HMRC seems to regard directors’ loan accounts (DLAs) as a ‘risk’ area, in which there is the potential for errors. Such is HMRC’s concern that they have produced a ‘Directors’ Loan Account Toolkit’, which provides guidance on the errors that commonly occur. It also includes a checklist to help reduce them (seewww.hmrc.gov.uk/agents/toolkits/dla.pdf).

However,toolkits and checklists only offer general guidance. Practical issues and problems can arise in respect of DLAs for director shareholders of ‘close’ family or ownermanaged companies, three of which are outlined below.

1. ‘Bed and breakfasting’

One of the checklist points in the HMRC toolkit is: “Where an… Read more…

CFC reform and IP

In order to reduce the risk of companies diverting profits overseas without good commercial reason, UK companies are subject to tax on the profits of their ‘controlled foreign companies’.  A controlled foreign company (CFC) is one which is resident outside the UK, controlled by persons resident in the UK – the reform of the rules removes the requirement that the company be in a lower tax jurisdiction than the UK, although there is an exemption for CFCs in countries with effective tax rates similar to the UK.

Control

‘Control’ is determined by considering the rights of… Read more…

It is probably a sign of the present hard economic times that more taxpayers seem to be seeking tax relief for losses on investments in shares and business loans. This is reflected in the number of cases reaching the tax tribunal.

Tax relief claims for losses against capital gains are prevalent. However, such relief generally only shelters gains at rates of up to 28%. By contrast, loss relief against income potentially provides income tax relief at rates of up to 50%, and is therefore the preferred route for many individuals.

The provisions allowing individuals to claim relief for losses on… Read more…

The Capital Gains Tax (CGT) relief on disposal of an individual’s only or main residence is very valuable and well known. Taxpayers are generally aware of the need to reside in the property, which is a fundamental requirement for principal private residence (PPR) relief. However, what degree of permanence and continuity is necessary to qualify for PPR?

In Clarke v CRC [2011] UKFTT 619 (TC), HMRC raised assessments on the taxpayer, on the basis that he was not entitled to PPR relief in respect of two properties. Prior to purchasing those properties, he lived at the matrimonial home with his… Read more…

Most tax professionals and many taxpayers will be familiar with the concept of ‘time to pay’ (TTP) arrangements with HM Revenue and Customs (HMRC). The basic position of HMRC is that tax is payable when due by law (note – the tax legislation does allow certain tax liabilities to be paid by instalments, but such instances are relatively uncommon). However, HMRC has some discretion (under a general responsibility of collection and management of taxes etc in the Commissioners for Revenue and Customs Act 2005) to allow payment after the due date, in the form of TTP arrangements.

HMRC issued… Read more…

The loan relationships provisions for companies have been around since 1996, and it is fair to say that the legislation overall is complex. However, it is not normally difficult to identify a loan relationship for these purposes, although a recent case indicates that even this task may not be without its problems. The loan relationship legislation in FA 1996 was rewritten and is now contained in CTA 2009. It states that a company has a ‘loan relationship’ for corporation tax purposes if it is either a debtor or a creditor in respect of a money debt, and the debt arises… Read more…