UK tax advisers welcome new HMRC service for expanding businesses

Expanding UK businesses are to receive tailored tax assistance from growth support specialists at HM Revenue & Customs who will offer help with tax queries and support in accessing reliefs and incentives.

“Mid-sized businesses make a vital contribution to the U.K. economy and I want to see them grow, succeed, and prosper,” Mel Stride, financial secretary to the Treasury, said in a September 20 statement.

About 170,000 UK businesses with turnover of more than £10 million or more than 20 employees are eligible and can apply online, HMRC said. Industries that could benefit include manufacturing, information and communications, and professional services, including legal and accountancy services. Read more:

My news story for Tax Analysts, September 21 (paywall)

‘Patient capital’ review invites feedback on UK tax reliefs

HM Treasury is seeking feedback on the cost effectiveness of tax relief measures to promote entrepreneurship as part of a consultation on how best to provide funding to help British start-ups become “world-leading unicorns.”

The UK leads Europe in the creation of so-called unicorns — innovative firms valued at more than $1 billion — but lags behind the US and China, the Treasury said in an August 1 statement. A new National Investment Fund will address a £4 billion “funding gap” between American and British firms, the Treasury said …

The consultation is part of a “patient capital” review expected to report in the autumn on how best to help innovative firms obtain long-term financing. Read more:

My news story for Tax Analysts, August 2 (paywall)

Innovate UK news release August 3

Tax relief on disincorporation may ‘fall by the wayside’

A tax relief intended to help owners of smaller companies revert to self-employment will not be available for transfers after March 2018 unless action is taken, the Office of Tax Simplification has pointed out. Take-up of the relief has been lower than expected.

Disincorporation relief, introduced in Finance Act 2013, provides relief from corporation tax when a company transfers qualifying business assets to its shareholders. No claim can be made if the value of the assets exceeds £100,000, however, and the OTS believes that this limit is one of a number of possible reasons for the low take-up.

The OTS is seeking to establish whether there is an “untapped appetite” among businesses to disincorporate in order to reduce the burden of administration. A focus paper invites readers to suggest, by September 15, what improvements are needed for the relief to be more effective.

Facilitating disincorporation would “appear to fit well with any moves to reduce the extent of tax motivated incorporations,” the OTS said. HM Treasury indicated that about 610,000 companies would be eligible for the relief, but fewer than 50 claims had been made by March 2016.

UK flags record tax relief for creative sector

Tax reliefs continued to support the UK’s creative industries, including films and high-end television production, video games, and animation, contributing more than £700 million in the last financial year, the government said.

Productions benefiting from the reliefs included the award-winning Netflix series The Crown and the award-winning film Lady Macbeth, which was released in the U.S. on July 14. The creative sector employs two million people across the UK, according to a July 20 release issued by HM Treasury, HM Revenue & Customs, and the Department for Digital, Culture, Media & Sport. Read more:

My news story for Tax Analysts, July 24 (paywall)

Simplifying the tax and NIC treatment of termination payments

Budget 2016 announced changes to the taxation of termination payments, following a consultation launched in summer 2015. The government noted that “certain forms of termination payments are exempt from employee and employer national insurance contributions (NICs) and the first £30,000 is income tax free”.

It added: “The rules are complex and the exemptions incentivise employers to manipulate the rules, structuring arrangements to include payments that are ordinarily taxable such as notice and bonuses to minimise the tax and NICs due.” From April 2018, the government would “tighten the scope of the exemption to prevent manipulation and align the rules so employer NICs are due on those payments above £30,000 that are already subject to income tax”.

The government said it would “continue to support those individuals who lose their job”. The first £30,000 would remain exempt from income tax and the full payment would be outside the scope of employee NICs.

A note of the outcome of this consultation was posted on 10 August, and a second consultation inviting comments by 5 October includes draft income tax legislation for Finance Bill 2017. Draft NICs legislation is expected in autumn 2016. Continue reading

Tax professionals urge UK government to delay interest expense reform

The U.K. government’s timetable for implementation of a key base erosion and profit-shifting project reform is too ambitious, tax professionals have warned.

There is “no need to rush” a review of U.K. law on deductibility of interest because existing rules already limit deductibility, the Chartered Institute of Taxation said …

The proposed restrictions are likely to have “significant adverse consequences” for heavily geared infrastructure and energy projects whose viability is often reliant on tax relief for interest, said Eloise Walker, partner at Pinsent Masons LLP, in a client briefing … Continue reading

Making Tax Digital: Understanding the costs and benefits for taxpayers

A National Audit Office report has identified two areas of risk in HMRC’s stated aim to have “one of the most digitally advanced tax administrations in the world”. These are optimism bias in the department’s key assumptions, and the need to understand the costs and benefits of the proposed “transformation” for taxpayers.

The NAO said: “Most business customers will be required to update HMRC quarterly rather than annually about their tax affairs, and some may need to purchase new software that works with the new systems … Some businesses are sceptical of HMRC’s evaluations of the costs and benefits of previous changes to the tax system. HMRC plans to develop a fuller picture of what it will cost taxpayers and businesses to use the new systems over the next year.” Continue reading