The tax practice at Smith & Williamson is growing so there is a lot to keep me busy! I have been working with new partners and directors to expand the services available to our clients, such as around business rates, tax disputes and resolution and US taxes. I am also overseeing a large review of work done across the tax practice, something I do each year to ensure our standards remain high.
What do you know now that you wish you’d known at the start of your career?
I can think of two things. First, it’s okay to say you don’t know. You are rarely expected to know the answer straight away, especially in the complicated world of tax. Ask lots of questions so you really understand the issue and are in the best position to work out the answer.
Second, if you want to progress, doing a brilliant job isn’t enough: others need to know it.
Are there any new rules that are causing a particular problem?
The reform of income tax basis periods is causing concern for some clients. The new rules should simplify the current system by taxing profits arising in the tax year. There are, however, a number of practical considerations that particularly impact self-employed individuals and trading partnerships that do not draw up annual accounts to 31 March or 5 April, and those that are in the early years of trade. The cashflow impact is a key concern: there are likely to be additional costs as a result of extra tax in the transition year, plus the extra costs of accelerating accounts preparation and/or estimating profits. We have undertaken cashflow forecasts for a number of clients. For some, this had led to changing the accounting year end date. HMRC has not provided detail on all aspects of the new rules yet, so this additional uncertainty can make it harder for some businesses to understand the full impact of the changes.
Has a recent case has caught your eye?
Quinn (London) Ltd v HMRC [2021] UKFTT 437 (TC) is interesting. The taxpayer was a building contractor and expenditure on its R&D activities was factored into the price paid by its clients under commercial contracts. Because of this, HMRC argued that the taxpayer was not entitled to R&D relief under the SME scheme as the expenditure was subsidised indirectly. However, the FTT disagreed, ruling that the legislation on subsidised costs was not intended to apply where there is no clear link between the price paid by the customer and the R&D expenditure. Although HMRC is not appealing the case, it published updated guidance reaffirming its position that relief should not be available in these situations. We are therefore likely to see HMRC continue to challenge customer-led R&D activity on similar grounds. Businesses may need to work with their advisers to understand this decision and consider whether or not they have this ‘clear link’. For example, we are reviewing contracts and payment terms for a number of our clients in more detail, to give confidence around the success of R&D claims.
What should we look out for in 2022?
We should expect more HMRC enquiries into covid-19 support scheme claims. HMRC believes the amount lost due to fraud or error is around £5.8bn. The government has invested heavily in the taxpayer protection taskforce to tackle these perceived errors. We are already seeing a high number of enquiries, particularly into CJRS claims. Due to the complexity of the CJRS support calculations, combined with how fast it was rolled out, even those businesses which had confidence in the accuracy of their claims have received enquiries. Many clients are asking us to review their CJRS claims now, with the aim of avoiding a longer, more expensive process later. Given that the new taskforce is expected to be in place until the end of 2022/23, despite recent projections from the Treasury that only a quarter of the funds will be recovered, the number of enquiries raised is likely be significant.
You might not know this about me...
I used to skydive, but I wouldn’t be brave enough to take it up again!
The tax practice at Smith & Williamson is growing so there is a lot to keep me busy! I have been working with new partners and directors to expand the services available to our clients, such as around business rates, tax disputes and resolution and US taxes. I am also overseeing a large review of work done across the tax practice, something I do each year to ensure our standards remain high.
What do you know now that you wish you’d known at the start of your career?
I can think of two things. First, it’s okay to say you don’t know. You are rarely expected to know the answer straight away, especially in the complicated world of tax. Ask lots of questions so you really understand the issue and are in the best position to work out the answer.
Second, if you want to progress, doing a brilliant job isn’t enough: others need to know it.
Are there any new rules that are causing a particular problem?
The reform of income tax basis periods is causing concern for some clients. The new rules should simplify the current system by taxing profits arising in the tax year. There are, however, a number of practical considerations that particularly impact self-employed individuals and trading partnerships that do not draw up annual accounts to 31 March or 5 April, and those that are in the early years of trade. The cashflow impact is a key concern: there are likely to be additional costs as a result of extra tax in the transition year, plus the extra costs of accelerating accounts preparation and/or estimating profits. We have undertaken cashflow forecasts for a number of clients. For some, this had led to changing the accounting year end date. HMRC has not provided detail on all aspects of the new rules yet, so this additional uncertainty can make it harder for some businesses to understand the full impact of the changes.
Has a recent case has caught your eye?
Quinn (London) Ltd v HMRC [2021] UKFTT 437 (TC) is interesting. The taxpayer was a building contractor and expenditure on its R&D activities was factored into the price paid by its clients under commercial contracts. Because of this, HMRC argued that the taxpayer was not entitled to R&D relief under the SME scheme as the expenditure was subsidised indirectly. However, the FTT disagreed, ruling that the legislation on subsidised costs was not intended to apply where there is no clear link between the price paid by the customer and the R&D expenditure. Although HMRC is not appealing the case, it published updated guidance reaffirming its position that relief should not be available in these situations. We are therefore likely to see HMRC continue to challenge customer-led R&D activity on similar grounds. Businesses may need to work with their advisers to understand this decision and consider whether or not they have this ‘clear link’. For example, we are reviewing contracts and payment terms for a number of our clients in more detail, to give confidence around the success of R&D claims.
What should we look out for in 2022?
We should expect more HMRC enquiries into covid-19 support scheme claims. HMRC believes the amount lost due to fraud or error is around £5.8bn. The government has invested heavily in the taxpayer protection taskforce to tackle these perceived errors. We are already seeing a high number of enquiries, particularly into CJRS claims. Due to the complexity of the CJRS support calculations, combined with how fast it was rolled out, even those businesses which had confidence in the accuracy of their claims have received enquiries. Many clients are asking us to review their CJRS claims now, with the aim of avoiding a longer, more expensive process later. Given that the new taskforce is expected to be in place until the end of 2022/23, despite recent projections from the Treasury that only a quarter of the funds will be recovered, the number of enquiries raised is likely be significant.
You might not know this about me...
I used to skydive, but I wouldn’t be brave enough to take it up again!
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