What are the rules?

If a business provides goods free of charge to any person and the cost of the goods to the business is under £50 in any rolling 12 month period, the supply is not subject to VAT. If the cost of the goods in 12 months exceeds £50, output VAT needs to be paid by the business on the full cost of the goods.

Under different provisions, if goods are supplied as a sample, no VAT need be charged regardless of the cost of the goods. That is, samples with a cost value of over £50 can be provided without any VAT charge arising.

HMRC consider a sample to be when they are provided free of charge and are supplied for a genuine business purpose as an illustrative or typical example of a product.

When the gift or sample rules may not apply

The issue facing marketing or advertising companies is that by increasingly using social media influencers, the supply of goods to the influencer is not considered by HMRC to be either a supply of gifts or samples.

This is as HMRC does not consider the goods are being provided free of charge to the influencers. Rather, it takes the view that the influencers are supplying services in the form of marketing, promotional or advertising services in respect of the products (or the brand). The value of this service is the notional value of the goods being supplied and VAT should be accounted for on this amount by the supplier of the goods.

The counter argument to this position could be that the influencer is being supplied the goods to ‘allow the characteristics and qualities of that product to be assessed’ – part of the definition of a sample. However, in the absence of any formal agreement – which in many cases does not exist between the supplier and the influencer – this can be difficult to evidence or support. HMRC can argue that the influencer has no expertise in assessing the characteristics or qualities of a specific product. In this case, the benefit of the influencer exists in its online or social media reach and exposure and this is the primary benefit of the arrangement to the supplier.

The alternative of formalising the arrangements between the business and the influencer may only strengthen HMRC’s position. Contracts will often detail the services to be provided by each party to the other and make clear that a ‘barter’ transaction is taking place between the two. This can raise complexities around the valuation of the influencer’ supplies and how much VAT the business needs to account for. It can also create issues for the influencer around VAT registration if the value of their services exceeds the VAT registration threshold (£85,000 in 2024).

Other issues

The supply of products to non-UK resident influencers will not be subject to VAT as the goods are sent out of the UK. However, businesses will also need to be aware that they still need to consider the value of the services being received in return as VAT needs to be accounted for on these services under the ‘reverse charge’ adjustment.

Summary

This is an area in which HMRC are increasingly active. Marketing companies which issue goods as gifts or samples should be aware of the basic rules applying to these supplies. Additionally, however, as marketing strategies increasingly include the role of social media influencers these basic rules are becoming less relevant. Instead, marketing and advertising companies are being caught by complicated VAT rules regarding barter and valuation issues.

The valuation of these supplies can be difficult to agree with HMRC and we are able to help clients to understand the rules as they apply to their arrangements and enter into discussions with HMRC on their behalf where required.

If you would like to discuss the rules around gifts or samples or the more complicated issues around barter transactions, please contact Dougie Todd, Partner and Co-head of our VAT team who would be happy to speak to you.

The papers confirm that the legislation introducing VAT on school fees will apply from the date of the Budget and to VAT on school fees from 1 January 2025.

In other words, whilst the legislation takes effect from 30 October 2024, it only applies to supplies made from 1 January 2025.

Anti-forestalling legislation applies to all payments made from 29 July 2024 in respect of supplies made from 1 January 2025. In other words, fees in advance payments made after 28 July 2024 are no longer effective in setting a tax point.

The papers also say that some Fees in Advance schemes may be challenged if HMRC consider they are ineffective in setting a tax point. The only detail they give is “the scheme involved paying a lump sum to the school in advance, but the details of the supplies that the money was not buying were not determined at the time the money was paid”, (i.e. if the money paid did not relate to specific terms).  

The papers confirm that VAT will also apply to boarding services and that both education and boarding services are caught if the supplies are made by a “connected person”.

Where pupils with special education needs (SEN) are placed in a private school, VAT will apply, but where they have been placed there under an EHCP funded by the Local Authority (LA), devolved government or non-departmental public body, then the LA will be able to reclaim the VAT.

Where pupils have an Education Health and Care Plan (EHCP) whose needs could be met in a state school, but whose parents have placed them in a private school out of choice, VAT will apply.

The change is being implemented by introducing an ‘exception’ to the VAT legislation which introduces a definition of ‘private school’ and removes it from the list of eligible bodies, thus preventing it from exempting its supplies.

The provision of nursery education whether at a standalone nursery or one attached to a private school will remain exempt. VAT will therefore only apply from the first year of primary school (the year in which compulsory school age is reached).

VAT will apply to education and vocational training provided by sixth forms attached to private schools and standalone sixth form colleges. However, education and vocational training supplied by further education colleges will remain exempt.

Education and boarding provided by state schools, including academies, are not affected by any change.

Other closely related supplies of goods and services such as school meals, transport, and books and stationery will remain exempt, and are not affected by the changes.

However, if schools artificially attempt to ‘value shift’, i.e. artificially assign a greater value to these services and lower the amount charged for education and boarding, this will be challenged as VAT avoidance.

Before and after childcare, e.g. breakfast clubs or childcare based holiday clubs that just consist of childcare will remain exempt as welfare.

The papers go on to say that the Government does not expect fees to go up by 20% and that they expect private schools to take steps to minimise fee increases, and that since schools can now recover VAT, they expect schools to be liable for VAT on around 15% of their fee income. However, since VAT is a tax on consumption, this is simply an effort to deflect blame.

For further advice around how we can help, please visit our VAT on School Fees page here, or contact Phil Salmon, Partner and Co-Head of VAT.

 

Nudge letters

HMRC are continuing their nudge letter campaigns. Nudge letters are a cost-effective solution for HMRC to communicate with many taxpayers at once. They allow HMRC to gather potential loss of tax that it has identified. Nudge letters usually state that HMRC holds information on the taxpayer and are used to encourage taxpayers to review their tax affairs.

There are many topics HMRC are targeting regarding nudge letters; some of the recent letters include:

• Annual Tax on Enveloped Dwellings (ATED)
• Research and Development (R&D)
• Electronic Sales Suppression (ESS)
• Crypto

HMRC investigating taxpayers named in the ‘Pandora Papers’

First leaked in 2021, the ‘Pandora Papers’ were 12 million documents, allegedly involving offshore deals and transactions to conceal wealth. HMRC has started issuing letters to some of the taxpayers named in the papers and they have 30 days to respond to the letter. Read more here.

Online earning platforms

As part of the HMRCs latest attempts to keep up with the rapid expansion of the digital economy, HMRC is writing to online content creators who make money or receive gifts for posting material on platforms such as Instagram, TikTok and YouTube. Online marketplaces will now need to submit the income of sellers using their platforms to the resident tax authority, and self-employed individuals will need to supply the same information on their Self-Assessment tax return. There are concerns that this could lead to discrepancies and an enquiry by HMRC. Read more here.

Code of Practice (COP) 9

Code of Practice 9 is HMRC’s most serious civil investigation type which carries an allegation by HMRC of fraud or deliberate behaviour. COP9 is one step away from criminal prosecution and is seen as the ‘last chance’ by HMRC for taxpayers to make a full disclosure and avoid criminal charges. If you receive a COP9 notice, get in touch with us immediately – these letters should not be ignored and require expert advice. HMRC published new guidance on 14 June, reinforcing their activity in this area.

Avoidance schemes

We are starting to see HMRC counter avoidance notices for ‘partner amendments’. We are aware that there are several schemes where HMRC is ready to start issuing amendments, however resourcing is an issue. If you believe your tax affairs are not in order, get in touch with us immediately to review your position and advise on your next steps. It is worth noting that by approaching HMRC to request a settlement with a TTP arrangement, it allows you to control the process. Should HMRC amend your tax returns, the tax payable will be due within 30 days.

Disclosures and enquiries – how we can help

If you have found an error or omission in your tax return, disclosing this before HMRC sends a nudge letter, or opens an enquiry, will have a more favourable outcome. It can result in the form of lower penalties, as the disclosure would be considered ‘unprompted’. If you have received a nudge letter, and then make a disclosure, HMRC will deem this as ‘prompted’, meaning potentially higher penalties. For example, a prompted penalty for an offshore omission can be as high as 200%. We can help by advising you of your next steps, preparing your disclosure, and co-operating with HMRC to achieve a favourable outcome for you.

Requirement to give security

HMRC is using the Notice of Requirement (NOR) to give security, by issuing directors with security notices for company liabilities. If you receive a notice, act immediately – there are strict deadlines to adhere to. We have a wealth of knowledge and experience negotiating Time To Pay (TTP) arrangements with HMRC for companies and their directors, and once in place, arranging for the security notice to be withdrawn. Get in touch.

Loan charge

HMRC has started to issue discovery assessments to taxpayers who it believes have not disclosed the loan charge, in their 2018/19 tax return. Discovery assessments are a formal assessment which allow HMRC to collect any loss of tax.

HMRC self-assessment phone line set to close for three months!

HMRC have recently announced that from 12 June 2023 for three months they will close their phone lines to relieve pressure and encourage taxpayers to use their online digital services.

We hope you enjoyed this edition of the Tax Disputes & Resolutions round up. You can read all of our previous insights here. If you would like further advice on anything mentioned above, or to discuss your circumstances in more detail, contact Danielle Ford, Partner & Head of Tax Disputes or Riocard Hoye, Senior Manager.

Two years after the announcement in October 2021 that HMRC were to consider an investigation, HMRC has started issuing letters to some of the taxpayers named, requesting they review their tax affairs. Letters will be sent to hundreds of taxpayers, and they will have 30 days to respond to the letter.

Should updates to their tax affairs be necessary, HMRC is recommending  that taxpayers go to the GOV.UK website and search ‘tell HMRC about underpaid tax from previous years’. There are three disclosure options, two of which are potentially relevant here – the Contract Disclose Facility (CDF) or the Digital Disclosure Service (DDS). Care must be taken, as owing to the nature of HMRC’s enquiries, the DDS may not be the most suitable method of disclosure to HMRC as fraud could be suspected. The alternative method is the Contractual Disclosure Facility (CDF), under Code of Practice 9 (COP9), which offers protection from criminal prosecution for any issues disclosed. There are similarities to the Euro Pacific Bank case, where HMRC encouraged taxpayers with connections to the now liquidated bank to use the Worldwide Disclosure Facility (WDF), although HMRC should have included reference to the CDF.

Disclosures and penalties 

If a taxpayer finds a mistake in their filings to HMRC, disclosing the error or omission before HMRC sends a letter or opens an enquiry will lead to the most favourable outcome. Following receipt of an HMRC letter, a disclosure to HMRC will be treated as ‘prompted’ for penalty purposes. Prompted penalty rates are higher than unprompted penalties rates. For example, an offshore omission can result in the maximum prompted penalty of 200%. In addition, a further penalty of 50% of the tax could be levied for an ‘asset move’; this is where assets have been moved from the UK or other jurisdictions and therefore is considered to be a method to avoid UK tax or to disguise non-compliance with UK tax legislation.

Completely voluntary disclosures to HMRC benefit from the lowest possible penalty range for the type of error. Broadly, the length of time interacting with HMRC will also be significantly shorter in comparison to a full investigation.

A professional tax advisor can guide a taxpayer through the disclosure process and advise, where applicable, the penalty mitigation available. We recommend taxpayers immediately seek professional advice following receipt of an HMRC nudge letter, statutory enquiry or where a taxpayer has found a mistake in their filings to HMRC.

At haysmacintyre, we have a wealth of experience in making successful disclosures to HMRC under the CDF and WDF, achieving the most favourable outcome for clients, bringing closure to their earlier years’ tax affairs and allowing them to move forward.

We are here to help; should you require more information or professional advice, please contact Danielle Ford, Partner and Head of Tax Disputes & Resolutions, or Riocard Hoye, Senior Manager.

1. Purpose of this Policy

This privacy policy (“Privacy Policy”) explains our approach to any personal information that we might collect from you or which we have obtained about you from a third party and the purposes for which we process your personal information. This Privacy Policy also sets out your rights in respect of our processing of your personal information.

This Privacy Policy will inform you of the nature of the personal information about you that is processed by us and how you can request that we delete, update, transfer and/or provide you with access to it.

This Privacy Policy is intended to assist you in making informed decisions when using the Site and our Services and/or to understand how your personal information may be processed by us as a result of providing the Services to others or when you apply to work at Haysmacintyre LLP. Please take a moment to read and understand it. Please note that when using the Site it should be read in conjunction with our Website Terms of Use.

Please also note that this Privacy Policy only applies to the use of your personal information obtained by us, it does not apply to your personal information collected during your communications with third parties.

2. Who are we and what do we do?

The site and our services are operated by Haysmacintyre LLP (“we”, “us”, or “our”).

The data controller responsible for your personal information processed via the Site or in relation to the Services is Haysmacintyre LLP and subsidiary entities; haysmacintyre Corporate Finance Limited; Ely Place Administration Services Limited and haysmacintyre IT Consultants Limited

Haysmacintyre LLP is an English limited liability partnership under number OC423459 and whose registered office is at 10 Queen Street Place London EC4R 1AG

How to contact us?

If you have any questions about this Privacy Policy or want to exercise your rights set out in this Privacy Policy, please contact us by:

• sending an e-mail to dataprotection@haysmacintyre.com; or
• calling us on: 020 7969 5500

3. What personal information do we collect and how do we use it?

Our primary goal in collecting personal information from you may be to: (i) verify your identity; (ii) help us deliver our Services; (iii) improve, develop and market new Services; (iv) carry out requests made by you on the Site or in relation to our Services; (v) investigate or settle inquiries or disputes; (vi) comply with any applicable law, court order, other judicial process, or the requirements of a regulator; (vii) enforce our agreements with you; (viii) protect the rights, property or safety of us or third parties, including our other clients and users of the Site or our Services; (ix) provide support for the provision of our Services; (x) recruitment purposes; and (xi) use as otherwise required or permitted by law.

To undertake these goals we may process the following personal information:

If you are a visitor to the Site:

• Name and job title.
• Contact information including email address.
• Demographic information such as postcode, preferences and interests.
• Other information relevant to provision of Services.

If you are an individual client in receipt of our Services or prospective individual client:

• Name and job title.
• Contact information including email address.
• Payment information.
• Other information relevant to provision of Services.
• Information that you provide to us as part of our providing the Services to you which depends on the nature of your instructions to us and the work we are carrying out for you.
• Relevant information as required by anti-money laundering regulations and regulatory rules which require us to conduct due diligence on our clients. This may possibly include evidence of source of funds, at the outset of and possibly from time to time throughout our relationship with clients, which we may request and/or obtain from third party sources. The sources for such verification may comprise documentation which we request from the prospective client or through the use of online sources or both.

Primarily we are engaged by corporate instructors (i.e. other corporate entities) and as such those instructors are not data subjects.  As part of such instructions personal information about other persons may be provided to us (e.g. personal information relating to, without limitation, any of our corporate clients’ or prospective clients’ workers (including their employees, directors, members, or contractors), any opponent or vendor or purchaser personal information including personal information relating to their legal advisors or workers as relevant or similar).

If you are an individual whose personal information may be processed by us as a result of providing the Services to others (including our individual clients and corporate clients) we will process a variety of different personal information depending on the Services provided in question.

This may include personal information relating, without limitation, to any of our corporate clients’ or prospective clients’ workers (including their employees, directors, members, or contractors), any opponent or vendor or purchaser personal information including personal information relating to their legal advisors or workers as relevant or similar.

This is a non-exhaustive list which is reflective of the varied nature of the personal information processed as part of a law firm providing legal services:

We might also need to process personal information in relation to other third parties instructed either by our own clients or other persons or companies involved with us providing the Services to our client (for instance, foreign accountancy practices, tax advisers, law firms, experts, HMRC).

Please note also that we do not have to provide information to you about how we process your personal information when we do so as a result of providing the Services to others and may indeed be subject to professional obligations of secrecy in respect of the Services.  We are providing the information in this Notice, however, because we believe in being as transparent as possible about its data privacy practices and want you to be able to understand how we may process your data (and about how you can exercise any applicable data subject rights)

If you are a potential recruit:

• Name and job title.
• Contact information including email address.
• Curriculum vitae, your education, employment history and similar matters and similar information that you may provide to us.
• Other information relevant to potential recruitment.

In particular, we may use your personal information for the following purposes:

Fulfilment of Services.

We collect and maintain personal information that you voluntarily submit to us during your use of the Site and/or our Services to enable us to perform the Services. Please note also that our Terms of Business also apply when we provide the Service.   

Who do we share your personal information with for this purpose?

We may share personal information with a variety of the following categories of third parties as necessary when providing the Services:

• Experts (for example foreign lawyers, tax or medical advisors, accountants, valuers)
• Insurers (including but not limited professional indemnity insurers)
• Regulators/tax authorities/corporate registries
• Courts and Tribunals
• Crime enforcement agencies
• Translators
• IT and telephony service providers for hosting and support services
• Document storage providers
• Cloud based providers of accountancy systems

Please note this list is non-exhaustive and there may be other examples where we need to share with other parties in order to provide the Services as effectively as we can.

What is our legal basis?

It is necessary for us to use your personal information to perform our obligations in accordance with any contract that we may have with you or it is in our legitimate interest or a third party’s legitimate interest to use the personal information to ensure we provide the Services  in the best way that we can.

Client services.

Our Site uses various user interfaces to allow you to request information about our Services. Contact information may be requested in each case, together with details of other personal information that is relevant to your enquiry. This information is used in order to enable us to respond to your requests.

Who do we share your personal information with for this purpose?

We do not share your personal information for this purpose. 

What is our legal basis?

It is in our legitimate interest or a third party’s legitimate interest to use your personal information in such a way to ensure that we provide the very best client service we can to you or others.

Your feedback about our Services.

From time to time we will contact you to invite you to provide feedback about our Services in the form of online or postal communications. We use this information to help us improve the quality of service provided by our staff. We also use your feedback to monitor the quality of our Services.

Who do we share your personal information with for these purposes?

We use a third party service provider to assist us with client surveys and feedback requests.

What is our legal basis?

It is in our legitimate interest to use the information you provide to us in your feedback for the purposes described above.

Business administration and legal compliance.

We may use your personal information for the following business administration and legal compliance purposes:

• to comply with our legal obligations (including any accountancy regulatory body requirements such as the ICAEW Know Your Client, Anti-Money Laundering, Anti-Bribery or similar obligations including but without limitation maintaining regulatory insurance);

• to respond to enquiries, investigations, and to deal with regulators, relevant tax authorities, crime and enforcement agencies and similar bodies;

• for internal training and administration purposes; 

• to enforce our legal rights or defend our position or to take advice in this context;

• protect rights of third parties; and

• in connection with a business transition such as a merger, acquisition by another company, or sale of all or a portion of our assets.

Who do we share your personal information with for these purposes?

We will share your personal information with professional advisers such as lawyers and accountants and/or governmental or regulatory authorities, crime and enforcement agencies and judicial bodies such as courts and tribunals. 

What is our legal basis?

Where we use your personal information in connection with a business transition, to enforce our legal rights, or to protect the rights of third parties it is in our or a third party’s legitimate interest to do so. For all other purposes described in this section, it is our legal obligation to use your personal information to comply with any legal obligations imposed upon us.

Recruitment.

We use your personal information for the following recruitment purposes:

• To assess your suitability for any position for which you may apply including partner level positions or summer placements and also any business support or services role whether such application has been received by us online, via email or by hard copy or in person application.

• To review our equal opportunity profile in accordance with applicable legislation and to take steps to ensure that Haysmacintyre LLP does not discriminate on the grounds of gender, race, ethnic origin, age, religion, sexual orientation, disability or any other basis covered by local legislation and that all recruitment decisions are made entirely on the basis of merit.

Who do we share your personal information with for these purposes?

We will share your personal information with third parties who assist us in carrying out our recruitment activity.   

What is our legal basis?

Where we use your personal information in connection with recruitment it will be in connection with us taking steps at your request to enter into a contract we may have with you or it is in our legitimate interest to use personal information in such a way to ensure that we can make the best recruitment decisions. We will not process any special data except where we are able to do so under applicable legislation or with your explicit consent.

Client insight and analysis.

We analyse your contact details with other personal information that we observe about you from your interactions with our Site, our email communications to you and/or with our Services.

Where you have given your consent (where lawfully required), we use cookies, log files and other technologies to collect personal information from the computer hardware and software you use to access the Site, or from your mobile device. This includes the following:

• an IP address to monitor Site traffic and volume;

• a session ID to track usage statistics on our Site;

• information regarding your professional interests, experiences with our Services and contact preferences.

Our web pages and e-mails contain “cookies” “web beacons” or “pixel tags.” (“Tags”). Tags allow us to track receipt of an e-mail to you, to count users that have visited a web page or opened an e-mail and collect other types of aggregate information. Once you click on an e-mail that contains a Tag, your contact information may subsequently be cross-referenced to the source e-mail and the relevant Tag. In some of our e-mail messages, we use a “click-through URL” linked to certain website administered by us or on our behalf.

Please see our Cookie Policy for further information.

By using this information, we are able to measure the effectiveness of our content and how visitors use our Site and our Services. This allows us to learn what pages of our Site are most attractive to our visitors, which parts of our Site are the most interesting.

Who do we share your personal information with for these purposes?

We share your personal information with a variety of third party service providers to assist us with client insight analytics (Google Analytics).

What is our legal basis?

Where your personal information is completely anonymised, we do not require a legal basis to use it as the information will no longer constitute personal information that is regulated under data protection laws. Our collection and use of such anonymised personal information may be subject to other laws where your consent is required. Please see our Cookie Policy for further details.

Where your personal information is not in an anonymous form, it is in our legitimate interest to use your personal information in such a way to ensure that we provide the very best products and services to you and our other clients.

Marketing communications.

We carry out the following marketing activities using your personal information:

Postal marketing.

We use your name and address to send you marketing communications by post.

Our postal marketing will include personalised and non-personalised postal marketing. Personalised marketing is marketing which has been specifically tailored to you. For example, our personalised postal marketing will feature those of our Services that we think are most likely to appeal to you. Non-personalised marketing is marketing about our Services generally and is not tailored to any particular individual. 

Where we are sending you personalised postal marketing, we also use information that we observe about you from your interactions with our Site, with our email communications to you and/or with our Services in order to decide what sort of personalised marketing communications to send you. Please see the “Client Insight and Analysis” section above for more details about the personal information collected and how it is collected.

Who do we share your personal information with for these purposes?

We share your personal information with a variety of third party postal providers who assist us in delivering our postal marketing campaigns to you.

What is our legal basis?

Where your personal information is not in an anonymous form, such as your postal address, it is in our legitimate interest to use your personal information for postal marketing.

Email marketing.

We use your name and email address to send you marketing communications by email, where you have consented to receive such marketing communications or where we have another lawful basis to do so.

Our email marketing will include personalised and non-personalised email marketing. Personalised marketing is marketing which has been specifically tailored to you. For example, our personalised email marketing will feature those of our Services that we think are most likely to appeal to you. Non-personalised marketing is marketing about our Services generally and is not tailored to any particular individual. 

Where we are sending you personalised email marketing, we will also use information that we observe about you from your interactions with our Site, with our email communications to you and/or with our Services in order to decide what sort of personalised marketing communications to send you. Please see the “Client Insight and Analysis” section above for more details about the personal information collected and how it is collected.

Who do we share your personal information with for these purposes?

We share your personal information with our third party email marketing providers who assist us in delivering our email marketing campaigns to you.

What is our legal basis?

Where your personal information is completely anonymised, we do not require a legal basis to use it as the personal information will no longer constitute personal information that is regulated under data protection laws. However, our collection and use of such anonymised personal information may be subject to other laws where your consent is required. Please see our Cookie Policy for further details.

Where your personal information is not in an anonymous form, it is in our legitimate interest to use your personal information for marketing purposes.

We will only send you marketing communications via email where you have consented to receive such marketing communications, or where we have a lawful right to do so.

• Any other purposes for which we wish to use your personal information that are not listed above, or any other changes we propose to make to the existing purposes will be notified to you using your contact details.

4. How do we obtain your consent?

Where our use of your personal information requires your consent, you can provide such consent:

• at the time we collect your personal information following the instructions provided; or

• by informing us by e-mail, post or phone using the contact details set out in this Privacy Policy.

5. Our use of cookies and similar technologies

Our Site uses certain cookies, pixels, beacons, log files and other technologies of which you should be aware. Please see our Cookie Policy to find out more about the cookies we use and how to manage and delete cookies.

6. Third Party contractors and other controllers

As mentioned above, we may appoint sub-contractor data processors as required to help us to deliver the Services, such as but not limited to, ixbrl tagging providers where we do so, they will process personal information on our behalf and at our direction.  We conduct an appropriate level of due diligence and put in place necessary contractual documentation in relation to any sub-contractor to ensure that they process personal information appropriately and according to our legal and regulatory obligations.

Further, we may appoint external data controllers in common with us where necessary to deliver the Services, such as but not limited to, legal advisers valuers foreign accountants. Where we do so, we will comply with our legal and regulatory obligations in relation to the personal information including but without limitation (where necessary) putting appropriate safeguards in place to ensure any personal information is processed according to our legal and regulatory obligations.

7. Extra-EEA Transfers

If you are based within the EEA, please note that where necessary to deliver the Services we will transfer personal information to countries outside the EEA. Not all countries provide the same level of protection in relation to personal information as within the EEA. Where necessary to make such transfers, we will comply with our legal and regulatory obligations in relation to the personal information. This will includes having a lawful basis for transferring personal information and putting appropriate safeguards in place to ensure an adequate level of protection for the personal information.

8. How long do we keep your personal information for?

Regarding visitors to the Site, we will retain relevant personal information for at least 12 months from the date of our last interaction with you and in compliance with our obligations under the EU General Data Protection Regulation (or similar legislation around the world), or for longer where we are required to do so according to our regulatory obligations or professional indemnity obligations.

Regarding personal information we have processed as part of providing the Services to any client, we will retain relevant personal information for at least seven years from the date of our last interaction with that client and in compliance with our obligations under the EU General Data Protection Regulation (or similar legislation around the world) or for longer where we are required to do so according to our regulatory obligations or professional indemnity obligations. See our Terms of Business for further details.

If personal information is only useful for a short period e.g. for specific marketing campaigns, we may delete it.

9. Confidentiality and security of your personal information

We are committed to keeping the personal information provided to us secure and we will take reasonable precautions to protect personal information from loss, misuse or alteration.

We have implemented information security policies, rules and technical measures to protect the personal information that we have under our control from:

• unauthorised access;

• improper use or disclosure;

• unauthorised modification; and

• unlawful destruction or accidental loss.

All of our members, employees, workers and data processors (i.e. those who process your personal information on our behalf, for the purposes listed above), who have access to, and are associated with, the processing of personal information, are obliged to respect the confidentiality of the personal information of all visitors to the Site and all users of our Services.

10. How to access your information and your other rights?

You have the following rights in relation to the personal information we hold about you. Please note that these rights are subject to certain exemptions which may be applicable to any request you make:

Your right of access..

If you ask us, we’ll confirm whether we’re processing your personal information and, subject to any applicable exemptions, provide you with a copy of that personal information (along with certain other details) within the timescales or extended timescales provided for by the GDPR for complex requests, or as applicable provide you will an explanation of why we will not be complying with your request. If you require additional copies, we may need to charge a reasonable fee.

Your right to rectification.

If the personal information we hold about you is inaccurate or incomplete, you’re entitled to have it rectified. If you are entitled to rectification and if we’ve shared your personal information with others, we’ll let them know about the rectification where possible and where this would not involve disproportionate effort. If you ask us, where possible and lawful to do so, we’ll also tell you who we’ve shared your personal information with so that you can contact them directly.

Your right to erasure.

You can ask us to delete or remove your personal information in some circumstances such as where we no longer need it or if you withdraw your consent (where applicable because that was the legal basis on which we were processing your personal data). If you are entitled to erasure and if we’ve shared your personal information with others, we’ll take reasonable steps to inform those others where possible and where this does not involve disproportionate effort. If you ask us, where it is possible and lawful for us to do so, we’ll also tell you who we’ve shared your personal information with so that you can contact them directly.

Your right to restrict processing

You can ask us to ‘block’ or suppress the processing of your personal information in certain circumstances such as where you contest the accuracy of that personal information or you object to us. If you are entitled to restriction and if we’ve shared your personal information with others, we’ll let them know about the restriction where it is possible for us to do so and does not involve disproportionate effort. If you ask us, where it is possible and lawful for us to do so, we’ll also tell you who we’ve shared your personal information with so that you can contact them directly.

Your right to data portability

With effect from 25 May 2018, you have the right, in certain circumstances, to obtain personal information you’ve provided us with (in a structured, commonly used and machine readable format) and to reuse it elsewhere or to ask us to transfer this to a third party of your choice.

Your right to object

You can ask us to stop processing your personal information, and we will do so, if we are:

• relying on our own or someone else’s legitimate interests to process your personal information, except if we can demonstrate compelling legal grounds for the processing; or

• processing your personal information for direct marketing.

Your rights in relation to automated decision-making and profiling.

You have the right not to be subject to a decision when it’s based on automatic processing, including profiling, if it produces a legal effect or similarly significantly affects you, unless such profiling is necessary for entering into, or the performance of, a contract between you and us.

Your right to withdraw consent.

If we rely on your consent (or explicit consent) as our legal basis for processing your personal information, you have the right to withdraw that consent at any time.

Your right to lodge a complaint with the supervisory authority.

If you have a concern about any aspect of our privacy practices, including the way we’ve handled your personal information, you can report it to the Information Commissioner’s Office (ICO) in the UK where your concern relates to Haysmacintyre LLP You can find details about how to do this on the ICO website or by calling their office on 0303 123 1113.

11. Collection of information by third-party sites and sponsors

The Site contains links to other sites whose information practices may be different from ours. Visitors should consult the other sites’ privacy notices as we have no control over information that is submitted to, or collected by, these third parties.

12. Changes to this Privacy Policy

We may make changes to this Privacy Policy from time to time.

To ensure that you are always aware of how we use your personal information we will update this Privacy Policy from time to time to reflect any changes to our use of your personal information. We may also make changes as required to comply with changes in applicable law or regulatory requirements. We will notify you by e-mail of any significant changes. However, we encourage you to review this Privacy Policy periodically to be informed of how we use your personal information.

What is Property Income

Property income is defined as generating income from land by exploiting an estate, interest or right in or over land as a source of rents or other receipts. The most common form of property income is rent but it also includes other receipts such as payments by a tenant for work to maintain or repair the property and lease premiums.

There are specific tax rules that treat part of the lease premium on the grant of a lease for a term of less than 50 years as property income that is subject to corporation tax for companies. The amount that is treated as property income is calculated on a sliding scale where broadly 2% of the lease premium for each complete year (plus an additional year) that the lease is less than 50 years treated as rental income. For example, 52% of the lease premium for a lease granted for 25 years is treated as property income. The remaining part of the lease premium is subject to the capital gains rules.

There are also special rules that can treat inducements for entering into a lease and payments made for the surrender of a lease, which might usually be considered capital transactions, wholly or partly as property income. These rules are fact dependant and tax advice on the specific scenario should be sought.

We would recommend obtaining advice from your tax advisor on the taxation treatment whenever you are granting, acquiring or surrendering leases.

Calculating the profits of a property business

UK resident companies are subject to corporation tax on the profits arising from UK property businesses and overseas property businesses, which are treated as distinct property businesses for computational purpose.

A UK company with overseas property may be subject to tax in the local jurisdiction as well as in the UK. The double charge is relieved by deducting the overseas tax paid on the property income from the UK tax due on the same income. This is done either under the terms of a Double Taxation Treaty with the overseas country or, where no treaty exists, under separate UK rules, depending on the circumstances.

The profits of the property business must be computed in accordance with Generally Accepted Accountancy Practice (GAAP) and will generally follow the accounting treatment in the accounts subject to any capital expenditure and expenditure not incurred wholly and exclusively for the purposes of the property business not being deductible as a property business expense.

The deductible expenses for corporation tax purposes are generally similar to those discussed under UK Taxation of Property Income Held Personally. It can be possible to obtain tax relief as management expenses for some expenses that are not deductible as property business expenses.

Interest and other financing costs are however not treated as property expenses for Corporation Tax purposes and are dealt with under the rules for non-trade loan relationships.

The tax treatment of corporate interest is a complex area with a number of different rules such as transfer pricing, the corporate interest restriction and hybrid rules impacting the relief available for interest. This will be discussed in the next article as it is a vast topic on its own.

A UK company may also be able to obtain tax relief for fixtures in a building and plant and machinery used in property business by claiming, although capital allowances are generally not available for residential properties. It may also be able to obtain structure and building allowances (‘SBAs’) on the construction or refurbishment of non-residential buildings.

Non-resident companies

Since 6 April 2020 non-UK resident companies have been chargeable to UK Corporation Tax on profits of a UK property business, together with any loan relationships and derivatives relating to generating the UK property income. These Non-Resident Landlords (NRLs) were subject to the income tax regime on UK property income prior to 6 April 2020.

The default position for non-UK resident landlords is that the tenant or letting agent is required to withhold 20% tax at source before paying the net rent which could be disadvantageous especially where the landlord is paying for expenses directly. It can be possible for such entities to register for the non-resident landlord scheme to receive the gross rent and we would recommend registering for this, which we can assist with.

NRLs will also need to consider the interaction between the UK tax regime and the tax regime in their country of residence. The most common interaction is withholding tax (‘WHT’) on interest, which will be covered in the corporate interest article, but if the NRL is situated in a country that also taxes property income then the tax rules in the country of residence, including any double tax treaty with the UK, will need to be checked to ensure that relief is given for any double taxation.

NRLs who prepare signed accounts that meet UK GAAP or IFRS accounting standards will need the statutory accounts to be ‘tagged’ in iXBRL format and submitted to HMRC together with the corporation tax return and computation. NRLs who are not required to prepare statutory accounts in their local jurisdiction will need a tagged profit and loss statement within the tax computation at the very least to submit a valid UK tax return.

Losses

The losses arising from a UK property business can first be set off against the company’s total taxable profits for that accounting period and then surrendered as group relief to other companies in the same group. Any remaining property losses can be carried forward for offset against total profits of the following accounting period or, for losses accruing on or after 1 April 2017, surrendered as group relief where the company cannot offset them against its own profits and the same property business is carried on in the succeeding accounting period.

Overseas property business losses can be used only against future profits of that overseas property business.

The above is not exhaustive but hopefully provides a broad overview of the UK Corporation Tax regime for property businesses. Please do contact Reshma Patel at rpatel@haysmacintyre.com or Mark Baycroft mbaycroft@haysmacintyre.com if you have any questions.

Creative, Media & Technology, or more commonly referred to as ‘CMT’ in the haysmacintyre office, is our firm’s largest sector, encompassing, technology companies at varying stages of their lifecycle, digital and media agencies, retail, fashion and ecommerce brands, and listed corporate entities, including some of the UK’s most exciting businesses.

There were instances where engagers were taking a blanket approach and deducting PAYE and National Insurance (NI) regardless of whether the legislation applied. Further challenges included, for example:

• Is the engager caught by the legislation?
• Who at the engager was going to have overall responsibility for legislation?
• What policies and procedures needed to be put in place to ensure the legislation was being applied?

To recap, a business will fall within scope of IR35 where two of the following three conditions are met:

• Turnover exceeds £10.2m;
• Gross assets of £5.1m plus; or
• More than 50 employees

Many charities and NFP organisations regularly engage individuals directly on a self-employed basis and the same ‘tests’ for both IR35 and employment status need to be considered to help determine whether they can be paid ‘gross’, otherwise PAYE and Class 1 NI needs to be deducted. Examples of the tests which need to be considered include, but not limited to:

• Mutuality of obligation: Is the school obliged to provide work to the contractor/worker?
• Personal skills: Is the individual providing specialist skills which nobody else possess and do they have the right to provide a substitute (including the unfettered right of substitution)?
• Reality of the engagement: HMRC will typically look at what the contracts says and compare this with how the services are provided.

The amount of questions HMRC can raise during an employment status review can be more than 100, which can prove time consuming for both the engager and the worker to deal with.

HMRC campaign letter

The current HMRC campaign is not limited to individuals who provide their services via an intermediary, such as a personal service company (PSC). It will look at any individual where the payments made are not subject to payroll deductions, such as Income Tax and NI.

What is HMRC looking for?

Based on the campaign letters we have seen to date, HMRC is requesting the following information:

• A full list of all sub-contractors, workers and individuals who were engaged during the 2022/23 tax year.
• Details of payments made to those individuals, sub-contractors and workers including details of the services provided.
• Provision of sample invoices.
• A copy of any internal guidance and/or manuals.
• Sample contracts and time records.

The final question from HMRC concerns a description of the procedures in place for determining the employment status of the contractors/workers.

In respect of this question, HMRC wants to understand what steps businesses are taking to ensure they have fully considered the tax treatment of the payments they make, to any ‘off-payroll’ workers they may engage. This will include, for example:

• What testing of the contractual arrangements is being carried out?
• Is the school making use of HMRC’s Check Employment Status for Tax (CEST) tool, or any other similar software as part of its verification processes?
• Where there is any disagreement over the tax treatment on payments made to a worker, how is that dispute resolved?
• How often does the school review the employment status of its workers?

Even if you have not received one of HMRC’s campaign letters, the fact that HMRC has put in place a targeted campaign within the charities and not for profit sector is an indication that it believes there is a high level of non-compliance.

Updated HMRC guidance

As well as its current campaign, HMRC has recently updated all of its guidance in respect of the off-payroll working (OPW) arrangements, which covers the following points:

• Who is responsible for operating the OPW rules?
• How are the worker supply chains being monitored?
• How are status determinations being made?
• What training is being provided to ensure there is compliance with the legislation?
• What internal guidance is in place?
• How are the PAYE reporting obligations being discharged?

How haysmacintyre can help

We have considerable experience assisting clients with a wide range of employment tax issues, especially in relation to employment status and OPW arrangements. The following are examples of how we can help you:

• Review your existing OPW arrangements
• Assisting with any HMRC enquiries
• Provide training or technical updates
• Any ad hoc matters

If you wish to discuss matters further, please do not hesitate to contact Nick Bustin, Director of Employment Tax, or a member of the Employment Tax team.

It’s unusual to find a specialist hospitality service at a mid-tier accountancy firm, but it brings you advantages: closer partner-led service than you may find at the Big Four, with a full range of skills and support that’s also accessible and affordable for smaller hospitality businesses.

We also collaborate regularly with our other service teams, and as we are all based in one office, it means you’ll benefit from readily available comprehensive and pragmatic advice.

 

How has the Government done this?

The supply of education, vocational training, and closely related goods and services was exempt when supplied by an eligible body. Schools within the meaning of the various Education Acts that cover the UK were defined as eligible bodies.

What the Government has done is to draft an ‘Exception’ to this legislation so that it now says that the supply of education and vocational training is exempt except when it is supplied by a private school. It then goes on to define what a private school is. In essence, it defines it as a school at which full time education is provided for pupils of compulsory school age, or for persons over school age but under 19 to cover sixth form colleges.

This means that VAT becomes chargeable in the academic year that pupils turn five, not from the day or term in which they become five (Reception). In Northern Ireland education becomes compulsory at four.

Nursery provision

In setting this age limit the Government has opened the door for nursery provision to remain exempt and, indeed, the Treasury’s Technical Note confirms that this is the case and that it applies to both standalone nurseries and nurseries attached to private schools.

Special Educational Needs

Far less helpfully, the Government has announced that any pupil with Special Educational Needs (SEN) in a private school will be subject to VAT on their fees.

They make much of the fact that where such a pupil has an Education, Health and Care Plan (EHCP), or the Scottish and Welsh equivalents, then the Local Authority (LA) can recover the VAT they are charged. This is not some generous relief, simply the normal operation of Section 33 of the VAT Act which allows LAs to reclaim VAT, and it overlooks the fact that getting an EHCP is a time consuming and difficult process.

Closely related goods and services

The other interesting thing about the way the legislation is drafted is that, with one exception, it continues to allow closely related goods and services to remain exempt. That exception is board and lodging which is closely related to a supply of education or vocational training.

That means that other closely related supplies of goods and services can continue to benefit from their previous treatment as exempt.

The only comment that the Note makes is to say that any attempt at value shifting will be challenged so you could not, for example, say that 95% of your fees relate to the provision of school meals and only 5% to fees.

This throws up a number of queries which have yet to be addressed, although additional guidance is due to be issued by HMRC in due course. Firstly, the Note says that these closely related goods and services can remain exempt and gives as examples, school meals, transport, and books and stationery. This overlooks the fact that whilst HMRC accepts transport and books as being supplies which are closely related to education, and thus capable of falling within this exemption, transport in a vehicle with a capacity of 10 or more and the supply of books are also zero-rated. There is a provision in VAT law which says that when a supply is capable of being exempt and zero-rated, then zero-rating takes precedence.

In addition, there is a well established concept in VAT law regarding what are known as composite supplies. A composite supply can arise where you have a principal supply of something and one or more supplies which are ancillary to that principal supply and as case law has held are simply means to better enjoy that principal supply.

Where you have a composite supply, then the ancillary supplies take on the same VAT liability as the principal supply. In a sense it is akin to the force of gravitational attraction pulling in the ancillary elements.

So, whilst the draft statute law says closely related supplies like school meals can continue to be regarded as exempt, the provision of school meals alongside education would almost certainly be regarded as a composite supply, such that the meals would become subject to VAT.

It may be unlikely that many schools would want this, but some schools might wish to minimise the value of their exempt supplies to maximise input tax recovery, so it will be interesting to see how the Courts would view this apparent conflict.

Before and after school activities

Where additional education is supplied, for example music lessons, sports coaching or additional language tuition, then this will be subject to VAT as education.

Before and after school clubs looking after pupils who have been dropped off by their parents, or who are awaiting pick up, and which are essentially childcare rather than supplying education can be treated as exempt welfare.

Where the Note muddies the water is that it says that where there is an extra-curricular club such as a football club where children are not being coached or otherwise taught how to play football but are playing with their peers and are supervised then it seems to imply that VAT should be chargeable on this (though it does not actually say so).

I cannot see any difference between this and any other type of after school club which is essentially childcare, as presumably Health & Safety legislation would require the presence of an adult in case of accidents.

VAT registration

The Note says that where schools do not currently make any taxable supplies, they will be allowed to register from 30 October 2024.

Any school which has any taxable supplies at all has an absolute entitlement to register for VAT before that date on a voluntary basis. But if it does, then it will need to start to charge VAT on these existing taxable supplies earlier than they might otherwise have to.

Whilst the Note says that additional support will be put in place to ensure all schools can register before 1 January 2025, there has to be some doubt surrounding this given HMRC’s recent performance levels around VAT registrations. Schools who have an entitlement to register might want to think about submitting an application to register prior to 30 October but requesting an effective date of registration of say 1 January or 1 December if, as most will, they issue their January term fees in December.

When applying for registration, schools will want to ensure they request a return stagger which suits them, so if they want it to be coterminous with their Financial Year, then most will want to request a February/May/August/November return stagger.

In addition, the time when partial exemption annual adjustments and Capital Goods Scheme (CGS) calculations become due is driven off the ‘tax year’. The tax year ends in the Spring VAT return quarter, but HMRC does have the power to allow a different tax year. If you request a return stagger with a May VAT return, then your partial exemption annual adjustment can be carried out in either that quarter or the August one, unless you specifically request a tax year ending in August, where it could be declared in either the August or November returns.

This is often overlooked with organisations automatically assuming they do their annual adjustment at their financial year end. But do not rush to ask for a different VAT year in case you inadvertently lose the ability to make a CGS adjustment. For example, a May VAT year would mean you could make adjustments for CGS items brought into use on or after 1 June 2016, but an August one would mean you could only go back to September 2016.

I would add that it is not only businesses who overlook the tax year since one of my clients was recently advised by HMRC that their tax year ended on 31 November, and when I last looked, there was no such day!

Fees In Advance

As expected, anti-forestalling measures were announced which means that all payments of fees made after 29 July 2024, but which relate to the term starting in January 2025, will be subject to VAT.

Whilst expected, it is a shame that the Government broke with tradition here where such measures usually take effect from midnight on the day they are announced as this means that any parent who happened to make a prepayment of fees on the morning of 29 July before the announcement was made in the afternoon will be caught by the measure.

The other comment made by the Treasury is that they note that whilst in principle, they accept that a prepayment will have crystallised a time of supply or tax point, they go on to say that in many cases the structure of a Fees In Advance (FIA) scheme will not have been effective in setting the time of supply if the details of the supplies were not determined when the money was paid. They go on to say that by this they mean if the money paid did not relate to specific terms’ fees which had been set.

This would mean that virtually all FIA schemes are at risk since, whilst most schemes estimate future likely fee increases, very few will be able to set them in stone in case, for example, there is another sudden energy crisis.

It would also, for example mean that a parent who made a prepayment for seven years five years ago when there was no serious prospect of VAT being applied to school fees would, in effect, be hit with a retrospective tax.

I can see no legal basis in trying to argue that a parent who had made an advance payment for their child’s education was not clear about what they were buying simply because the precise amount which would be due in five years was not known, and they expected to pay additional amounts to cover any fee increase.

It seems to me that this is an attempt to bully schools since no matter how silly an argument this might be, HMRC can take it knowing that if they lose, they can appeal to the Upper Tribunal, and then the Court of Appeal and Supreme Court, knowing that they have the infinite resources of Government which even the wealthiest of independent schools may not have.

It can only be hoped that schools will work together in the event that HMRC does seek to make such challenges.

For further advice around how we can help, please visit our VAT on School Fees page here, or contact Phil Salmon, Partner and Co-Head of VAT.