Some thing very interesting happened

Firstly, lets quickly understand what is capital gains tax?

When an individual sells their assets such as shares, jewellery, valuable etc and make gain on it. Such gain can be subjected to capital gains tax. When it come to the properties, your home is out of the scope of the capital gains tax but any other property such as second home, investment properties are with in the scope.

This means one can sell their home and make profit on it without any worry of paying tax. But if a profit is made on a second property which is not home then there may be capital gains tax liability.

In the recent P Hunt V HMRC it became obvious what does 5% means !

So the background is that Mr Hunt sold his 5% shares in the company and claimed entrepreneurs’ relief and paid less tax at the rate of 10%

HMRC  argued that he does not qualify for ER !  and Mr Hunt must pay additional £180k tax.

To qualify for ER one:

• must hold shares for at least 24 months
• must hold at least 5% of the “share capital”

Definition of share capital became clear in this case which refers to the issued share capital not the number of shares.

Mr Hunt held more than 5% shares but the value of the shares were less than 5% of the issued share capital.

If you have any query on entrepreneurs’ relief or you are selling your business do contact us and we can help you avoiding unfortunate situations like Mr Hunt  [email protected]  or 01417750070

After implementation in public sector, contractor have been expecting the news for private sector too.

The chancellor has gone forward with the extension of the off-payroll working rules (IR35) to the private sector. But after some recent legal cases it has been decided that the matter will be dealt with care so the impetation has been been delayed to April 2020.

From April 2020, IR35 will be extended to private sector. This means the organisation provding work (agency or direct client) will be the ones to decide if the contractor falls under IR35 or not. If it is determined that the contractor fall under IR35 then they will need to deduct income tax and employee NICs and pay employer NICs.

HMRC will not carry out targeted campaigns into previous years when individuals start paying employment taxes under IR35 for the first time following the reform, and businesses’ decisions about whether their workers fall within the IR35 rules will not automatically trigger an enquiry into earlier years.

Here is a recent legal case that established contractor relation with the organisation

MDCM Ltd v HMRC, 19 March 2018

Construction contractor Mark Daniels won his appeal over a contract covering the 2012/13 and 2013/14 tax years. During this time, his services were engaged by Structure Tone Limited (STL) via Solutions Recruitment Limited. HMRC argued that the engagement amounted to a contract of employment between Daniels and STL.

The judgment suggests that a contractor who is not controlled, is paid a daily rate, has no notice period or benefits, and is not part and parcel, should not be caught by the IR35 rules.

Although good news for the contractor, an examination of the judgment suggests that some case law was given limited consideration, which could leave the door open for an appeal to the upper tribunal by HMRC.

MDCM Ltd v HMRC: key factors

As with many recent IR35 cases, control was the key factor, with the tribunal ruling there was insufficient evidence to support HMRC’s claim that Daniels was controlled by STL.

Other key factors impacting Daniels’ IR35 status, according to the tribunal, included the following:

• There was no requirement for either party to give notice to terminate the contract.
• Daniels wasn’t considered to be integrated into the STL business.
• Daniels was required to pay his own expenses.

If you are a contractor in private sector, contact us on 01417750070 or www.patax.co.uk

As part of encouraging the usage of environmental friendly cars, government is taking steps to transfer tax benefits to the users of electric cars.

Since 6 April 2020 the band for CO2 emissions of 1-50 g/km are altered to take into accounts the range of the car while running on electricity only. This means users of hybrid car will pay very less tax.

For example the annual tax liability on the use of BMW i3s Electric Car 94AH with Range Extender Auto,  will be just £142 for standard tax rate payers and £284 for higher rate tax payers. 

If you are looking to purchase an electric car through the business then contact us to find out your income tax liability.

Contact us on 01417750070 or [email protected]

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