the travel expenses in the circumstances you have outlined cannot be claimed.
6th Jul 2020
If you had asked me this question a few years ago I would have voted "allowable" without any hesitation whatsoever. However, following a sequence of Tax Case decisions in the last five or six years, I have to say that this whole area is a real minefield now. You'll see why if you click on the following link (with full attribution to the author, Mike Truman):
This said, the common theme in the cases cited was that the medic in question held an employment and the other work undertaken was either directly or indirectly (sometimes quite remotely) related to that employment. So, on balance, where the ONLY work being undertaken is locum work (of a self-employed nature) then, provided that the place of work never became "settled and regular", I would still in all good faith claim the travel costs to and from home.
Incidentally, I note that you mentioned "law firms" in your last post and so your client would appear to be a legal locum, rather than a medical locum. Nevertheless the principles are precisely the same.
29th Jun 2020
As others have posted, this is a termination benefit and so is NOT reportable on the P11D. A "P11D-able" benefit in kind can only apply where the benefit is provided by reason of the employment, not by reason of the termination of same. The amount to show on the P11D is the scale charge(s) up to the last day of service.
The post-termination benefit may still be taxable, but only where the entire severance package exceeds £30k. The key difference is that Class 1A NICs are not payable on ANY termination benefits where the employment ended prior to 6/4/20, which this one evidently did. And, even post-5/4/20, Class 1A NICs are only payable if the entire severance package were to exceed £30k (and only on any chargeable excess).
29th Jun 2020
It's become a bit of a cliché, I know, but ME TOO!!
The HMRC Guidance really couldn't be more clear:
"When you’re working out if a payment is non-discretionary, only include payments which you have a contractual obligation to pay and to which your employee has an enforceable right."
In all my years in tax I've never, ever come across a director of a company which he/she owned who has an employment contract with it. Without an enforceable contract you don't get to first base as regards it being non-discretionary.
The OP states that the director merely decided to "give himself a bonus of £10000" and so I assume from this must indeed control the company. No further questions, M'Lud.
4th May 2020
Replying to Tax Dragon
No. You used to have to formally apply for a dispensation but "exemptions" are the default position for all business expenditure (i.e that which satisfies the "wholly and exclusively test"). If that were not the case then there would have been no need to - ahem - dispense with dispensations.
Of course one is still left with having to make judgements about W & E! But my experience is that, even when an Employer compliance visit is undertaken, the officers, by and large, are not looking to nit-pick on this kind of thing. They are after much bigger fish.
21st Oct 2019
I agree in principle, David, but, at the risk of splitting hairs, would you not agree that the charge (as "deemed employment income") would arise under sec633 of ITEPA. See EIM74011, firstly the reference to:
"the payment is paid to a former employee or office holder or to their widow, widower, surviving civil partner, child, relative or dependant..."
which seems to apply to the case in point, and then:
"Section 633 ITEPA 2003 generally applies to payments that form a series of payments or gifts. Isolated gifts to former employees may be chargeable as employment income either as general earnings or because they are in connection with the termination of the employment."
It looks like we are indeed dealing with a "series of gifts" in this posting.
You may be right about the CT deduction but I think there are plenty of Inspectors who might argue that, as s633 applies to voluntary annual payments, then no deduction would be due. Debatable either way, I think.
14th Aug 2019
I have a client who was referred to me specifically (and only) to deal with HMRC's Debt Management Unit as regards the tax debt thrown up by HICBC having been omitted from the SATRs by the existing accountant. (I'm told that no questions were asked of the client as to whether he even had any children, so no surprise there!)
HMRC attempted to code out the tax debt by issuing a massive K code in MARCH of a particular tax year (and for that tax year). Naturally this didn't work and so the tax debt simply rolled over (and doubled up into the next tax year). That wasn't entirely successful either. Anyway, to cut to the chase, despite multiple years and mounting tax debts, they didn't impose penalties, even though they were entitled to. As other posters have said, Revenue practice on this is inconsistent.
On the question of the imposition of penalties, the answer is this. If the taxpayer is within the SA system TMA requires penalties to be charged on the "tax difference": that is the difference between the tax determined to be due after enquiry and the tax liability shown on the return. This "difference" is after claiming any reliefs or making other tax adjustments which emerge from such an enquiry. So, in the example mentioned, the penalties would be on the net £2,500, not on the £4,000.
If however, the taxpayer is not within SA then the HICBC tax shortfall alone would be the figure on which any penalty would be levied. Fair? Certainly not! But that's income tax for you, isn't it?!
18th Jul 2019
I received one of these, too. It could just be a failure at HMRC's end to properly distinguish between MSBs and ASPs on their database. But the cynic in me thinks it more likely to be the deliberate use of scare tactics by the AML Unit. Perhaps because they think issuing "gypsy's warnings" like these is sufficient to fulfil their AML supervisory role. I don't think they're staffed up to do actual AML "audits".
This "grouse beater" approach puts me in mind of the so-called "Nudge" letters which HMRC bombarded our clients with a few years ago when all they [we] had done was to claim loss relief! These were the letters that insinuated some kind of wrongdoing because the taxable income had gone down!! Flush 'em out!
24th Jun 2019
"Dividend tax for a higher rate taxpayer is 32.5%...."
The OP mentioned utilising the client's PAs so one assumes that in this case there would be no HR liability (or it could easily be avoided via timing).
24th Jun 2019
I can think of nothing that would prevent the making of a CT-disallowable pension contribution by a non-trading, non-dormant company. However I would challenge the wisdom of doing that from a tax-efficiency viewpoint. In effect the company "loses" 19% CT on the disallowed contributions. But, assuming that ER is due, if the company were put into members voluntary liquidation the client would pay just 10% (presumably after the CGT annual exemption, so probably only c9% net).
The dividend allowance is only £2k pa and so, unless there is absolutely no other income, any divis on top of that are probably going to be taxed at 7.5% anyway. I cannot see the advantage of paying this and (in effect) losing 19% on the company pension contribution. Once the money has been extracted via an MVL, there must surely be some other way of utilising the PAs from the income generated? Even before the pension income kicks in.
Ay any rate, all other options would need to be carefully weighed.