HMRC notices

In most cases, property rental income must be brought into account in the year in which the income was earned, even if the invoice has not yet been paid. However, a deduction is allowed in respect of bad & doubtful debts.

These are debts which are either clearly irrecoverable (a bad debt) or a doubtful debt to the extent it is estimated to be irrecoverable. The deduction allowable for a doubtful debt is the full amount of the debt, less than any amount the taxpayer expects to recover.

Whilst HMRC does not usually seek proof of each bad debt for which a claim is made, it is clear that a deduction can only be made where a taxpayer has taken all reasonable steps to recover the debt and proper evidence should be held to demonstrate this.

If the debt is later recovered the taxpayer should account for the recovery as a receipt of their rental business in the year the debt is paid. Similarly, if a doubtful debt later looks as if it will be paid at some future date, the taxpayer should bring the debt back in as a receipt when prospects change.

No deduction is allowable if a debt is waived for reasons other than the financial position of the debtor, for example between connected parties or merely because the tenant is a habitual slow payer.

The 'badges of trade' tests, whilst not conclusive, are used by HMRC to help determine whether an activity is a proper economic / business activity or merely a money-making side-line to a hobby. Eventually, taxpayers may have to decide if their hobby has morphed into a trade – and therefore subject to tax. The badges of trade can be used at this time to help resolve this dilemma.

Both HMRC and the courts are clear that it is important to look at the whole picture rather than looking at each 'badge' in isolation when considering options.

HMRC will consider the following nine badges of trade as part of their overall investigation as to whether a hobby is actually a trade:

• Profit-seeking motive
• The number of transactions
• The nature of the asset
• Existence of similar trading transactions or interests
• Changes to the asset
• The way the sale was carried out
• The source of finance
• Interval of time between purchase and sale
• Method of acquisition

The introduction of the trading allowance in April 2017 allows taxpayers to make small amounts of money from their hobby without concerns about any tax complications. Even if HMRC consider that the activities in question are a trade, taxpayers can make up to £1,000 per year from their hobby tax-free.

HMRC has published a useful list to help businesses be prepared to import goods from the EU to the UK after the 31 January 2020 Brexit date. In the short-term there will be a transition period during which all rules remain the same. The Government expects to have a trade deal in place with the EU by the end of the year.

The six points of action listed below are likely to be relevant once a trade deal with the EU is in place or in the case that negotiations falter.

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 will be different rules if your clients are moving goods from Ireland to Northern Ireland.

In tandem with the list for importing goods, HMRC has published a useful list to help businesses be prepared to export goods from the UK to the EU after the 31 January 2020 Brexit date. In the short-term there will be a transition period during which all rules remain the same. The Government expects to have a trade deal in place with the EU by the end of the year.

The seven points of action listed below are likely to be relevant once a trade deal with the EU is in place or if negotiations falter.

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 exporting goods. It is also important to ensure that the importer has an EU EORI number.
2. Decide who will make the export declarations. Your client can hire someone to deal with customs or if properly prepared, can do it themselves.
3. Check the rate of tax and duty. Your importer will need to pay customs duties and VAT on all imports.
4. Check what you need to do for the type of goods you export. There might be other things required, depending on what they are exporting. For example, check if the export licences or certificates needed will change. Check the rules for exporting alcohol, tobacco and certain oils. Check the labelling and marketing standards for exporting food, plant seeds and manufactured goods.
5. Find out how changes to VAT will affect you. This includes understanding how your clients will claim VAT refunds from EU countries and how they will pay VAT when selling digital services to EU customers.
6. Deciding how to transport goods outside the UK. Your client can hire someone to do this or if properly prepared, do it themselves.
7. 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 will be different rules if your clients are moving goods from Ireland to Northern Ireland.

HMRC has published a useful list to help businesses transport goods commercially when driving from the UK to or through Europe. In the short-term there will be a transition period during which all rules remain the same. The Government expects to have a trade deal in place with the EU by the end of the year.

The six points of action listed below are likely to be relevant once a trade deal with the EU is in place or in the case that negotiations falter.

1. Make sure the vehicle operator has applied for all relevant operator licences and permits.
2. Make sure the driver is eligible to drive abroad. You must also ensure the driver has a valid passport, a valid Driver Certificate of Professional Competence (CPC) card and an international driving permit (IDP). An IDP will be required in some EU countries if there’s a no-deal Brexit.
3. Check the rules for the goods being carried. There are rules for transporting certain goods. The driver may need to follow set routes or stop at specific check points if they are transporting mixed loads or specific types of goods.
4. Make sure the driver has the right export documents.
5. Find out what vehicle documents the driver needs to carry.
6. Check local road rules.

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.