In association with Croner Taxwise, the conference will focus on some specific areas that we believe will be of significant interest and relevance for our consultancy clients. Employment status & off-payroll (IR35) VAT Managing people in the modern accountancy practice Dealing with fast growth business Tax planning for the family business Dealing with Non-Doms

1. L O N D O N C O N F E R E N C E 2 0 1 9
In association with:

2. HOUSEKEEPING
Network ID - TLS Events
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3. PROGRAMME
 09.30 - Welcome & introduction
Chris Watts, PKF Francis Clark
 09.40 - Employment status & off-payroll (IR35)
Rebecca Seeley Harris, PKF Francis Clark
 10.10 - VAT update - focusing on the changes to VAT in the construction sector
Liam Dushynsky, PKF Francis Clark
 10.35 - Managing people in the modern accountancy practice
David Passfield, Croner Taxwise
 11.00 - Break
 11.15 - Dealing with fast growth business
Stuart Rogers, PKF Francis Clark
 11.35 - Tax planning for the family business
John Endacott, PKF Francis Clark
 12.10 - Dealing with Non-Doms
Karen Bowen, PKF Francis Clark
 12.40 - Round up & panel Q&A session - www.sli.do (code #E212)
 13.00 - Lunch

4. PANEL Q&A - CODE E212
www.sli.do

5. EMPLOYMENT STATUS &
OFF-PAYROLL (IR35)
Rebecca Seeley Harris, Tax Director

6. EMPLOYMENT STATUS

7. EMPLOYMENT STATUS
• Tax status:
• employed or self-employed
• Employment rights:
• employed, self-employed & limb ‘b’ worker
Employment
Status
• IR35 Public sector 2017 - Private sector 2020
• Onshore intermediaries - agency tax
legislation
• Self-employed (re-classification)
• Office-holders i.e. directors
• Managed ‘personal service companies’ (MSC)
Tax
purposes

8. OFF-PAYROLL (IR35)

9. OFF-PAYROLL – APRIL 2020
Off-payroll Public Sector – April
2017
Off-payroll Private Sector
consultation – April 2020
Private Sector medium / large
businesses only
• Annual turnover: not more than £10.2 million
• Balance Sheet total: not more than £5.1
million
• Number of Employees: not more than 50
“small company” exception
based on Companies Act 2006

10. LABOUR SUPPLY CHAIN
• the end client will make the status
determination
From April 2020
• Cascaded down the supply chain; or
• Supplied direct to the worker by the
client
The determination and
requested reasoning will
either be:
• fee-payer
The determination will
also be supplied to the
• tax loss will be collected from Agency 1
Agency 1 will be
responsible for
compliance of the chain
• liability transfers to the client
If HMRC can’t collect
from Agency 1

11. OFF-PAYROLL WORKER
The worker has
the right to see
the
status
determination
The worker will
have the right to
request the
reasoning for
the decision
The worker will
have the right to
challenge the
decision
The challenge
process will be
client led
The client will be
responsible for
setting up or out-
sourcing a client-
led process
Based on a set
of legislative
requirements

12. LIABILITY
Deduction of
taxes initially
sits with the
Fee-payer
Liability will
rest with any
party that has
failed to fulfil
its obligations
Transfer of
liability if
HMRC can’t
collect

13. MAKING THE DETERMINATION
• Update not
available until
April 2020
CEST
“reasonable
care”
Blanket
assessments
Role based
assessments

14. NEXT STEPS
Employment
Status Audit
Identify and
review current
engagements
•With agencies
•With PSCs
Appoint
someone to
a designated
status role
Joined up
processes –
HR,
Finance,
procurement
Review
internal
systems
Training Outsource

15. MANAGED SERVICE COMPANIES

16. MANAGED SERVICE COMPANIES
Aimed at composite managed service companies in 2007
HMRC won first case in Court of Appeal in March 2019
Christianuyi v. HMRC [2019]
There has to be:
• Managed service company (MSC)
• Managed service company provider (MSCP)
• Provider has to be ‘involved’ with MSC
Directors of MSCs liable for PAYE and NICs; but
Transfer of liability provision

17. AGENCY TAX LEGISLATION

18. AGENCY TAX LEGISLATION
• Personal service
• Worker is under the supervision,
direction or control
• Presumption is the worker is
deemed employed
• Presumption has to be rebutted
S.44 ITEPA 2003 -
onshore
intermediaries -
false
self-employment

19. LIMB ‘B’ WORKER

20. LIMB ‘B’ WORKER
Limb ‘b’
worker
s.230
(3)(b) ERA
1996
Case law
Uber
Pimlico Plumbers
Off-payroll backlash
Tax issues
- holiday
pay and
compensa
tion

21. Any
questions?
THANK YOU FOR LISTENING

22. VAT UPDATE - FOCUSING ON THE
CHANGES TO VAT IN THE
CONSTRUCTION SECTOR
Liam Dushynsky, Indirect Tax Director

23. AGENDA
• Construction Sector Changes
• Reverse Charge Introduction
• DIY Claims
• Other reverse charge changes
• Making Tax Digital
• Brexit No Deal Planning

24. “The reverse charge will help level the playing field for businesses
by ensuring that VAT fraud is removed from supply chains. This
measure will impact on up to 150,000 businesses in the
construction and building sector. The impact on business
administrative burdens is expected to be significant because of the
numbers impacted.”
https://www.gov.uk/government/publications/vat-reverse-charge-for-building-and-construction-
services/vat-reverse-charge-for-building-and-construction-services
https://www.gov.uk/guidance/vat-domestic-reverse-charge-for-building-and-construction-
services
CONSTRUCTION SECTOR CHANGES

25. CONSTRUCTION SECTOR CHANGES – REVERSE CHARGE
Builder
Charges
£100K VAT
Pays
HMRC
£100K VAT
Main Contractor
Pays the
£100K VAT
Reclaims
£100K VAT
from HMRC
HMRC
Receives £100K from
Builder
Gives £100K to main
contractor
 Missing Trader Issues

26. CONSTRUCTION SECTOR CHANGES – REVERSE CHARGE
 Missing Trader Issues
Builder
Charges
£100K VAT
Keeps the
£100K VAT
Does a
runner
Main Contractor
Pays the
£100K VAT
Reclaims
£100K VAT
from HMRC
HMRC
Receives £0 from
Builder
Gives £100K to main
contractor

27. CONSTRUCTION SECTOR CHANGES – REVERSE CHARGE
 Other common examples of issues
 New builds (mainly zero rated)
 HMRC often inspect purchase invoices
 If unsure default position by builder is
generally to charge VAT (not reclaimable
if incorrectly charged)
Offices
Student
Flats
 Issues with Dwelling or Relevant
Residential Purpose (RRP) rules -
who is the main contractor etc.
 Different officers take different views

28. CONSTRUCTION SECTOR
CHANGES – REVERSE CHARGE
 VAT domestic reverse charge for Building
and Construction services from 1st October
2019 to tackle criminalised attacks on VAT
system
 Standard or reduced rate supplies where
payments require Construction Industry
Scheme (CIS) reporting
 Supplies between sub-contractors and
contractors will be subject to the reverse
charge unless supplied to a contractor who
is an end user
 End users will be recipients who use the
building or construction services for
themselves

29. CONSTRUCTION SECTOR CHANGES – REVERSE CHARGE
Applicable Services Non-Applicable Services
Building construction, repair and demolition… Oil/Gas Drilling…
Work on land and site infrastructure… Mineral Extraction…
Work on water management… Manufacturing components/plant for a site…
Work on the provision/installation of utilities… Manufacturing components for water/utilities…
Cleaning during works… Architects / Surveyors/ Design Consultants…
Painting/Decorating of Buildings.. Art creation & restoration…
Ancillary services (e.g. excavation, scaffolding
etc.)…
Signwriting / Erecting of Advertising…
Installing seats / blinds / shutters…
Installing Security / CCTV / PA systems…

30. CONSTRUCTION SECTOR CHANGES – REVERSE CHARGE
 How does a domestic reverse charge operate?
• Supplier includes a reverse charge statement on invoice
• Customer accounts for the VAT due rather than the supplier
• Customer deducts this VAT at same time as input VAT
• Removes scope for sub-contractors in chain to evade paying VAT due to
HMRC
• Only applies to supplies between UK taxable persons (registered or liable
to be registered)
Box Figures Supplier Customer
Box 1 £0 £20
Box 4 £0 £20
Box 6 £100 £0
Box 7 £0 £100

31. CONSTRUCTION SECTOR CHANGES – REVERSE CHARGE

32. CONSTRUCTION SECTOR CHANGES – REVERSE CHARGE
 Questions
• Invoice Statement? – “Reverse charge – Customer to pay the VAT to
HMRC”
• What if I do a mixed services? – Reverse charge all
• What if I am unsure? - If recipient is VAT registered and payments are
subject to CIS then reverses charge
• Tax Point? – When transaction takes place (one off) or VAT invoice
issued / cash received (when continuous services)
• Are Reverse Charge Sales lists required? – No they are just for mobile
phones and computer chips
• Do I need to do checks? Yes

33. CONSTRUCTION SECTOR CHANGES – REVERSE CHARGE
Check if customer is an end user or intermediary
Consider the cashflow impact on supplier
Check Selling billing arrangements and paperwork
Keep evidence of CIS and VAT Status
Include a statement in terms and conditions
Recommendations

34. CONSTRUCTION SECTOR CHANGES – DIY CLAIMS
 Policy Changes?
 Strict 3 month time limit for submission of claim following completion
 Invoices are required (sometimes nothing substantial for months after
main works)
 HMRC have been querying the date of completion and claims where the
house has been occupied prior to completion
 Applies to new build and conversions
 Lots of claims have been rejected
 HMRC have confirmed they will accept a reasonable excuse for
perceived late submissions – possibility to re-open closed claims

35. OTHER REVERSE CHARGE
CHANGES – 14 JUNE 2019

36. OTHER REVERSE CHARGE CHANGES – 14 JUNE 2019
What’s meant by ‘renewable energy certificates’
 These certificates are commonly called ‘Guarantees of Origin’ (GoOs) and are
also known as:
 Renewable Energy Certificates (RECS)
 Renewable Obligation Certificates (ROCS)
 Renewable Energy Guarantee of Origin (REGO)
 International Renewable Energy Certificates (I-RECS)
This list is not exhaustive.
 The domestic reverse charge will apply to all supplies of these types of
certificates. This means purchases and sales of certificates between
businesses that are registered or liable to be registered for VAT in the UK.

37. MAKING TAX DIGITAL

38. MAKING TAX DIGITAL
 Many software providers are encountering
teething problems but resolving quickly
 Online set-ups have encountered glitches
 March/June/Sept/Dec – Due Wednesday 7th
August
 Need to sign up for MTD 72 hours before
submitting or 7 days before if paying by direct
debit
 May (monthly) (Deadline Sunday 7th July)
 Please try in advance of the weekend
 If you opted in early you have to stay in
 Delayed start for VAT groups and some other
traders
 A letter should have been received

39. BREXIT – NO DEAL
PLANNING

40. BREXIT – NO DEAL PLANNING
 31 October 2019 (Maybe)
 Make sure you have an EORI (Economic Operator Registration
Identification)
 Apply for TSP (Transitional Simplification Procedures)
 Apply for a duty deferment account
 Read the No-Deal tariff to see how it may impact you
 Consider supply chains and incoterms
Visits on the increase
 Classification
 Preference
 Existing procedures
 Licences

41. MANAGING PEOPLE IN THE
MODERN ACCOUNTANCY
PRACTICE
David Passfield, Croner Taxwise

42. Managing people in the modern
accountancy practice
David Passfield
Senior Presenter and Broadcaster
Aaron Lawrie
Croner Taxwise

43. #SuccessStartsHere
Welcome to our seminar
• Protecting employers since 1983
• Over 37,000 clients currently
• Working with SMEs and large employers
• Over 1M pieces of HR advice given per annum
• Advice given 24/7
• 3,000 accountants and their clients have access to our
dedicated advisors
• Handling tribunal cases for employers

44. #SuccessStartsHere

45. #SuccessStartsHere
• Factoring voluntary overtime into holiday pay
• The Court of Appeal have ruled on the case of East of England
Ambulance Trust v Flowers which questioned when voluntary
overtime should be included in a workers’ holiday pay
• Voluntary overtime should be factored into holiday pay when it is
‘sufficiently regular and settled’
• This ruling will be key in any future disputes on voluntary overtime
and holiday pay
PLEASE ASK FOR FURTHER CLARITY & ADVICE
Latest News

46. #SuccessStartsHere
LAW CHANGES: 2019+ GOOD WORK PLAN

47. #SuccessStartsHere
• All employees & workers to receive written statement from Day
One (6th April 2020)
• Extra details to be provided in Main Statement
– all remuneration (not just pay) e.g. vouchers/lunch, durations &
conditions of any probationary period….etc
• Holiday pay reference period, for those whose pay varies, will
be extended from 12 to 52 weeks. This is to even out the
effects of peaks & troughs on work over a year (6th April 2020)
• Employment status tests. Further clarity*
• Zero hours employees may request stable hours *
LAW CHANGES: 2019+ GOOD WORK PLAN

48. Establishing
Employers Rights

49. Your Employees
“If only people could do what they are supposed to do!”
In what ways could your employees enable business growth?
What action would you need to take (or want to take) for this
to happen?
What stops or restricts you taking action?

50. #SuccessStartsHere
83 Pieces of Legislation
Before
Employment
During
Employment
After
Employment
How many rights does an
employer have?
ESTABLISHING EMPLOYERS RIGHTS

51. #SuccessStartsHere
STANDARDS
EXPECTATIONS
ESTABLISHING EMPLOYERS RIGHTS

52. #SuccessStartsHere
STANDARDSEXPECTATIONSJOB DESCRIPTION
ESTABLISHING EMPLOYERS RIGHTS

53. #SuccessStartsHere
TERMS & CONDITIONS
STAFF HANDBOOKS
ESTABLISHING EMPLOYERS RIGHTS

54. #SuccessStartsHere

55. The Contract of
Employment

56. #SuccessStartsHere
Written Contract:
Right to receive a Contract of Employment
(written statement of terms and conditions)
STATUTORY EMPLOYMENT RIGHTS

57. #SuccessStartsHere

58. #SuccessStartsHere
Policies

59. #SuccessStartsHere
Leave Harassment
Whistleblowing Capability
ProbationMobility
Wastage
Lay off
I.T.
Drugs Other employmentCar
Expenses
Smoking
Social networking
Absence
Media
POLICIES
Health & Safety

60. #SuccessStartsHere
Dress code
Internet
Right to
search
Language
E-mail
Alcohol
Data
Protection Lone worker
Stress
Notice
Mobile phone
Shared
Parental Leave
Bereavement
Flexible
Working
Confidentiality
Anti-bribery
Equal
opportunity
Pension
TrainingHygiene
Relationships
At Work
POLICIES

61. #SuccessStartsHere
Establish your Rights outside work

62. #SuccessStartsHere
• Poor Performance
• Capability
• Conduct
• Absenteeism
• Stress
• Dismissal
Issues that prevent growth

63. #SuccessStartsHere
Performance

64. #SuccessStartsHere
Why manage performance?
• Understand/Improve your productivity and
results
• Improve your bottom line
• Increase your ‘customer’ experience
• Develop employer/employee relationships
Performance management

65. #SuccessStartsHere
• Are your Job Descriptions fit for purpose?
• Do they meet your current business
needs?
• Will they meet your future business needs?
Job descriptions

66. #SuccessStartsHere
Do you carry
out effective
performance
appraisals?
Performance appraisal

67. #SuccessStartsHere
Do you have
a Capability
Policy in
place?

68. #SuccessStartsHere
Absence

69. #SuccessStartsHere
Why can issues arise?
• No system
• Employee does not report absence as per your
rules/policy
• Line manager does not carry out reporting duties
• Process started but not ended
• Return to work meetings not in place
Absence records

70. #SuccessStartsHere
Record Monitor Manage
Managing absence

71. Discrimination

72. #SuccessStartsHere
• Race
• Sex
• Marriage and Civil Partnership
• Gender reassignment
• Sexual orientation
• Religion or belief
• Age
• Pregnancy and maternity
• Disability
Protected characteristics

73. Health & Safety
Employee Wellbeing

74. #SuccessStartsHere
• Stress is the adverse reaction people have when
they feel that they cannot cope with excessive
pressure or other types of demands placed on
them
• Prolonged stress may result in adverse physical,
emotional, mental and behavioural symptoms, but
stress is not an illness
• What can be the causes of stress in the
workplace?
Health & Safety – Stress

75. #SuccessStartsHere
• Excessive workload, long hours, unsocial hours
• Covering poor performance or absenteeism of
colleagues
• Bullying and harassment by Colleagues, Managers,
Supervisors
• Unable to do the job
• Unsuitable for the role
• Undergoing ‘performance management’
Health & Safety –
Causes of Stress in the Workplace

76. #SuccessStartsHere
Employers have a legal duty to take action to
reduce, and where reasonably practical,
eliminate ill health which is caused by work
related stress.
It is important that Employers;
• have a policy in place for identifying and
managing work related stress AND ideally…
• provide Counselling and Occupational
Health services and support through an
Employee Assistance Programme (EAP)
Stress in the Workplace

77. #SuccessStartsHere
Meets clients
statutory obligations
Demonstrates
a duty of care
Complies with
Equality Act 2010
Reduces
absence
Enhances
productivity
Employee Assistance Programme

78. Health & Safety

79. #SuccessStartsHere
Are Employment and Health &
Safety linked in your workplace?

80. #SuccessStartsHere
Employer’s Legal Obligations
• Employers have a duty to protect the health, safety
and welfare of their employees and other people.
• Employers must ensure all workers and others are
protected from anything that may cause harm.
• Employers must do whatever is reasonably
practicable to achieve this.

81. #SuccessStartsHere

82. #SuccessStartsHere
Health & Safety Penalty was £12,000

83. #SuccessStartsHere#SuccessStartsHere
An inspection could now
result in a letter or a
notice if they find a
material breach
HSE can
invoice at
£154
per hour
Fee For Intervention
HEALTH & SAFETY CHARGES

84. #SuccessStartsHere#SuccessStartsHere
POLICY
PROCEDURES
ASSESSMENTS
TRAINING
PERSONAL PROTECTIVE EQUIPMENT
MONITORING
REGISTERS
RECORDS
REVERSE BURDEN OF PROOF

85. Peter Smith
Peter Smith
03/06/19

86. Employment Services
 24 Hour advice
 Employment Tribunal: Insurance
 Documentation
 Updates
 Webinar training
 Payroll advice
 Early conciliation
 Online service
 Employee Assistance Programme

87. Health & Safety Services
 24 Hour advice
 Legal costs, representation & appeal
 Documentation
 Updates
 Webinar training
 Regular reviews
 Risk assessment training & instruction

88. #SuccessStartsHere
Affordable support
Based on staff numbers
Different service levels
Fixed fee at point of entry
All inclusive

89. The next step …

90. #SuccessStartsHere
Please request a complimentary
follow-up visit and we will review
your (and any of your clients)
Contracts, Polices, Procedures
etc… free of charge and without
any obligation.
Indicate which areas you would
like some further discussion
around.
We are able to offer you legal
representation for a current or
potential tribunal claim.
Next step….
Contract review

91. #SuccessStartsHere
And finally….
We can present an
employment law,
HR and Health &
Safety event to
your clients –
completely FREE
of charge.

92. BREAK

93. PANEL Q&A - CODE E212
www.sli.do

94. DEALING WITH FAST GROWTH
BUSINESS
Stuart Rogers, Tax Partner

95. INNOVATION & TECHNOLOGY
TAX LIFECYCLE MODEL
START UP
PRODUCT
DEVELOPMENT
FUNDRAISING
ATTRACTING
& RETAINING
KEY PEOPLE
GROWTH &
PROFIT
EXIT

96. START UP
 Limited liability
 Loss offset
 Identifying IPR and who owns it
 Only companies may benefit from R&D, patent
box, SEIS / EIS and EMI share options

97. R&D CLAIMS
 Enhancement to qualifying costs
 SME regime v RDEC
 Qualifying activity – be broad minded
 Boutique risk
 Approach to fees

98. R&D CLAIMS - SECTORS
 Advanced manufacturing
 Software
 Construction
 Renewables
 Food & drink
 Agri-business
 Waste management & recycling
 Lifesciences / pharma / medical

99. R&D CLAIMS – WHAT WE DO
 Identify potential claims
 Establish company qualification
 Work with clients to develop claim narrative
 Identify qualifying costs and maximise claim
 Prepare and submit claim
 Work hand in hand with the accountant
 Manage HMRC enquiries

100. PATENT BOX
 Ownership of IPR important
 Complex legislation
 Limited benefit for SMEs in many cases

101. SEIS / EIS
 Venture capital investment schemes
 Attractive to high net worth investors
 Key benefits
 CGT deferral
 Income tax credit
 CGT exemption

102. SEIS / EIS
 Complex qualifying criteria both at point of
fundraising and beyond
 FA 2015 changes
 Age of business / knowledge intensive
 Risk to capital
 Follow on capital / business plans
 Growth and furtherance
 Process
 Advance assurance
 Forms EIS1 to EIS3

103. SHARE SCHEMES
 Recruitment and retention tool
 Aligns key staff members with
shareholder objectives
 Be clear on the purpose and objective
 Focus on the commercial needs first,
not the tax wrapper
 How will the participant realise value?
 Will the plan be attractive to the
individuals?

104. SHARE SCHEMES - FLAVOURS
 Direct award
 EMI options
 CSOP
 Growth shares
 Partly paid shares
 Phantom share scheme

105. SHARE SCHEMES – WHAT WE DO
 Design share schemes based upon the
commercial need
 Advise on the tax treatment of the awards
 Undertake valuation work
 Implement share plans, either in-house or in
conjunction with a preferred lawyer

106. CORPORATE STRUCTURING
 Group v Parallel structure
 SSE qualification
 Demergers

107. INTERNATIONAL EXPANSION
 Withholding taxes
 VAT / customs duties
 Permanent establishment risk
 Foreign payroll risk
 Transfer pricing risk

108. EXIT
 Trade disposal / private equity / MBO
 Structuring consideration
 Entrepreneurs’ relief

109. YOUR SPECIALISTS
STUART ROGERS
CORPORATE TAX PARTNER
HEAD OF INNOVATION & TECHNOLOGY TAX
Stuart.Rogers@pkf-francisclark.co.uk
07730 220138
RICHARD TYLER
SENIOR TAX MANAGER
Richard.Tyler@pkf-francisclark.co.uk
01752 301010
SARAH BOYES
SENIOR TAX MANAGER
Sarah.Boyes@pkf-francisclark.co.uk
01823 275925
KATIE FARLEY
SENIOR TAX MANAGER
Katie.Farley@pkf-francisclark.co.uk
01803 320100

110. TAX PLANNING FOR THE FAMILY
BUSINESS
John Endacott, Head of Tax

111. CAPITAL GAINS TAX RELIEFS

112. COMPARISON OF CAPITAL GAINS TAX RELIEFS ON
UNQUOTED TRADING COMPANY SHARE SALE
 Tax relief most generous for full EIS or SEIS:
 Exemption on sale;
 Upfront tax relief; and
 Deferral relief (EIS) /50% tax reduction of original gain (SEIS)
 Exemption on sale to an employee ownership trust (EOT)
 Entrepreneurs’ relief/investors’ relief – 10% tax rate
 No associated disposal rule for investors’ relief or EIS/SEIS
 Qualifying trade definition varies between the reliefs
 Don’t overlook employment related securities and transactions in
securities

113. ENTREPRENEURS’ RELIEF
 Must have a material disposal of
business assets
 disposal of shares/ securities in a
company
 disposal of the whole or part of a
business; or
 disposal of an interest in assets in use
for the purpose of the business when
the business ceases to be carried on
 Lifetime limit of £10 million of gains
 Two year qualification period
 Extends to trustees where beneficiary
has an interest in possession and
qualifies in his own right
 Political uncertainty over future of the
relief

114. ENTREPRENEURS’ RELIEF - ASSOCIATED DISPOSALS
• Entrepreneurs’ relief extended for land or other asset
outside of a company/partnership
• Must be a material disposal of business assets for it to
apply
• Commonly used relief when structuring a sale of
development land
• For associated disposals, it is necessary to look at the
entire ownership period of the asset and not just the last
two years
• No such restriction if the land is in the
partnership/company

115. ENTREPRENEURS’ RELIEF -
SHARES OR SECURITIES
 Shares must be in the individual’s personal
company and it must be a trading company or
the holding company of a trading group
 Individual must be an officer or an
employee
 Individual must hold 5% of the shares:
 By nominal value;
 By votes; and
 By economic value
 Economic value can be by reference to
“equity holders” test or by entitlement to
sale proceeds
 No 5% requirement for EMI options

116. “all the company’s issued
share capital (however
described), other than
capital the holders of
which have a right to a
dividend at a fixed rate
but have no other right to
share in the company’s
profits.”
ITA 2007, s 989
What does a right to a fixed dividend
mean?
 Castledine – FTT (2016)
 McQuillan – UT (2017)
 Warshaw – FTT (2019)
Issue is preference shares
See CTM00509-CTM00516
ENTREPRENEURS’ RELIEF – MEANING OF ORDINARY
SHARE CAPITAL

117. INVESTORS’ RELIEF
 10% CGT on up to £10 million of gains
 Earliest claims in 2019/20
 Shares must have been held for 3 years & issued after 17 March
2016
 Unquoted trading company shares (including AIM) defined by
reference to s 165/s 165A
 Must be ordinary shares
 Cannot be a director & must be no reasonable prospect of
employment at the outset

118. LIQUIDATION PLANNING

119.  TiS clearance should be sought on
a liquidation
 No clearance possible for
Liquidation TAAR
 Gives some reassurance on the
Liquidation TAAR
 Consider alternatives to liquidation
 Spotlight 47 – HMRC believe that
a sale instead of a liquidation is
still caught by the Liquidation
TAAR
 Don’t overlook employment related
securities
Spotlight 47 - 4 February
2019 - Attempts to avoid an
Income Tax charge when a
company is wound up
HMRC will use the GAAR if
the Liquidation TAAR does
not apply
TRANSACTIONS IN SECURITIES ( TIS)

120. Conditions:
 A – at least 5% interest in the
company
 B – must be close company
 C – within 2 years from distribution
carrying on trade or similar activity
 D – must be tax avoidance motive
 HMRC say Condition C must be
linked to Condition D
Condition C
a) The individual carries on a trade or
activity which is the same or similar
to, that carried on by the company or
an effective 51% subsidiary of the
company
b) The individual is a partner in a
partnership which carries on such a
trade or activity
c) The individual, or a person
connected with him or her, is a
participator in a company which
carries on such a trade or activity or
is connected with another company
that does
d) The individual is involved with a
connected person which carries on
such a trade or activity
LIQUIDATION TAAR

121. BUSINESS PROPERTY
RELIEF CONSIDERATIONS

122. Vigne 2019 (UTT) - para 37
“There is no clear bright line between
businesses which qualify for relief and
those that do not. We are satisfied that
the FTT applied the correct legal test
and that the conclusion it reached was
the one it was entitled to reach on the
basis of the evidence before it. It is
irrelevant whether we, or another panel
of the FTT, might have reached a
different conclusion.”
Graham 2018 (FTT) - para 93
“Overall we conclude that Carnwethers
was an exceptional case which does,
just, fall on the non-mainly-investment
side of the line. The pool, the sauna,
the bikes, and in particular the personal
care lavished upon guests by Louise
Graham distinguished it from other
“normal” actively managed holiday
letting businesses; and the services
provided in the package more than
balanced the mere provision of a place
to stay.”
RECENT DECISIONS

123. 1. Time spent by owners and staff
2. Capital employed
3. Income
4. Profits
5. Overall context of the business
 Planning points:
 Watch excepted assets
 Subsidiaries with no
trading activity cannot
qualify for BPR
 Consider a demerger to
maximise BPR and
entrepreneurs’ relief?
 Move investment assets
down a generation?
 Consider non statutory
clearance (Annex C)
GEORGE APPRAISAL CRITERIA FROM FARMER

124. DEMERGER APPROACH
 As it stands BPR is in doubt as value of Combo Limited mainly relates to
investment property.
 A split demerger can be used to preserve BPR on the value of the trade.
 The shareholders then own 100% of two companies, one wholly property
(non-BPR) and one wholly trading (100% BPR).
Propco
Group
Tradeco
Group
Combo
Limited
Existing shareholders
100%
Existing shareholders
100%
Existing shareholders
100%
Total value - £3.5m
Property value - £2.0m
Trade value - £1.5m
BPR available – O
ER available – ? / O
Total value - £2.0m
Property value - £2.0m
BPR available – O
ER available – O
Total value - £1.5m
Property value - £1.5m
BPR available – P
ER available – P
Before After

125. INHERITANCE TAX
PLANNING POINTS

126. MAXIMISING THE RESIDENCE NIL
RATE BAND (RNRB)
Mr
£k
Mrs
£k
Total
£k
Business value 750 750 1,500
BPR (750) (750) (1,500)
House value 500 500 1,000
500 500 1,000
• RNRB is withdrawn where estate exceeds £2m before
BPR/APR.
• Need to consider will drafting – pass half the house to
children on a first death?
• Sever the joint tenancy on the house and hold as tenants
in common?
• Consider pre-death gifts?
• Deed of variation planning possible.

127. Rights Issue
 Two year qualification period for
shares to qualify for BPR
 No new qualification period on a
reorganisation of shares
 A rights issue qualifies as a
reorganisation of shares
 Can be used as “late in life”
planning to shelter assets
otherwise subject to IHT
 Can issue preference shares as a
rights issue on ordinary shares
Agricultural Property Relief (APR)
 Relief limited to agricultural value
rather than market value
 Landlord can qualify if let on a
Farm Business Tenancy (FBT)
 Where there is development
potential on land then BPR is
better
 Consider a contract farming
arrangement
 Can be effective for
entrepreneurs’ relief; and
 BPR
BPR/APR PLANNING POINTS

128. DEALING WITH NON-DOMS
Karen Bowen, Partner

129. AGENDA
Non-doms
 Implications of being deemed-dom
 Formerly Domiciled Residents (FDRs)
Cleansed accounts
 Tainting cleansed accounts and how cleansed accounts can be used
Offshore trusts
 The traps and things to consider post changes
NRCGT
 Extension to all disposals of UK property
 Compliance – return and payment date

130. The 3 legal forms of domicile:
 Domicile of origin – at birth from father (or mother if unmarried).
 Domicile of dependency – up to age 16 domicile follows father.
 Domicile of choice – displaces previous domicile by permanently settling
in new jurisdiction
In addition, 2 domiciles relevant for UK tax purposes:
 Deemed domicile
 Formerly domiciled resident
NON-DOM STATUS

131. DEEMED DOMICILE (DD) STATUS
 Before 6 April 2017, only relevant for IHT purposes:
 DD where UK resident for at least 17 out of 20 tax years
 From 6 April 2017, extended to include all taxes (income tax, CGT and
IHT)
 DD once UK resident for at least 15 out of the 20 previous tax years
 Watch out for the 15 out of 20 year rule especially for non-doms who have
left the UK and return later.

132. NON-DOMS WHO LEFT THE UK BY 5 APRIL 2017
 New DD rules do not apply if non-dom was non-resident on 6 April 2017
 15/20 rule means that six years of non-residence are required to ‘reset the
clock’
 IHT DD status lost in 4th year of non-residence but can be resurrected if
non-dom returns to the UK.

133. NON DOM LEAVING THE UK BY 5 APRIL 2017
Example
• Pierre is non-UK domiciled and first became UK resident in 2002/03.
He left the UK on 15 March 2017.
• For 2017/18, he was UK resident for 15 of the previous 20 years.
Under new rules, this would have caused him to become DD on 6
April 2017. But he left by 5 April 2017 so was protected from the new
DD rules.
• HOWEVER - if he returns to the UK before 6 April 2023 he will be
caught by the 15/20 rule and be DD.
• If Pierre delays resuming UK residence until after 6 April 2023, clock
is reset. DD status not applicable until 6 April 2038 at the earliest.
ALWAYS CHECK PREVIOUS 20 YEAR HISTORY FOR RETURNING
NON-DOMS

134. NON DOM LEAVING THE UK NOW – THE POTENTIAL
DD TRAP
Example
• Pedro is non-UK domiciled (domiciled in Mexico) and first became
UK resident in 2004/05. He is due to leave the UK on 15 December
2018.
• For 2019/20, he will be non-UK resident BUT he would have been
UK resident for 15 of the previous 20 years.
• Pierre was protected by the DD rules because he left by 5 April 2017
but that is not the case for Pedro.
• If Pedro resumes UK residence before 6 April 2025, his DD status
will remain in place (including IHT) due to the 15/20 year DD rule.

135. IMPLICATIONS OF BEING DEEMED UK-DOMICILED
• No longer able to claim the remittance basis – taxed on worldwide income and gains as
arise
• Capital loss election falls away – losses relieved in normal way
• Worldwide assets within the scope of IHT
• The DD tail for IHT:
• DD status falls away at start of 4th year of non-residence (need to stay NR for 4
years), but
• DD status resurrected if UK residence resumes within 6 years (due to 15/20 rule)
• DD status for IT and CGT only lost once no longer meet 15/20 rule so returning within 6
years will mean DD status continues.
• Settlors of offshore trusts who have DD status continue to receive protections provided
the trust is not tainted and a factual UK domicile status is not taken.
• Automatic CGT rebasing of foreign assets to their value on 5 April 2017 if:
• CGT deemed dom status effective from 6 April 2017, and
• non-dom paid the Remittance Basis Charge (RBC) in a previous tax year.

136. BECOMING DEEMED DOM FOR CGT ON 6 APRIL 2017 –
CGT REBASING
Example
• Maria is non-UK domiciled and has lived in the UK since 1998. She claimed
the remittance basis and paid the RBC in 2008/09. She acquired a property
in Monaco for £200,000 in 1996 before coming to the UK which she sells for
£2.5m in 2018/19. The property was worth £2m on 5 April 2017.
• The actual gain on disposal is £2.3m (£2.5m - £200,000). But, Maria
became deemed domiciled on 6 April 2017 for CGT purposes (having been
UK resident for at least 15 of the previous 20 tax years) and she paid the
RBC in a previous year, so the ‘cost’ of her property for CGT purposes is
rebased to £2m. The gain assessable for 2018/19 is £500,000 (she cannot
claim the remittance basis on this gain because she is now deemed dom).
• The acquisition of the property was funded by clean capital so she can bring
the £2.5m proceeds to the UK and pay CGT on a gain of only £500,000.

137. THE FORMERLY DOMICILED RESIDENT STATUS( FDR)
• Introduced with effect from 6 April 2017.
• Applies to individuals who:
• were born in the UK, and
• have a domicile of origin in the UK, and
• have taken a domicile of choice outside the UK, and
• are UK resident for the tax year (for income tax and CGT)
• Slight relaxation of the rules for IHT. The FDR status applies if UK
resident for the relevant tax year and for one of the preceding two tax
years (becomes effective in 2nd year of UK residence – assuming DD
does not apply on return).

138. FDR – UK TAX IMPLICATIONS
• No longer able to claim the remittance basis – taxed on worldwide income
and gains as they arise
• Capital loss election falls away – losses relieved in normal way
• Worldwide assets within IHT
• Any offshore trusts settled while non-dom treated as having a UK domiciled
settlor:
• Trustees within relevant property (for worldwide assets) for IHT purposes
• If FDR settlor can benefit, assessed on all trust income/gains as they arise to
the trust and IHT gift with reservation of benefit bringing value of trust into
personal estate.
• FDR status lost if non-dom becomes non-UK resident again – but also need
to watch the DD rules

139. CLEANSED ACCOUNTS
• The legislation allowed non-doms (but not FDRs) to cleanse offshore
accounts by 5 April 2019.
• Cleansing allowed non-doms to segregate mixed accounts into its
constituent parts leaving them with separate capital, gains and income
accounts.
• No UK tax implications if remittances made from the capital account,
provided not tainted before the remittance.

140. CLEANSED CAPITAL ACCOUNTS - ACTIONS GOING
FORWARD
• A cleansed capital account can become tainted if it receives cash of a different
nature – eg. new foreign income/gains assessed on the remittance basis.
• Deemed doms are now taxed on the arising basis and will therefore not taint
the cleansed capital account if it receives income/gains liable to UK tax.
• Non-doms who are not claiming the remittance basis may deposit their taxed
foreign income/gains into their cleansed capital account. Only recommended
if the remittance basis is definitely not to be claimed.
• Non-doms claiming the remittance basis must continue to segregate accounts.
• Sale proceeds must be credited to a separate account.
• Interest paid on the cleansed capital must not be credited to that account.
In all cases the cleansed capital account must not receive funds from any
other ‘tainted’ account.

141. TAINTED ACCOUNTS – CAUTION!
• Do not use to purchase UK assets
• Do not remit
• Spend offshore
• Use to make gifts offshore to non-relevant persons
• Period of non-residence lasting at least five years, possible to remit
foreign investment income and capital gains while non-resident without
UK tax implications.

142. REQUIREMENT TO CORRECT (RTC)
• Irregularities in relation to offshore income and gains up to 5 April 2017,
now under RTC.
• Complexities in working out remittances mean it is easy to make a
mistake.
• If HMRC find that UK tax has been underpaid (even if not deliberately), the
taxpayer will suffer a standard penalty of 200% of the tax due.
• This may be reduced to a minimum 100% penalty of the underpaid tax if
the taxpayer fully co-operates with HMRC, but restricted to 150% if
‘prompted’ by HMRC.
• HMRC receiving information from other jurisdictions under the Common
Reporting Standard (CRS) and are writing to taxpayers.
• Where client receives letter or comes forward, seek specialist advice.

143. OFFSHORE TRUSTS
• New offshore trusts still viable option for non-doms – but not for non-
doms with DD/FDR status!
• Foreign assets (except UK residential property interests/relevant loans)
excluded property even once DD.
• Protections for DD settlors not excluded from benefit provided that the trust is
not tainted:
• Taxed under s.739 (not s624/s720).
• Continue to be taxed under s87 re trust gains
• In both cases, DD settlor only assessed as and when takes income or
capital distribution/benefits from the offshore trust.

144. OFFSHORE TRUSTS
• The bad news:
• No longer possible to ‘wash out’ gains to non-UK resident beneficiaries.
• Except in year of termination, distributions matched proportionately.

145. TAINTING THE TRUST – LOSS OF TRUST
PROTECTIONS
• Trust is tainted if
• DD settlor adds property to the trust, or
• Trust does not pay at least the official rate of interest on loans made by DD
settlor, or
• DD Settlor provides services to the trust without full consideration, or
• DD Settlor pays more than official rate of interest on loans made to him by the
trust
• If tainting occurs, all protections are lost (forever!):
• Settlor interested - taxed on income and gains as they arise.
• IHT excluded property status continues to apply to assets held prior to tainting
but not to newly added value.
Income tax and CGT protections also lost if settlor takes a UK domicile of
choice!

146. ONWARD GIFT PROVISIONS
• Where distribution made to non-resident beneficiary and subsequently
passed to UK resident (beneficiary or not), consider onward gift
provisions.
• Applies where:
• Intention to make an onward gift to a person who will be, or is
expected to be, UK resident at the time the original distribution from
the trust is made,
• The onward gift occurs within three years of the original distribution,
• Pre 6 April 2018 distributions can be caught where onward gift is made
on/after 6 April 2018 and within the 3-year period.
• Legislation widely drafted, seek professional advice if thought to apply.

147. UK RESIDENTIAL PROPERTY
• Non-doms indirectly holding UK residential property brought within the scope of
IHT from 6 April 2017
• Captures property held by ‘excluded property’ trusts and foreign company
wrappers.
• Where properties held in trust (or underlying co of trust) 10 year and exit charges
now applicable.
• 10 year anniversary looks back to the date of the settlement.
• A gift with reservation will apply for the non-dom settlor if the trust has a UK
residential property interest and the settlor is not excluded from benefit.
• Where the trust/non-dom sells shares in a company holding residential property
interest and replaces with other foreign assets, any replacement asset will
continue to be treated as UK sited property for two years (for IHT purposes).
• The above does not apply if the underlying company sells the UK residential
property as there are no look-through provisions.

148. RELEVANT LOANS
• The IHT provisions regarding UK residential property also extend to
‘relevant loans’.
• Relevant loans = loans made by a trust or non-dom individual that have
been applied directly or indirectly towards the purchase, re-financing,
improvement or maintenance of UK residential property.
• Where relevant loans are repaid, the monies can continue to be
regarded as UK sited for two more years if replaced by non-UK assets.

149. NON-RESIDENT CAPITAL GAINS TAX ( NRCGT)
• Now applies to all disposals of UK property and sale of substantial
interests in property rich entities.
• Substantial interests = investor who at any time in the two years prior to
the disposal held at least a 25% interest in the property rich company.
• Property rich entity = an entity whose value, at the time of the disposal,
derives at least 75% of its value from interests in UK land.
• UK residential property rebased on 5 April 2015 value.
• Commercial property and any indirect shareholdings of UK property
rebased to its value on 5 April 2019.

150. NON-RESIDENT CAPITAL GAINS TAX ( NRCGT)
• NRCGT return required within 30 days of completion.
• Existing relationship with HMRC (eg file SA700 or SA100) payment can be
deferred (relevant for 2019/20 only).
• No relationship at time of disposal, payment within 30 days of completion.
• From 6 April 2020, payment for ALL disposals under NRCGT will be due
within 30 days of completion
• Example: an individual who files SA100s exchanges contracts on 5 April
2020, the payment of the NRCGT is due on 31 January 2021. If the
exchange takes place on 6 April 2020, the payment date is accelerated to
30 days from the date of completion.
• Trusts holding shares in property rich entities need to consider whether
the underlying company gains for any period pre NRCGT can be attributed
up to the trust under s13 TCGA 1992

151. SUMMARY
• Non-doms can still benefit from tax planning – eg use of offshore trusts
and remittance basis claims.
• Watch out for formerly domiciled residents! Advise before they come back
to the UK!
• In some cases, the use of Double Tax Treaties can help – India, Pakistan,
Italy and France have Estate Treaties with the UK that do not recognise
DD status.
• As a result of the recent changes, the legislation in relation to offshore
trusts has become more complex.
• Mistakes can easily occur and, in some cases, lead to unexpected tax
charges.
• Where in doubt, seek specialist advice.

152. ROUND UP
Chris Watts, Tax Consultant

153. PANEL Q&A - CODE E212
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