Lower Corporation Tax hopes, Business Changes, Farming Losses and Spurs 1 – HMRC 0

Jul 25, 2016   //   by Ralph   //   Latest News

no10Welcome to August’s edition of Accountant’s Corner. Following on from last month we now know that we will be leaving the EU although on what terms still has to be negotiated. Meanwhile from a tax point of view it all seems to be carry on as normal – for now.

Hope for lower corporation tax rate

The previous Chancellor George Osborne announced at the beginning of July that he intended to reduce corporation tax rates to below 15%. Now we have a new Chancellor of course this may not happen. Corporation tax levels although headline grabbing account for less than 10% of the total tax collected, so a reduction can actually be made without it costing too much.

Failure to notify HMRC of business changes can be costly

Recently, a case before the tax tribunal highlighted the need to notify HMRC of business changes. The case in point related to a sole trader who took his son into partnership. He failed to notify HMRC of the change and, although there was no loss of VAT to the exchequer, an 18% penalty was charged by HMRC for late notification. Although reduced later by the tax tribunal, there was considerable expense to the taxpayer for what was described by the tribunal as “the merest technicality…causing no loss to the revenue and no administrative inconvenience to HMRC”

Restriction of farming losses

As I have previously written about, there is a restriction in place that prevents farming losses being offset against other income or capital gains once there have been five successive tax years in which losses have been made. This, however, does not apply to the case of a farmer who engages in specialised activities which are potentially profit making but cannot be expected to show a profit before the end of the year of claim. For this to apply it needs to be demonstrated that there is an expectation of profit, and that business plans were prepared at the time etc.

Spurs win 1-0 over HMRC

Tottenham Hotspur football club won a victory over HMRC recently. The case concerned whether payments made under a compromise agreement upon termination of the employment of two players should be treated as salary or compensation payments. The tax tribunal decided in the club’s favour and the payments made were able to qualify for the £30,000 income tax exemption and not be subject to national insurance either.

Llangollen resident Ralph Robson FCCA can be contacted at the Wrexham office of TA Gittins & Company on 01978 264846 or on ralph.robson@tagittins.co.uk to discuss any of the above items or with any accounting or tax queries.

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