News & Insights

The latest tax developments and VAT round-up for the month.

Silverthrone tax digest covers the developments most likely to affect individuals, trusts, estates and businesses. If you would like to discuss anything here in more detail, please get in touch with your usual contact.

1. Private client

1.1 General election: what the parties promised on tax

With polling day set for 4 July, the Conservatives and Labour published their manifestos in mid-June, each ruling out rises in the main rates of income tax and National Insurance.

The Conservative manifesto, launched on 11 June, promised to cut employee National Insurance to 6% by April 2027, abolish the main rate of self-employed National Insurance by the end of the next Parliament and raise the personal allowance for pensioners. Labour’s manifesto, launched on 13 June, pledged not to raise income tax, National Insurance or VAT rates and to cap corporation tax at 25%, but to charge VAT on private school fees, replace the non-dom regime with a residence-based scheme, tax carried interest more heavily and add 1% to stamp duty land tax for non-UK resident buyers. Labour went on to win the election, and the new Chancellor’s first Budget on 30 October 2024 raised employer National Insurance and capital gains tax rates. Clients with sales, gifts or a change of residence in mind should review their personal tax planning with us now rather than wait for the detail.

1.2 HMRC letters on the business asset disposal relief lifetime limit

HMRC has written to people who claimed business asset disposal relief on their 2022/23 returns where it believes the £1 million lifetime limit has been exceeded.

Business asset disposal relief taxes qualifying gains at 10%, but only on a lifetime total of £1 million, and earlier claims under its predecessor, entrepreneurs’ relief, count towards that limit. The letters ask recipients to check their return within 30 days and either amend it or confirm that no change is needed, failing which HMRC may correct the return or open an enquiry, with interest and possibly penalties. The conditions can be strict, as trustees found out earlier this year. If you receive a letter, please send it to us promptly, and remember that any extra tax will sit alongside the second payment on account for 2023/24, due by 31 July 2024.

1.3 Doctor loses fixed protection for his NHS pension

The First-tier Tribunal has held that a doctor who briefly left and rejoined the NHS pension scheme built up too much benefit to keep Fixed Protection 2012.

Dr Laker obtained Fixed Protection 2012, opted out of the scheme in February 2013, rejoined a month later and then left for good in August 2013. HMRC revoked his protection because his benefits had grown by more than the permitted amount, and the dispute turned on how his final pensionable pay was measured. The tribunal agreed with HMRC that a “year” of pensionable pay could be made up of separate periods adding up to 12 months, rather than 12 consecutive months, so the appeal failed. The lifetime allowance was abolished from April 2024, but protections still matter for the new lump sum allowances, so please talk to us about pension planning before changing your scheme membership.

Martin Laker v HMRC [2024] UKFTT 568 (TC)

2. PAYE and employment

2.1 IR35: Adrian Chiles case sent back to the tribunal

The Upper Tribunal has overturned a decision that IR35 did not apply to broadcaster Adrian Chiles’s work for ITV and the BBC, and sent the case back for a fresh hearing.

Mr Chiles worked through his company, Basic Broadcasting Ltd, between 2012 and 2017, and around £1.7 million of tax and National Insurance is at stake. The First-tier Tribunal had found that he was in business on his own account, but the Upper Tribunal held that it had looked too much at his wider business and not enough at the terms of each hypothetical contract with the broadcasters. The decision follows other presenter cases decided against the taxpayer, although Kaye Adams won hers. Anyone working through a personal service company should keep each contract and the working practices under review.

HMRC v Basic Broadcasting Ltd [2024] UKUT 165 (TCC)

2.2 IR35: Jeremy Vine’s company refused a preliminary hearing

The First-tier Tribunal has refused a request by Jeremy Vine’s company to decide, as a separate preliminary issue, whether HMRC’s IR35 determinations were issued too early.

Jelly Vine Productions Ltd argued that HMRC’s determinations for 2013/14 to 2015/16 were invalid because HMRC was still reviewing Mr Vine’s employment status when it made them. The judge decided that whether it appeared to HMRC that tax was due could not sensibly be separated from the facts about his contracts, so the point will be heard with the main appeal. Procedural arguments rarely offer a short cut, and our tax dispute resolution team can help you weigh up the strongest grounds before an appeal is lodged.

Jelly Vine Productions Ltd v HMRC [2024] UKFTT 562 (TC)

2.3 Child benefit charge: misleading phone advice was a reasonable excuse

The First-tier Tribunal has cancelled four years of high income child benefit charge assessments, and all the penalties, because an employee relied on wrong advice from an HMRC helpline.

Mrs Manzi, a PAYE employee, was assessed for the charge for 2014/15 to 2019/20. When she rang HMRC in December 2019, she was told to stop her child benefit and that she need do nothing more, so the tribunal held that she had a reasonable excuse for not notifying HMRC, which left the four earliest years out of time; she still owed the charge for 2018/19 and 2019/20. As in an earlier case we reported, older years can sometimes be challenged. The charge now starts at income of £60,000 and if you have received an assessment you cannot pay, we can help you arrange payment with HMRC.

Sarah Manzi v HMRC [2024] UKFTT 563 (TC)

3. Business tax

3.1 Capital allowances sale and leaseback scheme fails

The Court of Appeal has ruled for HMRC that two companies could not claim capital allowances from a marketed scheme in which plant was sold to a bank and bought back within weeks.

Altrad Services Ltd and Robert Wiseman and Sons Ltd took part in arrangements designed to produce allowances on a repurchase price without any real economic cost to the companies. Applying a purposive reading of the legislation to the transactions viewed as a whole, the court held that the temporary transfer of ownership had no commercial substance and did not give rise to allowances, reversing the Upper Tribunal. Genuine investment in plant still attracts valuable relief, so please speak to us before signing up to any arrangement that promises allowances out of proportion to the money actually spent.

HMRC v Altrad Services Ltd and another [2024] EWCA Civ 720

3.2 No relief for goodwill on incorporating a veterinary practice

The First-tier Tribunal has held that a company could not claim corporation tax relief for £1.875 million of goodwill bought on incorporation, because a related party had carried on the business before April 2002.

Armour Veterinary Group Ltd bought the practice from its owner, who had been a partner in the predecessor partnership before 1 April 2002. Under the intangible assets rules, goodwill is treated as created before that date if a related party carried on the business before then, so no amortisation relief was due, and the argument that he had only been a salaried partner failed for lack of evidence. Owners who are incorporating or restructuring a long-established business should check the history of the business, and keep good partnership records, before relying on goodwill relief.

Armour Veterinary Group Ltd v HMRC [2024] UKFTT 539 (TC)

4. VAT and indirect taxes

4.1 Scrap metal director personally liable for VAT penalty

The First-tier Tribunal has upheld a penalty of about £107,000 charged personally on the sole director of a scrap metal company whose input tax was denied because of links to VAT fraud.

HMRC refused input tax of about £358,000 claimed by Loy Commodities Ltd for periods in 2018 and 2019, on the basis that its purchases were connected with fraud. The tribunal found that Mr Turner actually knew this, pointing to his awareness of fraud in the sector, weak checks on suppliers and his decision to keep trading after warnings, and so the 30% penalty was transferred to him. This is another reminder, after a similar case last year, that directors can be personally exposed, and that proper due diligence on suppliers is essential in high-risk trades.

Gary Turner v HMRC [2024] UKFTT 495 (TC)

4.2 Multiple dwellings relief abolished from 1 June

Stamp duty land tax multiple dwellings relief no longer applies to purchases of two or more homes in England and Northern Ireland with an effective date on or after 1 June 2024.

The change was announced in the Spring Budget and is now law in the Finance (No. 2) Act 2024. Contracts exchanged on or before 6 March 2024 can still qualify if they are not varied afterwards, and purchases of six or more dwellings in a single transaction can still be taxed at non-residential rates. Landlords and investors buying more than one property, or a home with an annexe, should take advice before exchanging contracts.

4.3 Public woodland made a country house purchase mixed use

The First-tier Tribunal has held that 12 acres of woodland bought with a house were not part of its grounds, so lower mixed-use rates of stamp duty land tax applied.

Ms Guerlain-Desai paid £3.16 million for Durford House, with a four-acre private garden and around 12 acres of woodland that the public used freely. The tribunal found that the woods did not serve the house in the way that grounds normally do, so the purchase was mixed use and she was due a refund of £225,250. As with a paddock let for grazing, each case turns on its facts, and the evidence about how land is used at completion is crucial.

Marie Guerlain-Desai v HMRC [2024] UKFTT 515 (TC)

4.4 Bed and breakfast manor was non-residential for SDLT

The First-tier Tribunal has accepted that a listed manor house run as a bed and breakfast was a hotel, inn or similar establishment, so non-residential rates applied to its purchase.

Mrs Hurst paid £1.8 million for Sortridge Manor in Devon in August 2021, and HMRC sought a further £47,750 on the basis that residential rates applied. The tribunal found that the previous owners had provided fully serviced accommodation to paying guests, despite the limits imposed during the pandemic, and allowed the appeal. Buyers of properties with a commercial use should book a meeting with us before filing their return, so that the evidence is gathered while it is still available.

Anne-Marie Hurst v HMRC [2024] UKFTT 540 (TC)

5. Key dates

The main deadlines and events for June to August 2024 are set out below.

6. And finally

6.1 Stamp duty turns 330

This month marks 330 years since stamp duty first arrived in England, on 28 June 1694. It was introduced under William III and Mary II by an Act placing duties on vellum, parchment and paper, to help pay for the war against France, and documents were embossed with a stamp to show that the duty had been paid.

For more than three centuries, buying land meant having the transfer deed physically stamped. That changed on 1 December 2003, when stamp duty land tax replaced stamp duty on land in England and Northern Ireland, and the stamp gave way to a tax return. Scotland and Wales have since introduced their own land taxes, but stamp duty itself lives on for transfers of shares.