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HMRC taskforce tackles dishonest dog breeders

Adrian Mooy - Wednesday, July 31, 2019
More than £5 million has been raised by a HM Revenue and Customs (HMRC) taskforce tackling dishonest dog breeders selling pups on the black market.


HMRC set up the taskforce in October 2015 after discussions with animal welfare groups suggested tens of thousands of puppies were being reared in unregulated conditions and sold illicitly every year.


Officers uncovered fraudsters selling puppies on a mass scale and for a huge profit, but because of the underground nature of the activity – failing to declare their sales.


Using a full range of civil and criminal enforcement powers, HMRC has recovered £5,393,035 in lost taxes from 257 separate cases since the formation of the taskforce.


Financial Secretary to the Treasury, Mel Stride MP, said:


It is utterly appalling that anyone would want to treat puppies in such an inhumane way and on such a scale. It’s also deeply unfair to all of the legitimate businesses who do pay the right tax, and the total recovered by the taskforce is equivalent to the annual salaries for more than 200 newly qualified teachers.
We continue to work hard with other government agencies and our partners to tackle these traders. We urge anyone with information about tax evasion to report it to HMRC online or call our Fraud Hotline on 0800 788 887.


Of those breeders and traders targeted, they include:


 • two unconnected puppy breeders in the west of Scotland who were handed tax bills of £425,000 and £337,000


 • a puppy breeder in the Midlands who was former Crufts judge, given a £185,000 bill


 • a dealer in Northern Ireland told to pay £185,000 in tax


 • a Somerset puppy breeder was given a £114,000 bill


 • a puppy dealer in the east of Scotland was handed a tax bill in excess of £400,000


 • a Swansea puppy breeder was given a £110,000 tax bill


The efforts of all involved in the taskforce have helped us to make inroads in to this brutal trade but it is a growing problem.

Last year nearly half of all animals seized by the Scottish SPCA were rescued from puppy farms and I would urge everyone to sign the pledge #SayNoToPuppyDealers and send a clear message that this cruel trade has to end.  Anyone with information about people or businesses involved in tax fraud can contact our HMRC helpline on 0800 788 887

Hybrid Cloud Technology

Adrian Mooy - Friday, July 26, 2019
Having all your data in the cloud may not be the best option due to cyber-security concerns.
Some firms are moving systems away from the public cloud in favour of a mix of on-premises and private cloud environments.
A hybrid cloud is a combination of on-premises and off-premises platforms and may mean that your business needs to work with multiple external IT companies.

UK Commercial Property owned by non-residents

Adrian Mooy - Thursday, July 25, 2019
From 6 April 2019, the scope of capital gains tax for non-residents has been extended to include UK commercial property.


Prior to this date only residential property had been within the charge to NRCGT.


Where commercial property is already owned prior to 6 April 2019, the chargeable gain will be calculated by reference to the increase in value from the rebasing date of 6 April 2019. An election is available to ignore revaluing at 6 April 2019 which will be beneficial if the original cost was higher than the April 2019 value.


For companies, any gains will be taxed at the corporation tax rate which is currently 19%. For individuals the rate is 20%.


The sale of shares in a company owning UK property can also be caught by the NRCGT charge.


Any tax due needs to be paid and a NRCGT return submitted online to HMRC within 30 days of completion of a sale.

Consultation on Companies House reforms

Adrian Mooy - Wednesday, July 24, 2019
The government has launched a consultation on proposed reforms at Companies House.


The consultation aims to tackle misuse of the register.


The consultation seeks views on a series of reforms to limit the risk of misuse:


  •  • knowing who is setting up, managing and controlling companies
 • improving the accuracy and usability of data on the register
 • protecting personal information on the register
 • ensuring compliance, sharing intelligence & measures to deter abuse


Louise Smyth, Chief Executive of Companies House, said:


'This package of reforms represents a significant milestone for Companies House as they will enable us to play a greater part in tackling economic crime, protecting directors from identity theft and fraud, and improving the accuracy of the register.'


Consultation closes 5 August 2019.

Making Tax Digital (MTD) – The Sign Up Process

Adrian Mooy - Tuesday, July 23, 2019
The first mandatory submission for quarterly VAT filers will be the 30th June with the VAT return due by the 7th August.
Please remember that HMRC do not automatically know that a business will be required to comply with MTD, instead each business must itself determine if and when it needs to comply with MTD and complete a two-stage sign-up process before the relevant MTD style submission can be made.


Firstly, notification to HMRC has to be made via their website that the business needs to comply with MTD going forwards. Secondly, the business needs to connect the MTD compatible software to HMRC’s systems (which should only be done once the confirmation email is received back from HMRC).


As it can take up to 72 hours for HMRC to confirm each sign up, this shouldn’t be left until the point at which the submission is to be made, and we would recommend that all affected businesses aim to have their sign ups completed by mid-July.

Incorporation no longer automatically resets the two year requirement for sole traders

Adrian Mooy - Monday, July 22, 2019
Entrepreneurs’ Relief (ER) entitles a business owner to significant relief from Capital Gains Tax (CGT) on the disposal of their business, often halving the consequent tax bill.


To qualify for ER, the company must normally have been the business owner’s personal company for the whole of the last two years and they must have been an officer or employee throughout.


Until now, this has created problems for sole traders who have recently incorporated, as incorporation has had the effect of resetting the two year requirement.


However, provisions contained in the Finance Act 2019 mean that the conditions for ER will be considered to have been met where the shares in a newly incorporated business have been issued to the business owner in exchange for all business assets or all assets other than cash and as a going concern.


Failing to transfer business vehicles or premises, for example, into the new company can mean that a business owner must wait an additional two years before disposing of the company in order to qualify for ER.


Sole traders and owners of other unincorporated businesses wishing to take advantage of ER should seek professional advice at the earliest opportunity.

SMEs unaware of £1 million annual investment allowance

Adrian Mooy - Friday, July 19, 2019
A new study has found that more than half (58 per cent) of SMEs are not aware of a temporary two-year increase in the annual investment allowance (AIA), which could help them secure £1 million in funding.


Last year, the Government increased the AIA from £200,000 to £1 million from 1 January 2019 to 31 December 2020 to assist businesses with plant and machinery investments.


AIA allows businesses to write off 100 per cent of qualifying capital expenditure against taxable profits for the same period up to the annual limit and yet many businesses are not aware of the opportunity currently on offer.


The research from Close Brothers Asset Finance also found that only 13 per cent of companies had intentions to increase investment significantly in 2019 because of the rise, meaning that around nine out of 10 businesses had no specific plans to make use of the increase in AIA.


It is thought that the complexity of the rules surrounding AIA may have been off-putting for some businesses.


Will Silsby, Technical Officer at the Association of Taxation Technicians, told Accountancy Daily: “AIA in the final three months of the chargeable period to 31 March 2021 is restricted to the time-apportioned fraction of the normal £200,000 limit, so just £50,000.


“For the first straddling period, the calculation is logical. The AIA cap for expenditure in the first part of the chargeable period (the months up to 31 December 2018) has to be the normal £200,000 limit regardless of the number of months in that part.
“There is currently no provision to allow any element of under-spend in the pre-January 2021 months to be carried over into the post-December 2020 months.”


Taxpayers’ bills delayed by payment on account errors

Adrian Mooy - Thursday, July 18, 2019
The Association of Taxation Technicians (ATT) has revealed that problems with HMRC’s IT systems earlier this year, relating to calculations for payment on account, mean that some taxpayers will not receive tax demands this month.


The glitches in the tax authority’s systems during the self-assessment tax return season also mean that calculations for payment on account on some returns may not be adjusted correctly.


It was apparently made clear at the time that HMRC’s systems had not processed payments on account for 2018/19 correctly. Unless affected taxpayers contacted HMRC to correct the position, they will not have received a demand in June or July for the second payment on account due by 31 July 2019.


Instead, those affected by this HMRC failure will need to pay their total 2018/19 self-assessment tax bill by the end of January 2020 and the ATT is advising them to set additional money aside to make sure their bill is covered.


Jon Stride, Co-Chair of the ATT’s technical steering group, said: “If a taxpayer does not make any payments on account during 2019, then their tax bill in January 2020 could be significantly larger than they are expecting and could come as quite a shock.


“Individuals who do not receive expected demands should either set aside the funds needed ready for next year or, if they wish, they can make a voluntary payment on account to HMRC of their July payment – and their January payment if that was also missed.”


The ATT has been told by HMRC that if no 2018/19 payments on account have been demanded, then the taxpayer will receive a demand from HMRC for the full amount of tax in January 2020.


Self-assessment taxpayers with annual tax demands of £1,000 or less do not have to make payments on account, while those in the regime who have 80 per cent or more of their total annual tax collected at source, such as by PAYE, do not have to make payments on account either.


Managing a rental business from home

Adrian Mooy - Wednesday, July 17, 2019


A landlord will often manage their property rental business from home, and in doing so will incur additional household expenses, such as additional electricity and gas, additional cleaning costs, etc. As with other expenses, the landlord can claim a deduction for these when working out the profits of the rental business.


Most unincorporated landlords will now prepare accounts on the cash basis.


Wholly and exclusively incurred


The basic rule for an expense to be deductible in computing the profits of a rental business is that the expenses relate wholly and exclusively to that business. This applies equally to a deduction for household expenses – they can be claimed where they relate wholly and exclusively to the rental business.


Actual costs


Where the expenses are wholly and necessarily incurred, a deduction can simply be claimed for the actual expenses. In reality, this will take some working out as household bills will not be split between personal and business expenses. Any reasonable basis of apportionment can be used – such as floor area, number of rooms, hours spent etc. Records should be kept, together with the basis of calculation.


Simplified expenses


Where a landlord spends more than 25 hours a month managing the business from home, the simplified expenses system can be used to work out the deduction for the additional costs of working from home. The expenses depend on the number of hours worked in the home each month, and the deduction is a flat monthly amount, as shown in the table below.


Hrs of business use p/m       Flat rate p/m

25 to 50 hours                       £10
51 to 100 hours                     £18
101 hours or more                 £26


The hours are the total hours worked at the home by anyone in the property rental business.




Nadeem runs his property rental business from home. In 2018/19, he spends 60 hours a month working on the business in all months except August and December, in respect of which he spends 30 hours in each on those months working on the business.


For 2018/19 he is able to claim a deduction of £200 for expenses of running his business from home (10 months @ £18 plus 2 months @ £10).


The simplified expenses rule does not cover telephone and internet, which can be claimed in addition to the deduction for simplified expenses.


Property partnerships

Adrian Mooy - Tuesday, July 16, 2019
A person may own a property jointly that is let out as part of a partnership business. This may arise if the person is a partner of a trading or professional partnership which also lets out some of its land and buildings. A less common situation is where the person is in a partnership that runs an investment business which does not amount to a trade, but which includes or consists of the letting of property.
When is there a property partnership?


The letting of a jointly-owned property in itself does not give rise to a partnership – and indeed a partnership is unlikely to exist where joint owners simply let a property that they own together. Whether there is a partnership depends on the degree of business activity involved and there needs to be a degree of organisation similar to that in a commercial business. Thus, for there to be a partnership where property is jointly owned, the owners will need to provide significant additional services in return for money.


Separate rental business


A partnership rental business is treated as a separate business from any other rental business carried on by the partner. Thus, if a person owns property in their sole name and is also a partner in a partnership which lets out property, the partnership rental income is not taken into account in computing the profits of the individual’s rental business – it is dealt with separately.


Further, if a person is a partner in more than one partnership which lets out property, each is dealt with as a separate rental business – the profits of one cannot be set against the losses of another.




Kate has a flat that she lets out. She is also a partner in a graphic design agency, which is run from a converted barn. The partnership lets out a separate barn to another business.


Kate has two property rental businesses. One business comprises the flat that she owns in her sole name and lets out, and the partnership rental business consisting of the barn which is let out as a separate rental business. This is a long-term arrangement.


Kate must keep her share of the profits or losses from the partnership property business separate from those relating to her personal rental business. She cannot set the profits from one against losses from the other. They must be returned separately on her tax return.


Partner note: HMRC’s Property Income Manual at PIM1030.