Trust Registration Service

We summarised the debacle of the Trust Registration Service (TRS) on 7 December 2017, and there have been continuing problems with the TRS ever since.

For example, until April 2020 it was not possible for agents to update the details of the trustees, settlors and beneficiaries on the TRS. However, the trust SA tax return asked, at question 20, to confirm whether the TRS had been updated with any changes.

Agents can now truthfully answer question 20 on the trust’s 2019/20 tax return, but had to ignore that question on the 2017/18 and 2018/19 returns. Any trust changes which occurred in the two years to 5 April 2019 should be reported on the TRS by 31 January 2021.

Note the TRS is not linked to the self-assessment service. A trustee can’t gain access to the TRS by logging into their Business Tax Account.

To allow an agent to access the TRS and update details the trustee and the agent must follow these steps:

  1. Trustee sets up a government gateway ID for the trust asking for an “organisation” account.
  2. Trustee logs into the government gateway for the trust and “claims” the trust. This requires the trustee to answer a number of questions about the trust, such as NI number name of lead trustee.
  3. Agent logs into to their Agent Services Account (ASA)
  4. Agent selects option to be authorised to maintain a trust, and enters the trust’s UTR number. The system generates a link which agent must send to the client.
  5. Trustee clicks on the link received from the agent and signs into the government gateway.
  6. Trustee chooses option to authorise agent to act to maintain the trust.
  7. Agent logs in with their ASA credentials to update the trust.

Will they collect more tax if they again align the rates of CGT and income tax?

“Increases in capital gains tax are inevitable now, despite doubts expressed ten years ago”, says Mark Lee, Chairman of the Tax Advice Network.

On 13 July, the Chancellor asked the independent Office of Tax Simplification (OTS) to undertake a review of Capital Gains Tax (CGT) in relation to individuals and smaller businesses. “The publication of a full scoping document on 14 July, just one day after a formal request was issued, suggests the request was no surprise.” Says Lee. “So, as the Sunday papers predict today, we are likely to see increases in the next Budget”.

The wording of the letter references capital gains as being a type of income. “This is odd language” says Lee, “as the Chancellor must know that CGT doesn’t tax income. By definition CGT taxes capital gains. That’s the increase in the value of your investments – and CGT is only charged when you realise those gains by selling your investments – things like second homes, shares, paintings and so on”.

“No one wants to say it but increasing CGT makes good political sense” says Lee, who was himself a tax adviser for 25 years.  “I remember discussing this very point with Sir Edward Troup at a tax conference in 2010.  Back then he doubted that aligning the rates of CGT and income tax would increase the tax take from CGT. I wonder what has changed?”

There are many exemptions and reliefs from CGT and an annual exemption. This means that the first £12,300 of capital gains anyone makes each year is tax free.  This rule simplifies things for the majority who cannot make significant capital gains.

Notes for editors:

1. Mark Lee is a Fellow of the ICAEW and of the CIOT. He is a former tax partner at the accountancy firm BDO and a former Chairman of the ICAEW Tax Faculty.

2. The Tax Advice Network, launched in 2007, operates the website and has members all over the UK.

3. In May 2010 George Osborne, Chancellor in the new Coalition Government, announced that he would “seek ways of taxing non-business capital gains at rates similar or close to those applied to income, with generous exemptions for entrepreneurial business activities. In his Budget on 22 June 2010 he raised the top rate of CGT to 28%.

4. Mark Lee’s subsequent conversation with Sir Edward Troup is recorded on the Tax-Buzz blog entry 5/7/2010: “CGT rules unlikely to change again in this Parliament”.

5. In 2010, Troup was Managing Director of the Budget Tax and Welfare directorate at HM Treasury. He later became Executive Chair and First Permanent Secretary of the HM Revenue and Customs (HMRC) in April 2016. He retired in December 2017, and was knighted in the 2018 New Year Honours.

6. On 13 July 2020 The Chancellor of the Exchequer, Rishi Sunak, asked the OTS to carry out a review of Capital Gains Tax to identify simplification opportunities. The scoping document for the review was published on 14 July 2020.

7. The rate of CGT has changed over time since it was first introduced in 1965. Until 1988 it was fixed at 30%. Then for 20 years CGT was payable at income tax rates, as if it was additional income (but with it’s own set of reliefs and exemptions). It was a Labour Chancellor, Alastair Darling, who reduced the top rate of CGT from 40% (when it was aligned with the then top rate of income tax) to 18% in 2008. In recent years the top rate of CGT has been 28% whereas the top rate of income tax is now 45%.

8. Lee questioned the rationale for reducing the rate of CGT in an article on his Tax Buzz blog on 5/2/2009: Why are capital gains taxed at less than  half the main rate of tax?


Adviser insights: Q&A with Bill Stevenson: Tax investigations specialist

How long have you been a tax adviser Bill?

Since July 2006 after 41 years on the bad side (HM Revenue and Customs – Previously Inland Revenue)

Why did you move into tax work?

It was in 1965 because my first choice of the diplomatic service was not considered suitable for this school leaver.
41 years later after having set up the COP9 teams in Scotland, Wales and Northern Ireland I decided to “retire early”. Since then I have enjoyed almost every day of my retirement providing my expertise in assisting clients to deal with HMRC. This is especially under Code of Practice 9 (but in fact any tax investigation where there is a mutual willingness to engage with a client on a full disclosure basis)

How did you come to specialise in Investigations work?

For the first 10 years or so of my career I progressed “through the ranks” to Tax Inspector and then on to Fully Trained Tax Inspector with District Charge.

I always enjoyed doing tax investigation work and catching people out. Then spending almost 9 years in HMRC’s Enquiry Branch undertaking specialist and serious tax investigations (with a view to prosecuting or settling civilly with errant taxpayers) I found the work even more interesting and I was good at it.

For another 20+ years in the job I was in charge of various tax offices and enjoyed working with and seeing staff develop.

Having retired early I was almost immediately asked to help an accountant who HMRC had their sights on and managed to satisfy them that their risk was ill-conceived. The rest is history as they say. Eventually I may retire but still find that my expertise is needed and appreciated by clients when it wins the day; so we will see when that day come.

What are the most common mistakes you see in your area of tax?

  1. HMRC do not always get it right but they do in a fair percentage of cases. So don’t think that you will be smarter than the investigator or deny irregularities if you know you’ve done wrong and want to settle in the most beneficial way possible.
  2. Don’t underestimate the time it takes to properly examine and defend a client. When the COP9 letter hits your doorstep – to be signed for – you only have 60 days in which to get your ducks lined up to best effect. Failing to meet that deadline or not properly accepting or rejecting HMRC’s offer can leave you exposed to losing immunity from prosecution for matters (however serious) that you have disclosed to HMRC.
  3. Lay your cards (however serious or misguided they may be) on the table with your COP9 specialist at the earliest possible. Keeping things back can lead to a suspicion that there is more being hidden and cause the trust/relationship to deteriorate or terminate.

What do you like most about the work you do?

Apart from the great satisfaction felt when you get the client a good result. Well it has to be forensically analysing business records and financial accounts to prove that the client’s full and frank disclosure is justified and that matters are not any more serious than disclosed.

What is your top tax tip for general practitioner accountants?

General practitioners should realise that I wouldn’t probably be able to do their job as well as they do it – I don’t want to prepare accounts and do tax returns.

In the same way they can do their clients the biggest favour by recognising that it needs a certain type of person and experience to do COP9 work and they should refer such cases for specialist attention. Additionally as I have no intention of doing their type of job their bread and butter is safe in their hands.

If you hadn’t gone into tax what would you like to be doing now?

A covert hotel inspector or failing that an agricultural farmer.

What has been the most rewarding thing you have done from a tax perspective?

Achieved the right result for a client who said that comparing my service to a Big 4 Accounting firm – and he had experience of such – would be a disservice to Bill….

Which aspect of tax would you nominate for a silliest tax rule award?

HMRC’s view that it only costs £4 per week (surprisingly £6 because of Covid19) for the additional costs of working from home.

What advice would you give your younger self?

Do it all again.

What do you enjoy doing in your spare time – away form the world of tax?

In season – Creel fishing inshore and when able driving my tractor.
You can reach Bill via his profile here>>>

Imaginary NIC debts

Another group of small employers have received letters and calls from HMRC’s debt management department this month, accusing them of deliberately underpaying the PAYE and NIC due for April to June. Those employers are certain that they have paid the correct amount of tax and NI for the period.

On closer inspection the amount that HMRC say is due equals the employer’s NIC for the months concerned. Where the employer has claimed the Employment Allowance, this should cover up to £4,000 of employer’s class 1 NIC for 2020/21 and the allowance should be set against the NIC liability for the month in which the claim is made and the following months until it is fully utilised.

The root of this problem is HMRC’s computer, specifically the National Insurance and PAYE System (NPS). For some reason the NPS is not picking up the employer’s claim for the Employment Allowance made in the first quarter of 2020/21. It is a known problem, which HMRC hope to solve with its IT business partners by 19 August.

In the meantime, the debt management letters may continue to arrive with your clients, but at least you know how the payment difference may have arisen. The employer can confirm whether their Employment Allowance claim has been accepted by checking their business tax account (BTA), unfortunately you can’t access the BTA on behalf of your clients.

Where your client has had their entire workforce on furlough for April to July, their full payroll costs, including employer’s NIC and pension contributions should have been covered by the CJRS grant. In such cases it made sense not to claim the Employment Allowance in the first quarter.

If the Employment Allowance was claimed, the CJRS claims for April to July should not include the costs of the employer’s class 1 N1C, if the total class 1 NIC liabiities are less than £4,000.

From 1 August 2020 the CJRS grant does not cover the employer’s class 1 NIC, or the employer’s contributions to the workplace pension, for employees on furlough. It thus makes sense to now make a claim for the Employment Allowance so it can be set against the employer’s NIC for August and later periods.

Remember there are additional conditions for claiming the Employment Allowance for 2020/21; the class 1 NIC liability for 2019/20 must have been less than £100,000 and the state aid threshold must not be exceeded.

Inheritance tax receipts fall. Does this make a wealth tax more likely?

Inheritance tax (IHT) seems to worry far more people than are ever likely to pay it. The latest stats reveal why the Government and HMRC may be planning to switch to a wealth tax instead.

The most recent figures available tell us that fewer than 4% of UK deaths resulted in a charge to IHT. And that HMRC received only a little over £5 billion inheritance tax in 2019/20.

Earlier this year an all-party parliamentary group proposed the wholesale reform of IHT and intergenerational fairness. Their main recommendation was to replace IHT with a flat-rate gift tax payable both on lifetime and death transfers. As ever such proposals are easier to accept in theory than they would ever be to legislate.

And let no one assume that a wealth tax would be easy to apply and charge by reference to shares, properties and other assets whose values are ever changing.

Many of the members of our Network are expert advisers on inheritance tax and related issues. YOU’ll find their profiles by entering inheritance tax in the search bar on the home page of this site

CGT 30-day reporting

From 6 April 2015 non-resident taxpayers who sell UK residential property have been required to report the gain and pay the Non-Resident CGT due with 30 days of the completion date.

From 6 April 2019 the range of assets that NRCGT applied to was extended to all UK property or land held directly or indirectly by a non-resident. All disposals within the NRCGT regime that completed before 6 April 2020 had to be reported on a simple online NRCGT form within 30 days.

From 6 April 2020 a 30-day reporting regime applies to all UK residential property disposed of by any individual taxpayer or trustee. Non-residents must report the disposal of any type of UK property, not just residential property. However, both UK resident taxpayers and non-residents must now use the new CGT on UK property service, which requires a government gateway ID and password to access it.

Non-residents may have difficulty setting up a government gateway ID as they may not have the necessary ID documents such as a UK passport, driving licence, NI number or a UTR number. If your client falls into this category, they can still create a UK property account by ignoring the boxes asking for the government gateway ID and password. Instead click on “create sign in details” below green box marked “Sign in”. The client needs to enter an email address and the address of the UK property.

Where your client is digitially excluded and doesn’t have an email address, you need to contact HMRC on 0300 200 3300, and ask for a paper form. Unfortunately, HMRC will only send this form to the taxpayer. So by the time it arrives, if it ever does, the 30-day period for reporting the gain may have expired.

Penalties apply for late filing of the NRCGT return and the UK property CGT return. These penalties were suspended for disposals completed before 1 July 2020, but all those disposals need to be reported by 31 July 2020, if there is CGT to pay.

Is a company car ‘available’ for private use?

A benefit in kind tax charge arises where a company car is available for an employee’s use. Once a car has been made available to an employee, the charge is reduced proportionately for period of unavailability of at least 30 days. This period can span two tax years.

The legislation (ITEPA 2003, s. 118) provides that a car is treated as being available for private use unless the terms on which it is made available prohibit such use and it is not so used.

During the Covid-19 pandemic, employees with company cars may have been furloughed or shielding. In guidance published on how to treat expenses and benefits provided to employees during the pandemic, HMRC address the issue of company car availability.

In the guidance they state that:

`You should treat a car as being made ‘’available for private use’’ during this period even if your employee is:

  • instructed to not use the car
  • asked to take and keep a photographic image of the mileage both before and after a period of furlough
  • unable to physically return the car or the car cannot be collected from the employee’.

However, HMRC concede that where restriction on movement applied because of coronavirus which prevent the car from being handed back, they will accept that a car is unavailable where the contract is terminated from the date that the keys, including tabs or fobs, are returned. Where the contract is not terminated, HMRC will regard the car as being unavailable 30 days after the returns of the keys, tabs or fobs.

HMRC’s test of availability goes beyond that set by the legislation. If an employee is instructed not to use the car and does not do so (for example, as shown by photographic evidence), under the terms of the legislation, the car is not ‘available’ for the employee’s private use, and where the period of unavailability exceeds 30 days a reduction in the tax charge should be forthcoming. Attempts by HMRC to impose a stricter test than that required by the legislation (e.g. the return of keys) should be challenged.

It should be noted, however, the test is whether the car is unavailable for the employee’s private use, not whether the employee is able to use it. Thus, an employee who is shielding may be unable to leave the house and drive a company car. However, unless private use is prohibited, the car remains available for private use and there is no reduction in the tax charge, despite the fact there is no actual private use.

Corporate losses

If a company has made a loss in the current accounting period it will want to set-off that loss as soon as possible, in order to obtain a refund of corporation tax paid for the current period or the immediate prior period.

Any trading loss first needs to be set against any profits in the current period from other trades or from non-trading activities. Only after these current period profits have been covered may any surplus losses be carried back against profits of the same trade in the 12 months immediately prior to the current year. You need to be clear that the loss-making activities arise from the same trade as the earlier profitable activities.

HMRC has provided some guidance on the question of whether the nature of the trade may have changed during the coronavirus crisis, such that it amounts to a different trade (see BIM48000). It is worth reading this before applying to carry back a loss.

Generally, you can only submit a loss claim once the current accounting period has ended and the full extent of the profits and losses for that period are realised. HMRC will accept draft accounts for the completed current accounting period as evidence that a loss is available to carry back to the previous period, in order to support a loss claim.

In exceptional circumstances HMRC is prepared to make a repayment of corporation tax paid in respect of the previous accounting period, before the current period CT return and carry-back claim are submitted. Companies will be required to provide HMRC with evidence to support these claims, such as management accounts, forward-looking reports to the board of directors, and relevant public statements. HMRC will consider each such loss claim on a case-by-case basis (see CTM92090).

Where the company has made quarterly payments on account those amounts may be repaid, if a revised calculation for the current period shows an expected loss or much reduced profits (see CTM92650).

Ten Linkedin tips for tax advisers

Before I offer my ten linkedin tips for tax advisers let me first share 3 key observations:

  • For our purposes Linkedin is best thought of as an online business networking platform. And recognised as being quite distinct from other (so-called) ‘social media’.
  • Even if YOU don’t intend to be active on Linkedin, some simple housekeeping cannot do any harm.  You want to be sure that your Linkedin profile and headshot are up to date and enhance the prospect of you being contacted by someone looking you up online.
  • Some people tell me they are concerned about increasing the amount of spam and sales messages they will get on Linkedin – if they change anything. All I can say is that I have over 11,000 followers on Linkedin and receive barely any spam. I’m choosy about who I connect with and have opted for the security settings in Linkedin that limit the facility to send me spam. And I’ve turned off all notifications I don’t want to receive.  You can do the same.

Ten tips

  1. Update your settings – via the ‘settings and privacy’ area of the site – accessed via the drop down menu by the little photo of you at the top of the screen when you are logged in to the site. Check out each setting and revise them to reduce the spam messages you get on each of the 4 pages:  Account, Privacy, Ads and Communication. It might take 20 mins to do this in total.
  2. Review and update your profile  – Ensure it projects an appropriate personal ‘first impression’ to anyone who looks you up on line and to anyone who is recommended or referred to you and who themselves uses Linkedin a lot (as I do for example).  Think about who do you want to positively influence? What first impression do you want to give them? Prospective clients? Introducers? New partners? New staff? Suppliers? Colleagues from your international association? The list goes on and on. Here is my list of Linkedin profile tips from 2012!  Little has changed – beyond the number of people now using Linkedin!
  3. Refine your home feed – if you are seeing nonsense here, click the 3 dots at the top right of each post that you don’t want to see. This will help educate the algorithm that decides what appears in your home feed.
  4. Unfollow strangers – especially those who post stuff that is of no interest. You can do this via their profile page and also whenever you see a post you don’t like. Unfollow is one of the options available when you click the 3 dots at the top right of a post in your home feed.
  5. Educate the algorithm – like, react and comment only on posts that are of real interest.  For example, the more tax related posts you engage with the more the algorithm will show you – as it learns what you like.
  6. Comment on relevant posts – Let your expertise be revealed through your comments and avoid treating this an opportunity to overtly self-promote whenever you comments to anyone’s posts. Again, your activity will help educate the algorithm. Obviously it helps us all if you also comment on those I write which mention the Tax Advice Network.
  7. ‘Ignore’ random connection requests – I have long been choosy about how I built up my connections (now 11,000+). I have concluded it is no longer worth me spending time on personal messages to check why a random person (or accountants from Asia) want to connect with me. And my approach also means I rarely get any spam.
  8. Use the ‘search’ facility – You can look up both specific people and also your ideal clients. Then send personalised connection request messages. It’s like saying hello at a networking event.
  9. Network online as you would offline – You would never walk into a room and start out by telling everyone how great you are, before you had first introduced yourself and started to build a relationship. Linkedin works best if you adopt the same approach online.
  10. Follow the Tax Advice Network business page – and add your membership of the Network to the list of your experiences and to your list of memberships further down your profile. For example:
    Proud to be a member of this leading network of independent tax advisers. The website helps people who are looking for someone with my tax expertise to find me, contact me and engage directly with me.

Mark Lee – July 2020

VAT payments due

The automatic deferment of VAT payments is coming to an end on 30 June, so clients who owe VAT for the quarter or month ending on 31 May 2020, will have to pay as usual by 7 July.

Where the business cancelled its direct debit mandate to ensure that VAT due in the period from 20 March to 30 June was not collected, it will have to reinstate that direct debit to ensure the VAT as reported on returns from May onwards is collected automatically again. If the direct debit is not reinstated in time, the business will need remember to make an electronic transfer of the VAT due.

If the business cannot pay its VAT bill on time, it should apply to HMRC for extra time to pay. The best way to do this is to call the HMRC payment support service on 0300 200 3835 before the tax becomes overdue. You can help to negotiate a Time to Pay arrangement with HMRC on behalf of your client.

HMRC is also starting to chase up VAT registered businesses to sign-up for MTD if they have not already done so.