Getting tough on share sales – latest HMRC action incoming

The Chartered Institute of Taxation (CIOT) have published details of an HMRC briefing stating that they have undertaken a project reviewing declared proceeds from share sales in 2019/20 Self-Assessment tax returns, against the values declared by purchasing companies. This is seen as an area of tax risk by HMRC, and they have the information available to investigate and challenge the declared values of share sale proceeds.

HMRC will be sending ‘nudge letters’ to those where a discrepancy is identified, as part of its one-to-many strategy. HMRC receives data from a vast number of sources and believe that the use of nudge letters provides it with a cost-effective approach to communicate with many taxpayers.

Nudge letters are a targeted communication from HMRC to a large group of taxpayers. HMRC’s nudge letters to date have either identified a potential loss of tax or, more broadly, are used as an educational exercise.

It is worth noting that representatives do not always receive a copy of these communications from HMRC. The communications are aimed at encouraging taxpayers to review their own tax affairs and voluntarily correct any errors or omissions. Our experience has shown that there can be inaccuracies with some of the information held by HMRC, or it has been interpreted incorrectly.

This latest HMRC nudge letter will contain an invitation to make a disclosure for those who agree that the tax return contains an inaccuracy, or a written response from those who are happy the information in their tax return is correct. Caution is advised here: if an error is found later, HMRC may use the written confirmation as evidence of deliberate or fraudulent behaviour in penalty negotiations.

HMRC is expected to take further action against those who do not respond, which may include discovery assessments or other compliance action, and could carry higher penalties.

We recommend reviewing declared share sales in 2019/20 and seeking professional advice should there be a discrepancy. A voluntary unprompted disclosure, ahead of the receipt of any letter, would benefit from the lowest available penalties. We expect HMRC to undertake similar projects in tax years going forward.

Should you require any professional advice please contact our head of tax disputes and resolutions, Danielle Ford.

The full publication can be found here.

Private Client Briefing Spring 2022

We again find ourselves in challenging and uncertain times. Economic uncertainty and increases to the cost of living are coupled with increases to the rates of National Insurance and income tax on dividends.

Alongside these tax increases, we continue to see increased enquiry activity from HM Revenue & Customs (HMRC) and confirmation of fundamental changes to the tax system in less than two years with the introduction of Making Tax Digital for Income Tax.

Please do not hesitate to contact me or any of the Team, if we can assist you in any way.

Tax Return Aide Memoire 2022

Your haysmacintyre team is ready to prepare your 2021-22 tax return, and hope that this aide memoire will assist you in collating the required information and documents.

Please get in touch by the following dates should you require support:

  • By 30 June if you wish us to check your 31 July 2022 payment on account; and
  • By 31 October at the very latest, to be sure of meeting the filing deadline

If you are due a repayment from HMRC: the sooner you submit your return, the sooner you’ll receive your repayment.

Whilst writing, a reminder that Making Tax Digital for Income Tax will apply to the self-employed and those with rental income, in just two years’ time. From April 2024, real time, digital tax records will be required.

Please do not hesitate to contact us if you have any queries, or if we can assist in any way.

UK Trust Registration Service guide for non-UK trusts

Definition of a non-UK trust

A non-UK trust is any trust which is not a UK trust. A trust is defined as a UK trust if the following apply:

  • All trustees are residents in the UK*; or
  • There is a mixture of UK and non-UK resident trustees and the settlor was resident and domiciled in the UK when the trust was set up, or when the settlor added funds to the trust. Deemed domicile status is ignored for this purpose.

*A trustee is a UK resident if either:

  • It is a UK body corporate
  • They are an individual who is UK resident for the purposes of one or more of the following taxes:
    • Income Tax
    • Capital gains tax
    • Inheritance tax
    • Stamp duty land tax
    • Land and buildings transaction tax (Scotland)
    • Land transaction tax (Wales)
    • Stamp duty reserve tax

Stephanie Parker, Trust Director, outlines topics such as the types of non-UK trusts that need to be registered and trusts with a UK tax liability in our guide below.

Major Sporting Events (Income Tax Exemption) Regulations 2022 for summer

1. Finalissima football match – SI 2022/487

The Finalissima football match between Italy and Argentina is due to be held at Wembley Stadium on 1 June 2022.

SI 2022/487 will come into force on 27 May 2022. The Income Tax Exemption will be available from 28 May 2022 until 2 June 2022 and only applies to individuals within the meaning of an accredited person. The individuals must be non-UK resident in the 2022/23 tax year or, if split year treatment applies, the income must relate to the overseas part of the tax year.

2. UEFA Women’s EURO 2022 finals – SI 2022/489

The UEFA Women’s Euro 2022 finals tournament is due to be held in England in July 2022.

SI 2022/489 will come into force on 30 June 2022. The Income Tax Exemption is available from 1 July 2022 until 6 August 2022 and only applies to individuals within the meaning of an accredited person. The individuals must be non-UK resident in the 2022/23 tax year or, if split year treatment applies, the income must relate to the overseas part of the tax year.

3. Birmingham Commonwealth Games – SI 2022/493

The Birmingham Commonwealth Games will take place from 28 July 2022 to 8 August 2022.

SI 2022/493 will come into force on 30 June 2022. The Income Tax Exemption is available from 1 July 2022 to 11 August 2022 and applies to duties or services in connection with the Birmingham Commonwealth Games which are performed by an accredited person in the UK during this period. The individual must be a non-UK resident in the 2022/23 tax year or, if split year treatment applies, the income must relate to the overseas part of the tax year.

If you require further information, please contact Danielle Ford, Director and Head of Tax Disputes & Resolutions.

Penalties for facilitating avoidance schemes involving non-resident promoters

Following our Tax Disputes and Resolutions team’s recent article in Taxation ‘HMRC’s power to publish information about avoidance schemes’ Finance Act 2022, s 86 (read the full article here), HMRC has published guidance on penalties for facilitating avoidance schemes involving non-resident promoters, Finance Act 2022, s 91 schedule 13.  The legislation introduces a new penalty that is to be applied to UK entities who facilitate tax avoidance schemes involving non-resident promoters.

The penalty will be up to 100% of the total fees or equivalent thereon received by all entities involved in the promotion of the avoidance scheme

This is part of HMRC’s wider focus on clamping down on promoters.

Tackling tax avoidance schemes involving offshore promoters has proved a challenge for HMRC.  The new penalty is a positive step to tackle non-resident promoters of tax avoidance schemes.

The new penalty together with POTAS and Enablers penalties and the publication of information to identify promoters will act as a greater deterrent to UK entities from promoting such schemes.

For more information, please do not hesitate to contact Danielle Ford, Head of Tax Disputes and Resolutions.

UK Trust Registration Service for non-UK trusts

Types of non-UK trust arrangements that need to be registered

 Trusts with a UK tax liability

Any trusts with a liability on UK source income or assets will need to register. Trusts required to register are those with a liability to:

  • Income Tax
  • Capital Gains Tax (CGT)
  • Inheritance Tax
  • Stamp Duty Land Tax
  • Land and Buildings Transaction Tax (Scotland)
  • Land Transaction Tax (Wales)
  • Stamp Duty Reserve Tax

Note that if there is a UK tax liability on non-UK assets (e.g. shares in a non-UK company holding UK residential property) trustees do not need to register. However, non-UK companies holding property may have to register on The Register of Overseas Entities.

Trusts acquiring land in the UK

Trusts which acquire land in the UK on or after 6 October 2020 will need to register.

Trusts entering into a business relationship

Where the trustees include at least one UK resident trustee, they will be required to register if they enter into a business relationship in the UK.

Exclusions

Certain types of trust will be excluded from the requirement to register, including will trusts, disabled person’s trusts, charitable trusts and certain life insurance policy trusts, amongst others.

Deadlines

Trusts with a UK tax liability created before 6 April 2021 must register by 31 January following the end of the tax year in which they first become taxable. This deadline is brought forward to 5 October if the liability is to Income Tax or CGT as the registration is linked to the request for a tax return to be issued.

All other trusts (non-taxable trusts and post 5 April 2021 taxable trusts) with a requirement to register must register by 1 September 2022 or 90 days from the date the requirement to register is triggered, whichever is later.

If a pre-6 April 2021 trust has a requirement to register as a taxable trust and also as a result of acquiring property or forming a business relationship, the earlier deadlines apply.

Any changes to the information held on the register must be notified within 90 days of the change.

Taxable trusts are required to make an annual confirmation that the register is up to date by 31 January each year.

Penalties

Whilst HMRC originally outlined a penalty scheme, it has stated that these will not be automatically issued, and a pragmatic approach will be followed. However, we would expect this approach to harden, and trustees should use their best endeavours to meet deadlines.

Retention of data and access to the register

Certain information must be held by the trustees and from 1 September 2022, those with a legitimate interest will be able to request limited information. Further details of this will be issued in the coming months.

Professional trustees must retain the data for five years from the date of the final distribution of assets and they must then delete the records unless they have permission to retain it or reasonably believe it may be required under an enactment or for the purposes of court proceedings.

For further information and to obtain a copy of our full TRS guide for non-UK trusts, please contact Stephanie Parker, Trust Director, or your usual haysmacintyre contact.

 

Trust Registration Service for UK trusts

Types of UK trust arrangements that need to be registered

 All UK express trusts

All UK trusts that are created deliberately must be registered (unless covered by a specific exclusion). Trusts are usually established by a written deed or declaration of trust, but they may also be created verbally, particularly in the case of ‘bare trusts’.

A bare trust exists where the beneficial owner has the right to capital and income, but legal ownership is in another’s name, eg a share portfolio held in the name of a parent for the benefit of a child, or private company shares held by someone as a nominee.

Bare trusts are also commonly found in relation to property ownership as property cannot be registered in the joint names of more than four people.

Taxable UK trusts

Any trust which has a liability to UK tax must register, even if it is covered by an exclusion. Trusts required to register are those with a liability to:

  • Income Tax
  • Capital Gains Tax (CGT)
  • Inheritance Tax
  • Stamp Duty Land Tax
  • Land and Buildings Transaction Tax (Scotland)
  • Land Transaction Tax (Wales)
  • Stamp Duty Reserve Tax

Exclusions

Certain types of trust will be excluded from the requirement to register, including will trusts, bank accounts for children, disabled person’s trusts, charitable trusts and certain life insurance policy trusts, amongst others.

Deadlines

Trusts with a UK tax liability created before 6 April 2021 must register by 31 January following the end of the tax year in which they first become taxable. This deadline is brought forward to 5 October if the liability is to Income Tax or CGT as the registration is linked to the request for a tax return to be issued.

All other trusts (non-taxable trusts and post 5 April 2021 taxable trusts) with a requirement to register must register by 1 September 2022 or 90 days from the date the requirement to register is triggered, whichever is later.

If a trust created pre-6 April 2021 has a requirement to register as a taxable trust and does not fall within the exclusions, then the earlier deadlines apply.

Any changes to the information held on the register must be notified within 90 days of the change.

Taxable trusts are required to make an annual confirmation that the register is up to date by 31 January each year.

Penalties

Whilst HMRC originally outlined a penalty scheme, it has stated that these will not be automatically issued, and a pragmatic approach will be followed. However, we would expect this approach to harden, and trustees should use their best endeavours to meet deadlines.

Retention of data and access to the register

Certain information must be held by the trustees and from 1 September 2022, those with a legitimate interest will be able to request limited information. Further details of this will be issued in the coming months.

Professional trustees must retain the data for five years from the date of the final distribution of assets and they must then delete the records unless they have permission to retain it or reasonably believe it may be required under an enactment or for the purposes of court proceedings.

For further information please contact Stephanie Parker, Trust Director, or your usual haysmacintyre contact.

Alice Palmer

Alice enjoys problem solving and helping clients to minimise their tax burden and also maximise tax reliefs. In particular, she has helped numerous charities claim one of the creative sector tax reliefs, advised on Gift Aid matters, withholding taxes, charitable direct tax exemptions and the use of trading subsidiaries.

Prior to joining haysmacintyre in 2016, Alice trained at a top 10 firm in a busy corporate tax team, building a firm foundation in Corporation Tax compliance and advisory.

Alice is active in local groups, including volunteering at an RDA (Riding for the Disabled) centre and helping improve the local environment.

Outside of the office, Alice enjoys wildlife watching/photography, horse riding, walking and planning her next adventure.

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