HMRC notices

We have previously covered the importance of making a Will and ensuring that assets are divided amongst beneficiaries in the way best suited to personal circumstances. One of the most important reasons for doing so is to ensure that individuals do not die intestate (without a Will). This avoids estates being distributed in accordance with fixed criteria instead of the deceased person's unscripted wishes.

However, there are a number of ways in which a whole Will can be revoked:

• by subsequent Will or codicil
• by destruction
• by marriage or civil partnership (but this does not apply in Scotland)

A Will can be partially revoked by divorce or dissolution of a marriage or civil partnership.

In Scotland, a Will which makes no provision for the children of the testator is presumed to be revoked by the subsequent birth of a child.

To make a minor change to an existing Will, you must make an official alteration called a codicil. This change must be witnessed in the same way as witnessing an original Will. There are no limits on how many codicils you can add to a Will.

However, if the changes are significant, it would probably make sense to make a new Will. The new Will should also explain that it revokes (officially cancels) all previous Wills and codicils. All copies of previous Wills should then be destroyed.

If you are unable to pay your tax bill or need time to pay then it is in your best interests to contact HMRC as soon as possible. For example, you can apply to HMRC to make a payment plan and seek to agree a way forward. This can be done through the Payment Support Service (PSS).

If the payment of overdue tax is unresolved, HMRC can take enforcement action to secure the money they are owed. HMRC can also charge interest on outstanding amounts and you may also be required to pay penalties and surcharges. There are a number of ways that HMRC can collect overdue tax.

This includes:

• collecting what you owe through your earnings or pension
• asking debt collection agencies to collect the money
• taking items that you own and selling them (if you live in England, Wales or Northern Ireland)
• taking money directly from your bank account or building society (if you live in England, Wales or Northern Ireland)
• taking you to court
• making you bankrupt or closing down your business

There are limits on HMRC’s scope to take money owed. For example, the Direct Recovery of Debts rules allow HMRC to target non-compliant taxpayers who have sufficient funds in their accounts to pay. HMRC has said that these powers will only be used as a last resort after the debtor has repeatedly refused to pay what they owe and have received a face-to-face visit from HMRC to discuss their debt. There are also measures in place to ensure that a minimum of £5,000 is left in a taxpayers account.

HMRC has published a useful list to help businesses be prepared to import goods from the EU to the UK as we count down to the 31 January 2020 Brexit date. We are then likely to see a fixed transition period until 31 December 2020 by the end of which the Government expects to have a trade deal in place with the EU.

The six points of action listed are relevant if there is a no-deal Brexit but are also likely to be required once a trade deal is in place.

1. Make sure your client has an EORI number that starts with GB. They will need an Economic Operator Registration and Identification (EORI) number starting with GB to continue importing goods.
2. Decide who will make the import declarations. Your client can hire someone to deal with customs or if properly prepared, can do it themselves.
3. Apply to make importing easier. Your clients can apply to use 'transitional simplified procedures' to reduce the amount of information they need to give at the border. They should also ensure they have a duty deferment account if they want to be able to make one payment of customs duties a month instead of paying for individual shipments.
4. Check the rate of tax and duty they’ll need to pay. They will need to pay customs duties and VAT on all imports.
5. Check what you need to do for the type of goods you import. There might be other things required, depending on what they are importing. For example, check if the import licences or certificates needed will change. Check the rules for importing alcohol, tobacco and certain oils. Check the labelling and marketing standards for importing food, plant seeds and manufactured goods
6. Get help and support. HMRC has setup a Brexit imports and exports helpline. The helpline can help with queries about customs declarations and procedures, duties and tariffs, importing and exporting different goods, transporting goods to and from the EU and product safety regulations.

There are also likely to be different rules if your clients are moving goods from Ireland to Northern Ireland.

The inaccuracy penalty system is intended to make penalties simpler to understand and more consistent across many taxes. HMRC has the power to significantly reduce the amount of penalties due. The largest reductions are for unprompted disclosures (as against prompted disclosures). The penalties also vary depending on the taxpayers’ behaviour. HMRC has 4 levels of behaviour ranging from taking reasonable care in dealing with errors to careless, deliberate or deliberate and concealed behaviour patterns.

There is no definition of taking reasonable care from a taxation standpoint. However, HMRC’s commentary in this area is helpful. HMRC accepts that 'reasonable care' cannot be identified without consideration of the particular person’s abilities and circumstances. HMRC recognises the wide range of abilities and circumstances of those persons completing returns or claims and accepts that what is necessary for each person to discharge that responsibility has to be viewed in the light of that person’s abilities and circumstances.

HMRC gives the example of not expecting the same level of knowledge or expertise from a self-employed, un-represented individual as we do from a large multinational company.

HMRC publishes a list of income streams that are excluded from a UK property businesses' taxable income. The list includes fishing concerns, hotels and guest houses, tied premises, caravan sites, lodgers and tenants in your own home, extra services to tenants and letting surplus trade accommodation. In most cases the income from these activities will be taxed as income of a trade and not as property income.

There are also certain receipts which can arise out of the use of land and which are specifically excluded by statute from a rental business. These include yearly interest, income from the occupation of woodlands managed on a commercial basis, income from mines and quarries and income from farming and market gardening.

There is also a £1,000 property income allowance that applies to income from property (including foreign property). If a taxpayer’s annual gross property income is £1,000 or less then the amount is exempt from tax and does not need to be reported on their tax return.

The cash basis scheme helps sole traders and other unincorporated businesses benefit from a simpler way of managing their financial affairs. The scheme was extended to landlords from April 2017. The scheme is not open to limited companies and limited liability partnerships. The entry threshold for the cash basis scheme is £150,000 and you can stay in the scheme until your business turnover reaches £300,000.

Unlike other taxpayers that need to opt-in to use the scheme, the legislation assumes that landlords will use the cash basis as the default method of calculation. A landlord can still elect to opt out of the scheme in which case they can continue to use Generally Accepted Accounting Practice (GAAP) to calculate their taxable profits. Landlords are also required to continue using GAAP if their rental receipts are in excess of the £300,000 scheme threshold.

The cash basis scheme allows landlords to use the cash basis when recording income received and expenditure paid i.e. recording the flow of money from and to the business based on actual money flows. Traditional accounting uses the accruals basis i.e. income and expenditure is recorded when a bill is received, or a customer is invoiced.

Where an individual makes a loss in a trade or incurs a loss as a partner in a partnership trade, the tax rules allow the loss to be set against general income. Certain trade losses may be offset against general income. It may also be possible to carry trade losses back to earlier years or forward to subsequent years. However, partial claims are not allowed. This means that a loss set against income for a particular year must be set as far as possible against that income, even if this means that personal allowances available for that year are not fully utilised.

This relief against general income extends to:

1. losses in trades (including a profession or vocation), provided they are carried out on a commercial basis and with a view to the realisation of profits;
2. losses arising out of land – mines, quarries and other concerns;
3. but not to relief for losses in an employment or office; these are not trade losses.

By way of explanation, HMRC’s internal manuals provide the following example:

Mark has been carrying on a trade for a number of years and makes up his accounts annually to 30 September. He makes a loss of £20,000 in the year ended 30 September 2012; that is, for the tax year 2012-2013. He can relieve that loss against his general income in 2012-2013 or by reference to his general income in 2011-2012 or his general income in both 2011-2012 and 2012-2013. The claim must be made by 31 January 2015.

If the loss is to be the subject of claims for both years, Mark must choose which claim has priority. But partial claims cannot be made. The loss used in the priority year is an amount equal to income of that year. The remaining loss can be used in the other year.

If Mark had general income of £22,000 in 2012-2013 and £5,000 in 2011-2012, the alternative reliefs under S64 ITA 2007 would be:

• £20,000 against 2012-2013, or
• £5,000 against 2011-2012 and £15,000 against 2012-2013.

It is not possible to relieve, say, £2,000 against 2011-2012 and £18,000 in 2012-2013. The claim for each year must be the smaller of the loss available for relief and the income available to be relieved.

If you are selling your business, there are some important actions you must take in order to properly finalise your affairs. We have summarised below some of the main steps you need to take if closing your business. Please note that this is not an exhaustive list and it is important to check what else may be required.

Self-employed sole trader

• Notify any staff about when and why you are selling your business.
• Keep staff informed about redundancy terms or relocation packages and be mindful not to breach your employees’ rights.
• Notify HMRC. There is an online form that can be completed to tell HMRC you are closing your business. The form covers both Self-Assessment and National Insurance.
• Cancel your VAT registration or possibly transfer to new business owner.
• Consider your liability to Capital Gains Tax and whether you can benefit from reliefs including Entrepreneurs’ Relief.

Business partnership

• Your responsibilities when selling a partnership will depend on whether you’re selling your share of the partnership or the entire partnership.
• Keep staff informed about redundancy terms or relocation packages and be mindful not to breach your employees’ rights.
• If you will cease being self-employed, cancel your Class 2 National Insurance contributions.
• Cancel your VAT registration or possibly transfer to new business owner.
• Consider your liability to Capital Gains Tax and whether you can benefit from reliefs including Entrepreneurs’ Relief.

Limited company

• Your responsibilities when selling a limited company will depend on whether you’re selling your entire shareholding, or the company is selling part of its' business. 
• Keep staff informed about redundancy terms or relocation packages and be mindful not to breach your employees’ rights.
• If you are selling your entire shareholding you should appoint new directors before you resign as a director yourself.
• Consider your liability to Capital Gains Tax and whether you can benefit from reliefs including Entrepreneurs’ Relief.
• If there are charges against your company, for example a mortgage on your house to secure a business loan, you must let the provider know within 21 days of the sale.
• You may want to transfer your VAT registration to the new owner.

HMRC publishes a list of income streams that are excluded from a UK property business. The list includes fishing concerns, hotels and guest houses, tied premises, caravan sites, lodgers and tenants in your own home, extra services to tenants and letting surplus trade accommodation. In most cases the income from these activities will be taxed as income of a trade and not as property income.

There are also certain receipts which can arise out of the use of land and which are specifically excluded by statute from a rental business. These include yearly interest, income from the occupation of woodlands managed on a commercial basis, income from mines and quarries and income from farming and market gardening.

In addition, there is a £1,000 property income allowance that applies to income from property (including foreign property). If a taxpayer’s annual gross property income is £1,000 or less, the amount is exempt from tax and does not need to be reported on a tax return.

There is specific tax legislation that seeks to determine which charge takes priority where two different charges could potentially apply to the same income. These rules are known as the 'priority rules'.

HMRC manuals state that for Income Tax purposes, savings and investment income, and income otherwise within one of the charges on miscellaneous income, which also falls to be treated as a trade receipt is dealt with under the trading income rules. For Corporation Tax purposes, distributions from unauthorised unit trusts and income from the sale of foreign dividend coupons, which are also trade receipts, are dealt with under the trading income rules.

There are a number of exceptions to these rules. For example, a receipt or other credit item which would otherwise be treated both as a trade receipt and as a receipt of a UK property business is dealt with under the property income provisions.

The Income Tax priority rules must be considered together with other rules of law about the scope of particular provisions or the order of priority to be given to them. For example, there are particular rules which expressly require certain activities to be treated as a trade.