Phil Blazey

Slipping through the cracks with all the announcements at the end of last week in politics was the news that the Finance (No. 2) Bill 2024 has been given Royal Assent. This means that the Independent Film Tax Credit for "low budget films with a specified UK connection" as the legislation kindly refers to them is now UK law and will be available from 1 April 2025. Some questions remain, although a few have been answered, so watch this space for more updates. #FLB #entertainmentpartners #ep #film #IFTC #lowbudgetfilm #independentfilm #taxcredit #taxincentives #incentives

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It's broken - fix it This article is I think from one of the weekend papers and Seb Maley contributed to it then. There is a real problem here that goes beyond Gov't and HMRC policy and deep into the heart of many individuals. Those of us who work in this space every day know that inconsistency rules and whether or not a case gets picked up, enquired about, taken to Tribunal often seems arbitrary and random. That situation is aggravated when decisions on similar cases get different decisions at Tribunal. More recently we have seen the Upper Tier Tribunal say that the First-tier Tribunal either did not understand the law or applied it incorrectly. That opens up the possibility that already decided cases will become irrelevant in considering new cases! There is certainly a group of people within HMRC who are driven by a belief that there are NO contractors. There are only employees and disguised employees. This group of officers (and I'm not suggesting that they act in concert or conspiracy) seem to exert influence and also override whatever oversight HMRC SOLS is meant to bring. There are also groups outside HMRC who think that clever words in a contract or concealing information or just because they think so, means that contractors are all independent and NOT employees. Both groups are wrong. The law, such as it is, is a hopeless confused mess and each case deepens the morass. In my view this is because the law starts from the wrong place and neither party trusts the other. Here's a thought. If you think you're an independent contractor let's assume you can register as such. HMRC will accept that registration on the basis that you will agree to a sequestration (or other legally binding agreement) that sees say 35% of each invoice (net of VAT) going to an escrow account in the name of the contractor and HMRC. That escrow account can be reduced ONLY if both parties agree. If HMRC has not investigated the contractor after say three years, the sum paid in to that escrow in the first year is repaid to the contractor. If an investigation is begun but not finished (i.e. not before a Tribunal or settled by agreement) by the end of year 4, the sum above is repaid to the contractor. If a Tribunal decides (or there is an agreement) there is an employment, HMRC can claim the 35% for the year and also demand any further amounts due. IN other words a contractor confident of their position loses some of the reward for a limited period. HMRC has some security that an investigation - if correct - will pay them tax. We can then all get on with defining the rules a bit better.

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Hotel La Tour has lost before the Court of Appeal https://lnkd.in/eEQNiGGU. The case focused on the recovery of VAT on advisers’ costs relating to the sale of shares of a subsidiary where there is downstream taxable activity. The COA has accepted HMRC’s appeal, holding that in HLT's case VAT on advisers’ costs cannot be recovered by the seller of the shares using the proceeds of sale as there is a direct and immediate link with the exempt share sale. This decision is in line with HMRC’s existing policy on costs where there is a direct link with an exempt supply of shares.   It will be interesting to see whether HLT appeals the decision to the Supreme Court. Businesses that have undertaken share or exempt asset sales where there is downstream taxable activity may wish to consider submitting protective claims to avoid earlier periods going out of time in the event that the taxpayer appeals and is successful.

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🔍 Spotlight on Inheritance Tax Investigations: Rising Returns Despite Fewer Enquiries 💼💷 The amount of tax collected from unpaid inheritance tax (IHT) is soaring, but HMRC’s targeted investigations suggest even higher potential recoveries. In the past five years, HMRC has launched thousands of investigations into estates suspected of owing IHT, recovering a substantial £1.39bn. Despite a significant drop in the number of enquiries—down from 5,658 in 2019/20 to 3,028 in 2023/24—the amount recovered in 2023/24 was £285m, slightly higher than the £273m recovered in 2019/20. This reflects the focused and thorough nature of current investigations. Sean McCann, chartered financial planner at NFU Mutual, highlights that HMRC’s comprehensive approach scrutinises everything from gifts made within seven years of death to life insurance policies not written in trust. Although the number of investigations has nearly halved since 2019, the consistent recovery amounts show HMRC’s efficiency in targeting cases with significant returns. The 2021-22 tax year saw the highest recovery at £326m from 4,258 investigations, demonstrating the potential impact of their detailed inquiries. The high value of recovered revenue justifies HMRC’s strategic focus on individual cases, ensuring substantial sums are rightly collected. What do you think the future holds? #InheritanceTax #HMRC #TaxInvestigations #FinancialPlanning #WealthManagement #TaxRecovery #EstatePlanning

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Now that quarter end for a few clients is over (at least the accounts part is, the reporting to trustees part is coming up) I was reflecting on a few of the things we picked up this time around. There was an underpayment a client had made to HMRC, the sooner we picked it up the less the interest charge was. There was some accrued income that hadn't been invoiced, without our prompting it wouldn't have been invoiced and that would be income lost. There were duplicate expense claims submitted that we tidied up. There was income that should have been accrued according to a grant agreement but wasn't. There was expenditure allocated to the wrong funder which we moved around to make the best use of the available funds. Thinking about recent debates about how much charities spend on overheads and the pressure to keep overheads low, yes, finance is an overhead cost. But without a strong finance team you'll pay the wrong amount to HMRC and end up paying interest, you'll forget to invoice and miss out on real cash income, you'll have multiple little errors in your numbers and you'll use the funding you've been given incorrectly because you don't have good records. Off to polish my halo now 😇

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Business Standard shared insights from Lex Panacea managing partner Mohit Garg on the burning issue of inheritance tax, who has attempted to lend some clarity and nuance to the debate titled "Explained: What the raging debate about inheritance tax is all about" Read more at: https://lnkd.in/ehBPq5ha #LegalInsights #SupremeCourt #TaxationTips #InheritanceTax #FinancialPlanning #CapitalGains #PropertyInvestment #TaxLaw #WealthManagement #HighCourt #PropertyLaw #EstateDuty

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A really interesting and potentially controversial ruling handed down by High Court recently in relation to conversion to CVL in Administration In brief, in order to move from Administration into CVL there must be an anticipation of a distribution to “unsecured” creditors. In Hobson v OAS Realisations (2022) Ltd the judge held that the company had properly converted to CVL despite a dividend only being paid to HMRC as a secondary preferential creditor in the sum of 59p/£. Whilst strictly speaking “Preferential” creditors do not hold security and are therefore by very definition “unsecured” the Insolvency Act does specifically (for very good reason) categorise them separately and the distinction is very important in circumstances concerning other consents required during an Administrators period in office. “Lumping” HMRC into the unsecured creditors category for this purpose has the unfortunate knock on effect of creating several inconsistencies within the act Were I cynical, I would be expecting Administrators to forthwith regularly pursue the “simple” route to converting companies into CVL simply by relying on a payment to HMRC as preferential creditors. I would be very surprised if this isn’t addressed quickly. Who said insolvency wasn’t sexy!!!! Happy Thursday everyone 😊

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See our blog below for a summary of expected tax changes following the election

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R&D TRIBUNAL RULING CLARIFIES WHAT ‘PAYING A CONTRACTOR’ MEANS In the recent First-tier Tribunal case of Tills Plus Limited v HMRC, HMRC was seeking to reclaim tax credits paid to the company on the basis that 1) the company had not paid its contractor and 2) the sub-contacted work did not qualify as R&D. While the FTT found that the R&D was not qualifying, on fairly straightforward grounds (similar to the Haddee case), it is the payment point that is more interesting. Although a payment was made to the subcontractor, it was not directly made by the company. Instead it was made by the father-in-law of the owner of Tills Plus Ltd. The original intention had been for this to be structured as a personal loan to the owner and followed by a director’s loan from the owner to Tills Plus to allow the company to pay the subcontractor. However, as a result of the difficulties in moving money in and out of Iran, it was agreed that contractor’s invoices would be paid direct by the father-in-law from his bank account in Iran. None of these arrangements were documented at the time but, after HMRC’s enquiry commenced, formal loan documentation was put in place. The FTT considered that the tax legislation while requiring the subcontracting cost must be paid before a claim for R&D relief is made, there is no requirement for the payment to come from the claimant’s bank account as HMRC had contended. A comparison was made with a payment by credit card which, while resulting in a third party paying money to the contractor, would nonetheless constitute valid payment as the principal had incurred a debt as a result of the payment. The FTT went on to say that although in this case the owner of the company may never recover funds from his loan to the company, this did not invalidate the payment to the contractor. This case again illustrates why it so important to document all financing arrangements and technical project objectives and get expert advice on the likely validity of an R&D claim before engaging contractors on a project. For help and advice on any R&D dispute or planned project please do get in touch with me, Dawn Register or Helen Adams. 

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A Post Transaction Valuation Check (PTVC) can be requested from HMRC for an individual to work out a capital gains tax liability or for companies to calculate corporation tax liability on chargeable gains. The request for a PTVC should be made using the CG34 form. HMRC’s guidance says the form must be completed and sent to the address on the form at least three months before the relevant tax return filing date. #HMRCValuations #Tax

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ESS: HMRC is writing to suspected businesses inviting them to come clean if engaging in Electronic Sales Supression (ESS), making it clear that if they don’t make a disclosure within 30 days thereof they will take further action that could mean a full audit, a civil or criminal investigation and raising an estimated assessment of the taxes that they believe are owed, including interest and penalties. There is a responsibility for the business to report to HMRC even if it just has access to ESS software but has not used it.

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So, there are rumours and speculation about potential tax rises and limitation/abolition of some IHT & CGT reliefs- people keep asking me should they be doing anything immediately? My personal advice is: 1) It’s likely to be sensible to aim to conclude projects you already have underway before the first budget of the new government - expected mid-Sep/ October- including in particular business or property sales, gifts and creating trusts; 2) Get the list out of things that you have been contemplating but haven’t gone ahead with - perhaps they are on the ‘too-hard’ pile. Go ahead and get the advice, make the decisions and consider implementing the strategies while you know what the tax rules are. The tax regime is not likely to become more favourable in the coming months/next few years. 3) Have a brainstorm with a good tax adviser soon- are there things you haven’t considered before, opportunities you haven’t take? Always good to debate the ‘what-if?’ questions too. Also, if you haven’t recently reviewed your pensions- it’s probably a good time to do so. I am a big believer in not letting the tax tail wag the dog though- make sure you really want to do something and don’t just rush to make a change only for tax reasons. Do reach out if you want a chat. Gary Smith always loves a chat about pensions too!

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