HMRC notices

The process of registering a trade mark can be very complex, and careful due diligence must be undertaken to decide what exactly is being trade marked and in which jurisdictions. It is possible to make a UK only trade mark application or a European Union wide application. The process for applying in other jurisdictions is based on local rules and would need to be considered on a case by case basis.

We consider the steps mentioned below to be taken in making an application solely in the UK. An application can be made online with the Intellectual Property Office (IPO), the official UK government body responsible for Intellectual Property (IP) rights including patents, designs, trade marks and copyright.

In order to apply you need:

• details of what you want to register, for example a word, illustration or slogan
• the trade mark classes you want to register in

There is a special service available, known as 'Right Start' service that will check your application meets the rules for registration. If you use this service, you pay £100 initially plus another £100 if you complete the application, plus £50 for each additional class applied for. You will then get a report telling you if your application meets the rules. To proceed, you must then pay the full fee within 14 days of getting your report. You can choose to continue your application even if it does not meet the rules for registration. There is also a standard online and paper application process available at slightly different fee rates.

The trade mark registration process takes about four months and includes approximately 20 working days for the IPO to consider whether your trade mark is suitable for registration, as well as the publication of the proposed trade mark in the IPO’s Trade Mark Journal – so that third parties have an opportunity to oppose your application. If there is no opposition, the trade mark will be registered.

As the school holidays fast approach, many parents face having to organise extra school holiday childcare over the summer months.

HMRC is reminding parents that the Tax-Free Childcare (TFC) scheme can help if you have children aged 0-11 years old. The TFC scheme helps support working families with their childcare costs and can be used to pay for regulated holiday clubs during the school holidays. More than 68,000 registered childcare providers including school, football, art and tennis clubs have signed up across the UK. Parents can pay into their account regularly and save up their TFC allowance to use during school holidays.

The TFC scheme provides for a government top-up on parental contributions. For every £8 contributed by parents an additional £2 top up payment will be funded by the Government up to a maximum total of £10,000 per child per year. This will give parents an annual savings of up to £2,000 per child (and up to £4,000 for disabled children until the age of 17) in childcare costs.

The TFC scheme is open to all qualifying parents including the self-employed and those on a minimum wage. The scheme is also available to parents on paid sick leave as well as those on paid and unpaid statutory maternity, paternity and adoption leave. In order to be eligible to use the scheme, parents will have to be in work at least 16 hours per week and earn at least the National Minimum Wage or Living Wage. If either parent earns more than £100,000, both parents are unable to use the scheme.

Chief Secretary to the Treasury, Liz Truss, said:

'We understand making arrangements for summer childcare at this time of year is important and can be a stressful time for parents. Tax-Free Childcare makes things easier, putting more money in the pockets of parents and supporting as many families as possible to secure high-quality, affordable childcare.'

An ISA is a tax exempt savings account available to UK residents. Whilst the amount invested in an ISA does not benefit from tax relief the income and gains are free from most taxes including Income Tax and Capital Gains Tax. Eligible holdings include cash ISAs, stocks and shares ISAs and innovative finance (including peer-to-peer loans) ISAs.

There is no minimum period for which an ISA must be held, and you can make withdrawals at any time without the loss of tax relief. The maximum amount that can be invested in an ISA in the current tax year is £20,000. The £20,000 limit can be used in one account or multiple accounts.

It is also possible for qualifying taxpayers to invest up to £4,000 of the £20,000 ISA limit in a Lifetime ISA. The Lifetime ISA is available to those aged between 18 and 40 to save for a new home or for their retirement. Under the scheme, the government provides a 25% bonus on yearly savings of up to £4,000 and once you start saving before you are 40, you can continue using the scheme until you turn 50. If you are approaching the age limit cut-off it is well worth opening a Lifetime ISA as you can continue saving until the day before you turn 50. The money invested in a Lifetime ISA can be used for purposes other than saving for a new home or retirement, but will be subject to a 25% withdrawal charge.

There are also Junior ISAs available for under 18’s which were introduced to encourage children to save money. The returns from Junior ISAs are also tax-free and are usually locked until the child reaches 18. The annual subscription limit for Junior ISAs is currently £4,368.

Statement of Practice 4/97 sets out HMRC’s views on the correct treatment for tax purposes of commission, cashbacks and discounts. Cashbacks are taken to mean lump sums received by a customer as an inducement for entering into a transaction for the purchase of goods, investments or services and received as a direct consequence of having entered into that transaction.

In general, an ordinary retail customer purchasing goods, investments or services at arm’s length will not be liable to Income or Capital Gains Tax in respect of any commission, discounts or cashbacks received by them. This applies even if the commission or cash-back is paid under an enforceable contract separate from the contract for the supply of the goods or services itself.

However, if someone is paid for introducing some other customer to the supplier of goods or services, then they are taxable under the miscellaneous income sweep-up provisions if:

• they are not otherwise chargeable; and
• the payment is not gratuitous.

Note that a cash-back received in the course of trading is a receipt of the trade to be included in taxable trade profits.

Where a freeholder (or landlord) of a property grants a new lease to a new tenant there are sometimes upfront payments due, usually known as a lease premium. The payments of these premiums are increasingly popular, and the tax implications can be complicated depending on the length of the lease.

For leases of 50 years or less a proportion of the premium is taxed as income. The proportion to be charged as income depends on the length of the lease. The shorter the lease, the greater the proportion to be charged. For leases of more than 50 years, the premium is treated as a capital sum and represents a capital gain by the freeholder. In this case none of the premium is treated as income. Certain other sums paid are treated like premiums. In some circumstances the tenant may be able to claim relief on the ‘income’ element of the premium paid.

A landlord may also be entitled to relief against their own rental business income for premiums paid to obtain a property that is now let, or where a lease was acquired for which an earlier tenant had paid a premium.

The assessment of self-employed or partnerships profits is usually relatively straight-forward if the accounting date – the date to which accounts are prepared – falls between 31 March and 5 April. However, overlap profits can arise where a business year end date is not coterminous with the end of the tax year.

Overlap profits can happen in the first 2 or 3 years of the business or in any year in which there is a change of basis period because of a change of the accounting date.

For example, if a client's business starts 1 January 2018 and their chosen year end date is 31 December 2019, the basis periods are:

• 2018 to 2019, 1 January 2019 to 5 April 2019
• 2019 to 2020, 1 January 2019 to 31 December 2019

The portion of accounts from 1 January 2019 to 5 April 2019 is therefore taxed twice and is known as overlap profit.

Overlap relief can be used to reduce the profits on the final tax return when the business ceases trading or if the accounting period changes. Overlap relief is a mandatory deduction. The full amount of the relief available for a particular tax year must be given as a deduction for that tax year. No part of the deduction can be waived.

If overlap profits were created some time ago, and profits have been declining in recent years, it may be prudent to consider a change of accounting date closer to, or at the end of, the tax year. In this way, the overlap relief can be claimed and tax liabilities reduced at a beneficial time for the business or partnership. There can also be Income Tax and National Insurance savings.

The SEIS provides for extensive Income Tax and Capital Gains Tax (CGT) breaks for investors and this greatly encourages much needed seed capital in new businesses. The SEIS is most valuable for taxpayers who can fully benefit from the tax reliefs on offer.

For investors the main benefits of the scheme are as follows:

• Income Tax relief worth 50% of the amount invested to qualifying individual investors on a maximum annual investment of £100,000.
• A 50% exemption from CGT on gains reinvested within the scope of the SEIS. The maximum gain to be relieved is capped at £100,000 and the relief will be withdrawn if the SEIS relief is ultimately withdrawn.
• There is a 100% exemption from CGT on the sale of shares more than three years after the date on which they were issued.
• An SEIS investment will normally qualify for 100% relief from Inheritance Tax where the usual conditions are met.

The availability of both Income Tax and CGT relief has made the SEIS a very popular scheme. The reliefs are only available where there is sufficient liability against which to set the relief. Under certain circumstances, small business owners can also use the scheme to invest in their own businesses. Of course, investors must consider the importance of picking a good company to invest in and carry out proper due diligence. 

There are a number of conditions which must be met in order to invest in the scheme. For example, the scheme can only be used to invest in small companies i.e. companies with gross assets of no more than £200,000 and with less than full-time equivalent 25 employees. A company can raise a maximum of £150,000 through the SEIS but can go on to use other schemes such as the EIS to raise further funds.

There are special rules for the taxation of post-cessation receipts after a trade has ceased. The legislation clearly states that the person who receives or is entitled to the post-cessation receipt is the person who is subject to Income Tax or Corporation Tax on the income. This does not have to be the same person who carried on the original trade.

HMRC manuals state that: a receipt which arises from a property rental business, after it has ceased, is taxable under special rules provided, it is assumed that the taxpayer has not already included that receipt in the computation of their rental business profits.

The taxpayer may also be able to claim relief for post-cessation expenses for which they have had no relief. One example might be the cost of background heating for empty premises to keep down condensation and so maintain the value of the property for later sale.

A claim for post-cessation property relief is possible if a taxpayer ceases to carry on a UK property business and within 7 years makes a 'qualifying payment' or a 'qualifying event' occurs in relation to a debt of the business. A claim to relief must be made on or before the first anniversary of the 31 January following the end of the tax year in which the payment is made.

The weekly rates of child benefit for the only or eldest child in a family is currently £20.70 and the weekly rate for all other children is £13.70. These rates have remained unchanged for some time. Taxpayers entitled to the child benefit should be aware that HMRC usually stop paying child benefit on the 31 August following a child’s 16th Birthday. Under qualifying circumstances, the child benefit payment can continue until a child reaches their 20th birthday if they stay in approved education or training.

Child benefit is usually payable for children who come to the UK, however, there are a number of rules which must be met in order to claim. HMRC must be notified without delay if a child receiving child benefit moves permanently abroad.

It is also possible to claim Guardian’s Allowance if you are bringing up someone else’s child because one or both parents have died. The Guardian’s Allowances is paid on top of child benefit and is currently £17.60 per week.

Beware related tax charge

The High Income Child Benefit charge applies to higher rate taxpayers whose income exceeds £50,000 in a tax year and who are in receipt of child benefit. The charge either reduces or removes the financial benefit of receiving child benefit. Where both partners have an income that exceeds £50,000, the charge will apply to the partner with the highest income.

For taxpayers with income above £60,000, the amount of the charge will equal the amount of child benefit received. Taxpayers have the choice: to keep receiving child benefit and pay the tax charge through Self Assessment or elect to stop receiving child benefit and not pay the charge.

It is common practise in the building industry for a final percentage of an amount due to a builder to be withheld as a retention. This payment allows the customer to retain part of the total payment due until satisfied that the builder has completed all the activities required of them under contract at an agreed level of satisfaction.

Typically, this may be for a 12-month period between a Certificate of Completion being given and the issue of a Maintenance Certificate.

HMRC accepts that builders will generally deal with retentions in one of the following ways:

• include retentions within turnover, provide for the estimated cost of remedial work, and make provision for any debt impairment, or
• defer recognition of retentions until their receipt becomes virtually certain.

HMRC is prepared to accept either of these options for tax purposes as an accepted treatment unless an unrealistically conservative view has been taken. In some cases, these monies are never paid. HMRC point out that, consequently, it will often be the case that, whichever of the above approaches is adopted, there will be little or no difference in the figure of net profit.