Category: Self Assessment

Are Cruise Ship Entertainers Employees?

afro american jazz pianist

If they weren’t on cruise ships HMRC would probably argue that they were employees but in the case of cruise ships they argue the opposite.

Pete Matthews (1) Keith Sidwick (2) v Revenue & Customs [2011] UKFTT 24 (TC)

Mr Sidwick was a musician and played piano on a series of cruise ships. Mr Matthews was a juggler, similarly entertaining passengers on cruise ships. Both were subject to a close degree of control by the ships officers but the First-tier Tribunal found that this degree of control was required by the context of a cruise ship.

The First-tier Tribunal concluded that the entertainers were not employees ‘…but earn their living by entering into a series of separate engagements with a number of different cruise lines in a similar way to actors…’

The reason why HMRC argued against employment was to stop a claim for Seafarers Earnings Deductions.

To get the deduction you must:

  • work on a ship. Oil rigs and other offshore installations aren’t ships for the purposes of Seafarers’ Earnings Deduction – but cargo vessels, tankers, cruise liners and passenger vessels are
  • work all or part of the time outside the UK. This means that for each employment you must carry out duties on at least one voyage per year that begins or ends at a foreign port
  • be resident in the UK or resident for tax purposes in a European Economic Area (EEA) State (other than the UK) – find out more by following the link ‘Check your residence status’ in the section below

You get the deduction from your earnings as a seafarer if you have an ‘eligible period’ of at least 365 days that consists mainly of days when you are absent from the UK.

From 6 April 2013 the rules that determine if someone is resident in the UK for tax purposes have been put on a statutory basis. These rules are known as the Statutory Residence Test (SRT).

steve@bicknells.net

Where should you pay tax? (Statutory Residence Test)

Flugzeug fliegend

Historically some of the key cases related to Pilots.

Shepherd v Revenue and Customs Commissioners [2007] BTC 426, [2006] EWHC 1512 (Ch)

A BA pilot had a home in Cyprus and spent 80 days in the UK (well below the 183 day test) in 1999/2000. However, he had ties to his former matrimonial home in Berkshire and the UK was his base for international flights, HMRC won the case on the basis that he had not ‘left the UK’.

Grace v Revenue & Customs [2008] Spc 663

Mr Grace was also a BA pilot, he claimed to have relocated to South Africa. Mr Grace won his case because he was set out the facts in a way that convincingly showed his links to his new country of residence. Although subsequently the outcome was reversed.

Gaines-Cooper Case

Robert Gaines-Cooper was a Multi Millionaire, based in the Seychelles but subject to the UK tax because of family ties

These cases demonstrate the problems of deciding residency, so on the 6th April 2013 a new Statutory Residence Test was introduced.

This test is relevent not only to Aircrew but also to:

  • Ships Crew
  • Lorry Drivers
  • Coach Drivers
  • Sales People
  • Travel Industry

UK ties are likely to be a key issue:

  1. Family Tie – Relevent relationships include Spouse, Child under 18, Common Law partner resident in the UK. However, Children in Full Time education are ok provided they don’t spend more than 21 days in the UK outside of term time.
  2. Accomodation Tie – A property in the UK where they can live for 91 days a year or 16 days if its owned by a close relative.
  3. Work Tie – Work in the UK for at least 3 hours a day for 40 days a year
  4. 90 Day Tie – Spend more that 90 days in the UK in this tax year or the previous tax year or the year before that
  5. Country Tie – the midnight test for the greatest number of days

On the positive side at least HMRC have been very specific in their guidance, these are are very specific tests!

steve@bicknells.net

 

Is my hobby a business?

Shopping chart on notebook isolated

The criteria used to assess if an activity is a hobby or a business are:

  • The size and commerciality of the activity.
  • The frequency of the activity and transactions
  • The application of business principles.
  • Whether there is a genuine profit motive.
  • The amount of time devoted to the activities.
  • The existence of arm’s-length customers (as opposed to just selling your wares to family and friends).

HMRC have some great examples to help you decided, for example

Gail is a full-time employee working for a stationery company. She pays her PAYE tax on this employment every month.

In her free time Gail makes cushions and uses most of them in her home. Occasionally she sells them to friends and work colleagues for an amount that just covers the cost of materials of £15. Sometimes she makes a loss. Any money she does make goes towards her holiday fund.

She decides to make extra cash by selling cushions on an Internet auction site and starts auctioning three or four to see how they go. They all sell for more than £50, a profit of at least £35 each.

She uses this money to buy more materials and within a month she is selling around ten cushions a week, always at a profit, and is considering setting up her own website.

Gail’s initial sales of cushions to friends are not classed as trading. It lacks commerciality and she does not set out to make a profit. The occasional sales are a by-product of her hobby. Once she begins to auction her cushions, she has moved into the realms of commerciality.

She is systematically selling her goods to make a profit. She will need to inform HMRC about her trade, and keep records of all her transactions. On the level of sales shown in the example the potential turnover of around £26,000 is well below the VAT annual threshold so Gail does not need to register for VAT.

You can find more examples at HMRC

Many traders start off in a small way and don’t realise that they need to register with HMRC, they assume their activity will be treated as a hobby, but things can grow quickly.

You should register as Self Employed as soon as your hobby becomes a commercial venture, even if you are losing money!

If you don’t register, HMRC will be looking for you and if you have an online business it won’t be hard for them to find you.

Ebay say they work ‘hard to ensure that businesses that trade on the platform are aware of their tax obligations’.

It added: ‘We do not hesitate to share information with government agencies should there be evidence of wrongdoing. We require all sellers trading as a business on eBay to register for a business account.’

steve@bicknells.net

Overseas property investors – are you ready for CGT in 2015

Taxes

In the Autumn Statement 2013 it was announced that a CGT charge will be introduced from April 2015 on ‘future’ capital gains made by non-UK residents disposing of UK residential property. George Osborne said…

“Britain is an open country that welcomes investment from all over the world, including investment in our residential property”

“But it’s not right that those who live in this country pay capital gains tax when they sell a home that is not their primary residence – while those who don’t live here do not. That is unfair.”

UK Residents typically pay capital gains tax at 28% on any profit from selling property that is not considered their primary residence.

 

 Reuters reported in Dec 2013…

Property lawyers and estate agents said foreign owners would be relieved the tax will not apply to historic gains before 2015. But they cautioned that the overall impact could be marginal as many foreign investors see London property as a safe and profitable place to park capital.

“Tax is not the primary driver for the majority of international buyers of residential property in London,” Knight Frank’s head of global research, Liam Bailey, said.

“It is important to note that the change to CGT rules brings the UK in line with other key investor markets, such as New York and Paris, where equivalent taxes can approach 35-50 percent depending on the owner’s residency status.”

It was not immediately clear how the tax would be collected and how it would apply if foreign owners used a domestic company to purchase property.

When a company disposes of an asset and makes a capital gain, as the main rate of corporation tax in 2014 is 21% (20% small profits rate) there could be a future tax saving opportunity for overseas investors to transfer property to limited companies.

There are other tax implications for example ATED (Annual Tax on Enveloped Dwellings) and SDLT (Stamp Duty Land Tax) but now could be a good time to consider your options.

steve@bicknells.net

Simple Tax – a great way to file your return

laptop_ipad_simpletax_right1

 

I read about Simple Tax in an article in the Express…

Backed by venture capital investors including EC1 Capital, Seedcamp and Charlotte Street Capital, SimpleTax was set up to help customers find ways to save money on their tax bills and file returns online with HMRC in minutes, without the expense of employing an accountant.

SimpleTax’s users have so far cut a total of £2.5 million from their tax bills

So I tried it out, it’s great and it’s free.

You will need your HMRC Online filing details if you want to file your return alternatively you can just print out the return.

For taxpayers who have straightforward returns Simple Tax should make it quicker and easier to complete and file online.

As you prepare the return Simple Tax gives you tips on things you can claim and ways to save tax.

Take a look and see what you think https://www.gosimpletax.com/

steve@bicknells.net

 

If your share value falls, so could your tax bill

fictitious newspapers

Did you know that in the case of Mr Brown v HMRC Mr Brown was able to claim a tax deduction for the loss in his share value without having to sell his shares? Its true, its known as a NegligibleValue Claim and HMRC have Help Sheet on it (286).

A negligible value claim enables you to set a capital loss against your income (or against other capital gains if you have them) for earlier years and claim a tax refund.

Many negligible value claims are made by shareholder directors whose company has failed. Their claim is to offset the loss on the shares in their company against their directors’ wages for earlier tax years.

When a taxpayer owns shares which become of negligible value the taxpayer may make a claim under s24 TCGA 1992, resulting in a deemed disposal and reacquisition, which crystallises a capital loss.

steve@bicknells.net

The effect of a negligible value claim is broadly that the taxpayer is treated as if he or she had disposed of the asset and immediately reacquired it for the amount specified in the claim.
Read more at http://www.taxationweb.co.uk/tax-articles/general/negligible-value-claims.html#Hlmd7ytCESlJuT27.99
The effect of a negligible value claim is broadly that the taxpayer is treated as if he or she had disposed of the asset and immediately reacquired it for the amount specified in the claim.
Read more at http://www.taxationweb.co.uk/tax-articles/general/negligible-value-claims.html#Hlmd7ytCESlJuT27.99

Maximising Gift Aid Donations

Give and Receive Sharing Support Helping Others

The end of the tax year is just a few weeks away.

Gift Aid donations are regarded as having basic rate tax deducted by the donor. Charities or CASCs take your donation – which is money you’ve already paid tax on – and reclaim the basic rate tax from HM Revenue & Customs (HMRC) on its ‘gross’ equivalent – the amount before basic rate tax was deducted.

Basic rate tax is 20 per cent, so this means that if you give £10 using Gift Aid, it’s worth £12.50 to the charity.

A Gift Aid declaration must include:

  • your full name
  • your home address
  • the name of the charity
  • details of your donation, and it should say that it’s a Gift Aid donation

If you pay higher rate tax, you can claim the difference between the higher rate of tax 40 and/or 45 per cent and the basic rate of tax 20 per cent on the total ‘gross’ value of your donation to the charity or CASC.

For example, if you donate £100, the total value of your donation to the charity is £125 – so you can claim back:

  • £25 – if you pay tax at 40 per cent (£125 × 20%)
  • £31.25 – if you pay tax at 45 per cent (£125 × 20%) plus (£125 × 5%)

You can make this claim on your Self Assessment tax return

If you are a higher rate tax payer donations made in 2013/14 will save tax at 45 percent, but in 2012/13 the rate was 50 per cent.

You can ask for Gift Aid donations to be treated as being paid in the previous tax year if you paid enough tax that year to cover both any Gift Aid gifts you made that year and the ones you want to backdate.

So if you want to donate now (before the end of the tax year) you could claim back extra tax by carrying it back into the previous tax year.

 

steve@bicknells.net

 

Will HMRC extend the Self Assessment deadline? £2m yet to file returns

Tax Money

There have been calls from Accounting Bodies to push back Friday’s deadline for Self Assessment returns because nearly 2 million tax payers have not yet filed their returns.

It was reported on Your Money .Com

Chas Roy-Chowdhury, ACCA head of taxation, said: “HMRC has a common-sense decision to make. Either it can stick to the deadline and penalise all those families and self-employed people who are struggling to get to grips with the self-assessment process, or it can do the right thing and give them a lifeline by extending the deadline. Self-assessment is not easy and there are fines starting at £100 for missing the deadline even if you don’t owe any tax.

“The circumstances around this year’s deadline are different in that there will be a high number of people who will never have done self-assessment in their lives. They are going to miss the deadline not because they have been putting it off, but because they are newcomers. If reports are to be believed that 2 million have yet to meet the deadline just two days before it closes, then it is likely a lot of people will miss it.”

The reason why there are so many newcomers this year is because of changes to Child Benefit and an increase in the number of those self employed.

So should HMRC extend the deadline?

steve@bicknells.net

3 Self Assessment Life Savers – Estimates, Provisional and Corrections

Tax Return Due Now

There are only a few days left to file your Self Assessment Return for 2013 and if you haven’t done it you might be starting to panic! a common reason for last minute filing is being unable to get the information to enter on the return, so what can you do?

Returns which include provisional or estimated figures should be accepted provided they can be regarded as satisfying the filing requirement.

  • A provisional figure is one which the taxpayer / agent has supplied pending the submission of the final / accurate figure
  • An estimated figure is one which the taxpayer / agent wishes to be accepted as the final figure because it is not possible to provide an accurate figure for example where the records have been lost. The taxpayer is not required to tick box 20 of the Finishing your Tax Return section of the return page TR 6 (or equivalent in a return for an earlier year) where estimated figures have been used

HMRC SAM121190

Correcting your return

If you make a mistake on your tax return, you’ve normally got 12 months from 31 January after the end of the tax year to correct or amend it. For example, if you send your 2012-13 online tax return by 31 January 2014, you have until 31 January 2015 to amendment it.

How to amend an online return

If you sent your tax return online by 31 January, it’s easy to amend it online too. You just need to log into your Self Assessment online account, go to the ‘at a glance’ page and choose the option to amend your tax return.

HMRC Correcting your Tax Return

steve@bicknells.net