CGT Roll-over Relief

Business Asset Roll-over Relief is a valuable relief that allows the deferral of Capital Gains Tax (CGT) on gains made when taxpayers sell or dispose of certain assets and use all or part of the proceeds to buy new business assets. The relief means that the tax on the gain of the old asset is postponed. The amount of the gain is effectively rolled over into the cost of the new asset and any CGT liability is deferred until the new asset is sold.

Where only part of the proceeds from the sale of the old asset is used to buy a new asset a partial rollover claim can be made. It is also possible to claim for provisional rollover relief where the taxpayer expects to buy new assets but haven’t done so yet. Interestingly, rollover relief can also be claimed if taxpayers use the proceeds from the sale of the old asset to improve assets, they already own. The total amount of rollover relief is dependent on the total amount reinvested to purchase new assets.

There are qualifying conditions to be met to ensure entitlement to this relief. This includes ensuring that new assets are purchased within 3 years of selling or disposing of the old ones (or up to one year before). Under certain circumstances, HMRC has the discretion to extend these time limits. In addition, both the old and new assets must be used by your business and the business must be trading when you sell the old assets and buy the new ones. Taxpayers must claim relief within 4 years of the end of the tax year when they bought the new asset (or sold the old one, if that happened after).

What is a tax calculation?

A tax calculation is created by HMRC if you have not paid the right amount of tax. HMRC’s annual reconciliation of PAYE for the tax year 2020-21 is now almost complete. HMRC use salary and pension information to calculate if you have paid the correct amount of tax.

The tax calculation is usually generated automatically by HMRC’s computer systems on what is known as a P800 form. P800s are generally sent out from after the end of the tax year and the process is generally completed by the end of November. The P800 form is also used if you have not paid enough tax so be sure to read the document carefully.

If you are due a refund, the P800 form will usually tell you that you can claim a refund online. Once you complete the claim online, the refund will be paid within 5 working days and will be in your UK account once your bank has processed the payment. If you do not claim the refund online within 45 days, HMRC will send you a cheque.

If your P800 tells you that you will be repaid by cheque, then you do not need to take any further action and you should receive a cheque within 14 days of the date on the P800 Tax Calculation.

If you have not received a P800 form but think that you have overpaid tax, you can contact HMRC to inform them. If HMRC agree that you are due a tax refund they will send you a P800 form.

If you complete a Self-Assessment return, then you should not expect to receive a P800 form as any underpayment or overpayment of tax will be handled by way of your tax return.

Structures and Buildings Allowance qualifying expenditure

The Structures and Buildings Allowances (SBA) facilitates tax relief for qualifying capital expenditure on new non-residential structures and buildings. The relief applies to the qualifying costs of building and renovating commercial structures. 

The relief was introduced in October 2018 at an annual capital allowance rate of 2% on a straight-line basis. From 1 April 2020, the annual rate was increased to 3% and the corresponding period reduced to 33 and one third years. 

HMRC’s internal manuals consider the meaning of qualifying capital expenditure for this tax relief. The manuals state that:

The amount of qualifying capital expenditure will depend upon whether the person who first uses the building constructed it themselves, or they acquired it unused from a developer. That amount is determined either directly from expenditure incurred on the construction of a building, or by comparing those costs with the sum paid for the relevant interest in the building.

From the total ‘qualifying expenditure’, any amounts that qualify for other capital allowances or are specifically disallowed must be removed. The qualifying expenditure does not change, even when the ownership of the building changes, there are exceptions relating to VAT liabilities and rebates.

IHT and domicile

Domicile is a general legal concept which in basic terms is taken to mean the country where you permanently belong but actually determining domicile status can be complex. HMRC guidance states that domicile cannot be defined precisely, but the concept rests on various basic principles.

Although domicile can change, there is generally a presumption in favour of the continuation of an existing domicile. To change a domicile, lots of factors are considered, for example, the location family, property and business interests.

There is also a concept in the UK of deemed domicile, whereby under rules introduced from 6 April 2017, any person who has been resident in the UK for more than 15 of the previous 20 years are deemed to be domiciled in the UK for tax purposes. This makes them liable to Inheritance Tax (IHT) on their worldwide assets.

IHT is generally chargeable to people domiciled (or deemed domiciled) in the UK or with assets sited in the UK. For example, HMRC’s manuals states that if someone creates a settlement with assets outside the UK, when they are not domiciled in the UK, the settlement could be excluded from the charge to IHT. There are also many double tax agreements that can, depending on the circumstances, change a person’s liability to IHT.

New warnings from HMRC re tax fraudsters

Fraudsters are continuing to target taxpayers with scam emails in advance of the 31 January 2022 deadline for submission of Self-Assessment returns. In fact, over the last year, HMRC received nearly 360,000 reports about bogus tax rebate referrals. 

A number of these scams purport to tell taxpayers they are due a rebate / refund of tax from HMRC and ask for bank or credit card details in order to send the fake tax refund. The fraudsters use various means to try and scam people including making contact by phone calls, texts or emails. Fraudsters have also been known to threaten victims with arrest or imprisonment if a bogus tax bill is not paid immediately.

HMRC operates a dedicated Customer Protection team to identify and close down scams but continues to advise taxpayers to identify fraud and avoid becoming victims themselves. For example, HMRC will only contact taxpayers due a refund by post and never use emails, text messages or external companies for this activity. Genuine organisations like HMRC and banks will not contact customers asking for their PIN, password or bank details.

If you think you have received a suspicious call or email claiming to be from HMRC you are asked to forward the details to phishing@hmrc.gov.uk and text to 60599. If you have suffered financial loss, you should contact Action Fraud on 0300 123 2040 or use their online fraud reporting tool.

Teesside Freeport open for business

The first of the English Freeports, Teesside, opened operations on 19 November 2021, and is expected to be followed shortly by Thames and Humber. The Teesside Freeport will be at the forefront of local low carbon sector creating thousands of jobs in green energy.

Businesses in Freeport tax sites are able to benefit from tax reliefs including:

  • an enhanced 10% rate of structures and buildings allowance
  • an enhanced capital allowance of 100%
  • full relief from Stamp Duty Land Tax
  • business rates relief on certain business premises within freeport tax sites
  • employer National Insurance contributions relief, subject to Parliamentary process and approval

In addition, local councils will be able to retain 100% of business rates growth generated by the freeport tax sites for the next 25 years, providing them with financial security to invest in regeneration in their local area.

The Teesside Freeport also has a custom's site designation. This is a special kind of port where normal tax and customs rules do not apply. Rather there are simplified customs procedures including tariff suspension, exemption, and deferral available.

In total, the government has committed to the creation of eight Freeport locations across England and at least one Freeport in each of Scotland, Wales and Northern Ireland. 

Tax Diary December 2021/January 2022

1 December 2021 – Due date for Corporation Tax payable for the year ended 28 February 2021.

19 December 2021 – PAYE and NIC deductions due for month ended 5 December 2021. (If you pay your tax electronically the due date is 22 December 2021).

19 December 2021 – Filing deadline for the CIS300 monthly return for the month ended 5 December 2021.

19 December 2021 – CIS tax deducted for the month ended 5 December 2021 is payable by today.

30 December 2021 – Deadline for filing 2020-21 self-assessment tax returns online to include a claim for under payments to be collected via tax code in 2022-23.

1 January 2022 – Due date for Corporation Tax due for the year ended 31 March 2021.

19 January 2022 – PAYE and NIC deductions due for month ended 5 January 2022. (If you pay your tax electronically the due date is 22 January 2022).

19 January 2022 – Filing deadline for the CIS300 monthly return for the month ended 5 January 2022.

19 January 2022 – CIS tax deducted for the month ended 5 January 2022 is payable by today.

31 January 2022 – Last day to file 2020-21 self-assessment tax returns online.

31 January 2022 – Balance of self-assessment tax owing for 2020-21 due to be settled on or before today unless you have elected to extend this deadline by formal agreement with HMRC. Also due is any first payment on account for 2021-22.

Self-Assessment countdown

There are now less than 75 days to file your 2020-21 Self-Assessment tax return. Last year over 12.5 million taxpayers were required to complete a Self-Assessment tax return but over 1.8 million taxpayers missed the 31 January deadline.

The deadline for submitting your 2020-21 Self-Assessment tax returns online is 31 January 2022. You should also be aware that payment of any tax due should also be made by this date. This includes the payment of any balance of Self-Assessment liability for the 2020-21 plus the first payment on account due for the current 2021-22 tax year.

If you miss the filing deadline then you will usually be charged a £100 fixed penalty if your return is up to 3 months late, regardless of whether you owed tax or not. 

HMRC is encouraging taxpayers to complete their tax return as early as possible to avoid getting stressed as the filing date looms. In fact, last year over 2,700 taxpayers submitted their tax returns on Christmas Day with a further 8,500 taxpayers completing their tax returns on Boxing Day.

If you are filing online for the first time you should ensure you register to use HMRC’s self-assessment online service as soon as possible. Once registered an activation code will be sent by mail. This process can take up to 10 working days. 

Most COVID support scheme grants are treated as taxable income in the same way as other taxable receipts and need to be reported to HMRC. This means that if you received a support payment during the 2020-21 tax year, such as the Self-Employment Income Support Scheme, this needs to be reported on your self-assessment tax return. If you received the £500 one-off payment for working households receiving tax credits this does not need to be reported under self-assessment.

Mandatory vaccination for frontline health and social care worker

The government has published its response to its consultation on making COVID-19 vaccination a condition of deployment for frontline workers in health and social care settings in England and has confirmed that it will now bring forward regulations to implement a mandatory COVID-19 vaccination requirement. The regulations will cover all those who have direct, face-to-face contact with service users, including doctors, nurses, dentists, domiciliary care workers, porters, receptionists, cleaners, volunteers, agency workers and trainees (unless they are exempt). The requirement will apply across the Care Quality Commission (CQC) regulated health and social care sector, whether they are publicly or privately funded.

This means health and social care workers will need to have received a full course of COVID-19 vaccination in order to continue to be deployed. Some individuals will be exempt from the regulations:

  • those under the age of 18
  • those who are clinically exempt from COVID-19 vaccination
  • those who have taken part or are currently taking part in a clinical trial for a COVID-19 vaccine
  • those who do not have direct, face to face contact with a service user, for example, those providing care remotely, such as through triage or telephone consultations, or managerial staff working in sites apart from patient areas
  • those providing care as part of a shared lives agreement.

The requirement will come into force in the spring, subject to the passage of the regulations through Parliament. There will be a 12-week grace period between the regulations being made and coming into force to allow those who have not yet been vaccinated to have both doses. Enforcement would begin from 1 April 2022, subject to Parliamentary approval.

The requirement will only cover COVID-19 vaccinations, not flu vaccinations.

A reminder of trivial benefit rules

We wanted to remind readers of the trivial benefits in kind (BiK) rules. The BiK exemption applies to small non-cash benefits like a bottle of wine, a bouquet of flowers given occasionally to employees, or any other benefit in kind classed as 'trivial' that falls within the exemption. By taking advantage of the exemption employers can simplify the treatment of BiKs whilst at the same time offering a tax efficient way to give small gifts to employees.

The trivial benefit rules provide an opportunity to give small rewards and incentives to employees. The main caveat being that the gifts are not provided as a reward for services performed or as part of the employees’ duties. However, gifts to employees on milestone events such as the birth of a child or a marriage or other gestures of goodwill would usually qualify.

The employer also benefits as the trivial benefits do not have to be included on PAYE settlement agreements or disclosed on P11D forms. There is also a matching exemption from Class 1A National Insurance contributions.

The tax exemption applies to trivial BiKs where the BiK:

  • is not cash or a cash-voucher; and
  • costs £50 or less; and
  • is not provided as part of a salary sacrifice or other contractual arrangement; and
  • is not provided in recognition of services performed by the employee as part of their employment, or in anticipation of such services.

The rules dictate that directors or other officeholders of close companies and their families, will be restricted to an annual cap of £300. The £50 limit remains for each gift. The £300 cap does not apply to employees. If the £50 limit is exceeded for any gift, the value of the benefit will be taxable.