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Essential monthly tax news and marketing strategies for busy accounting and tax professionals.

Tax tip #5 – Choose non-cash benefits to save employee NICs

3 minute read.

Even if a benefit is not exempt from tax and National Insurance, it can still be beneficial from the employee’s perspective to choose the benefit rather than cash salary, as this will save the employee Class 1 National Insurance contributions.  

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Wife taxable on 50% of rental profits from jointly-owned property when all rents were paid to and retained by husband

8 minute read.

The appellant was taxable on 50% of rental profits from a property jointly owned with her husband, notwithstanding that all the net rents were paid to and retained by him.

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VAT: Claiming bad debt relief

5 minute read.

Andrew Needham considers whether claiming bad debt relief is as straightforward as it seems and looks at two areas that can cause confusion.

The basics of claiming bad debt relief (BDR) are contained in VATA 1994, s 36, and permit BDR to be claimed from HMRC when an invoice remains unpaid, or partly unpaid, for six months after the due date for payment on the VAT return covering the period when the BDR becomes claimable. If the debt is eventually paid, the business has to pay the VAT back to HMRC on its next VAT return. However, there can be some twists to claiming BDR that businesses should be aware of, to make sure they get the full amount and also don’t fall foul of HMRC.

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Tax tip #4 – Take advantage of the transitional rules applying to under the alternative valuation rules

4 minute read.

Although the alternative valuation rules for benefits provided under optional remuneration arrangements (OpRAs) apply generally from 6 April 2017 (see Tip 3), transitional rules applied to arrangements in existence on 5 April 2017, the effect of which is to delay the date from which the alternative valuation rules apply.

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No relief on property disposal as it was not the taxpayer’s residence

6 minute read.

The taxpayer was not entitled to private residence relief on the disposal of a property because she did not occupy it with the intention that it would be her permanent home.

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HMRC’s ‘snooper’ methods

3 minute read.

Reducing the ‘tax gap’ is at the heart of HMRC’s strategy towards full digitalisation. The ‘tax gap’ is the difference between the amount of tax that should be paid and what is actually paid. According to HMRC’s Official Statistics Release of June 2018 the ‘tax gap’ is estimated at £55bn which is 5.7% of the total current tax take, equivalent to half of the annual defence budget. Approximately 10% of this is estimated as being lost via tax evasion. Although HMRC stress that any taxpayer could be the subject to an enquiry, the reality is that enquiries are either based on computer generated ‘behavioural technology’ risk-based selections or as a result of information received from sources.

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Tax tip #3 – Beware the alternative valuation rules for OpRAs

3 minute read.

The benefits of using a salary sacrifice or other optional remuneration arrangement (OpRA) were seriously curtailed from 6 April 2017 following the introduction of alternative valuation rules that apply where a benefit or expense is provided via an OpRA. The definition of an OpRA includes not only salary sacrifice schemes, but also flexible benefit arrangements and arrangements, such as cash or cash, where the employee is offered the choice between a non-cash benefit and a cash alternative.

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Tax tip #2: Salary sacrifice arrangements can still be beneficial

5 minute read.

The opportunities to use a salary sacrifice arrangements to save tax and National Insurance were seriously curtailed with the introduction of the alternative valuation rules that apply from 6 April 2017 to value benefits provided under an optional remuneration arrangement (OpRA).

Where the rules apply, the benefit of any associated tax exemption is lost if a benefit is provided through a salary sacrifice or other OpRA. Under a salary sacrifice arrangement an employee gives up an amount of salary in return for a benefit in kind. Where the benefit remains exempt from tax when provided under a salary sacrifice arrangement, the employee saves tax and the employer and employee save National Insurance. 

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Could digital versions of paper based newspapers benefit from zero-rating?

7 minute read.

Summary 

The appellant was the representative member of a VAT group and appealed against decisions of HMRC that digital versions of The Times, The Sunday Times, The Sun, and The Sun on Sunday could not be zero-rated under Item 2 Group 3 of Schedule 8 Value Added Tax Act 1994 and were, therefore, standard rated for VAT purposes.

Secondly, even if the digital editions of the above titles are not ‘newspapers’, the appellant contended that the principle of fiscal neutrality nevertheless requires zero-rating on the basis that, viewed from the perspective of the customer, they satisfy the same customer needs as conventional printed editions. HMRC argued the digital editions were not similar to the newsprint editions and, in any event, the principle of fiscal neutrality could not be used to expand the borders of zero rating from their 1991 limits.

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What tax reliefs remain for landlords?

5 minute read.

Gradually reliefs and allowances relating to renting are being eroded away and with the Property Tax Campaign in its fifth year, it is obvious that HMRC believe that there is still more tax to be gleaned. However, one relief that it would be difficult to withdraw entirely is the right to claim expenses incurred on the running of the property. Renting is deemed to be a ‘business’ for income tax purposes and as such similar expenses incurred in the running of other businesses are allowable. Repairs, car running costs relating to the business use, council tax, management expenses, legal fees are all allowable.

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