Construction Industry Scheme reforms could result in tax simplification

A number of Construction Industry Scheme reforms could result in tax simplification, benefiting landlords, tenants and HMRC. We take a look at three areas which are ripe for review.

The purpose of this article is to highlight three areas ripe for review in relation to the Construction Industry Scheme (CIS).

What Constitutes Category A and Category B Works?

22 April 2022

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In his second article on the VAT domestic reverse charge for construction, David Westgate examines the areas which will require further clarification and issues impacting developers

A new VAT domestic reverse charge (DRC) will be introduced on 1 October 2020 for building and construction services. (This was originally 1 October 2019; see Revenue and Customs Brief (10), dated 6 September 2019.) The final version of the draft Value Added Tax (Section 55A) (Specified Services and Excepted Supplies) Order 2019 was issued on 7 November 2018 together with related guidance.

The first part of this article, published in the September issue of Tax Adviser, considered the application of the DRC and its interaction with the construction industry scheme (CIS).

1 October 2019

David Westgate considers the scope and impact of the new VAT domestic reverse charge on construction

New legislation is being introduced that will impact businesses that receive supplies of building and construction services. These services clearly include heavy duty works but will also include things such as painting and decorating, general repairs, site clearance, and electrical and plumbing work. Goods or materials supplied in conjunction with the supply of building and construction services are also included.

1 September 2019

David Westgate leads us through some difficulties when landlords make contributions

What’s the issue?

Landlord contributions to tenants for landlord works (Cat A) and for tenant works (Cat B) are very common. Identifying the different types of contributions at the outset is critical in determining their correct treatment for contractual and tax purposes. Incorrect treatment of contributions can result in disputes with tenants, significant tax liabilities and penalties.

Tenant incentives

So why do landlords give incentives and what form do these incentives take? In order to answer these questions we need to understand the commercial aspects of a typical lease deal.

27 July 2017

David Westgate considers the purpose, benefits and process of becoming a REIT and the tax implications arising

Subject to a number of conditions, a UK real estate investment trust (REIT) is a company, or a group of companies with a parent company, that has elected to be a REIT under the UK tax legislation.

The election exempts a REIT from paying corporation tax on its qualifying property rental income and capital gains. This removes the ‘double layer’ of taxation at company and shareholder level. Instead, a shareholder in the REIT pays tax on corporate dividends derived from its property rental business (called a property income dividend or PID) as if they were income and gains from the shareholder’s directly owned property rental business.

1 July 2016

Also in this edition

We must find some clear routes through the statutory maze governing employment status.

The key components of a tax system are law enacted by a democratic parliament; collection and enforcement by an independent tax authority; and adjudication of disputes by an independent judiciary.

22 April 2022

We examine the items which are commonly exempt from reporting obligations for employee benefits, as well as covering PAYE Settlement Agreements and payrolling benefits under HMRC’s statutory regime.

The distinction between an exemption from tax and a deduction that can be claimed by the employee is an important one, particularly when considering the treatment of cash reimbursements to employees. Whilst some further explanation is outlined below, some common examples of items that may be treated as exempt for income tax, National Insurance (NI) and reporting purposes are listed in Common exemptions.

22 April 2022

This year’s Mental Health Awareness Week will focus on the issue of loneliness, which affects millions of people in the UK. We examine what we can all do to overcome loneliness in both our working and personal lives.

We have all needed to face the impact of Covid on both our working lives and personal lives. Whether we live on our own or have had to fight for a quiet corner amidst the rampages of our noisy offspring, many things have never been the same since the early months of 2020. The sudden shock of lockdown brought separation from family, friends, safe places and social networks. While we are starting to return to normal, it can still be a struggle to regain some of that comfort and familiarity.

22 April 2022

As the plastic packaging tax came into force on 1 April 2022, we examine the developments, challenges and the way forwards.

Aligned with the global focus on environmental, social and governance (ESG) issues, and with the aim of stimulating the market in recycled plastic, the plastic packaging tax came into force in the UK on 1 April 2022.

The plastic packaging tax is chargeable on plastic packaging imported into the UK or manufactured in the UK, which contains less than 30% recycled content. The tax presents the estimated 20,000 businesses due to be affected, and their advisers, with the unique challenges associated with the implementation and operation of a new tax. These arise from both the new data and information needs of the plastic packaging tax regime, and the usual difficulties of interpretation that arise when new provisions are introduced.

22 April 2022

In the second part of our feature on the end of the temporarily increased annual investment allowance on 31 March 2023, we examine the impact which the reversion to the standard allowance will have on businesses within the charge to corporation tax.

As the temporarily increased annual investment allowance (AIA) is due to revert to the standard £200,000 AIA limit from 1 April 2023, the transition period will have potentially significant impacts on businesses claiming the allowance, resulting in some surprising results in relevant tax assessments. The first part of this article was published in the April 2022 issue of Tax Adviser. Here, we examine the impact of the transition on incorporated businesses.

22 April 2022

The Upper Tribunal’s recent analysis in Peter Lowe and Civic Environmental Systems Ltd v HMRC considers the loss carry-back rules when the profits of the earlier year are subsequently increased.

The combined cases of Peter Lowe and Civic Environmental Systems Ltd v HMRC [2022] UKUT 84 (TCC) addressed three very distinct issues, including Mr Lowe’s entitlement to obtain relief for certain expenditure when calculating the capital gains tax payable following the disposal of a property and the amount of a penalty payable by Mr Lowe in relation to an underassessment on two of his tax returns.

However, this article concerns the third issue, being the consequences of a loss carry-back claim when the profits of the earlier year (i.e. those which are being relieved by the later year’s losses) are subsequently increased.

The facts of the case

In its corporation tax returns, Civic Environment Systems Ltd (CES) declared the following results:

22 April 2022

Caps on the greenhouse gases that can be emitted by certain businesses encourage the reduction of total emissions. We examine the UK tax rules governing the trading of emissions allowances.

Emissions trading is a market based approach to controlling the production of carbon dioxide and other greenhouse gases. Since carbon dioxide is the principal greenhouse gas, many people speak simply of trading in ‘carbon’. Both mandatory and voluntary emissions trading schemes exist.

Perhaps the most common example of a mandatory scheme is the European Union’s Emissions Trading System (EU ETS), launched in 2005 to reduce emissions in high carbon-emitting industries. Similar systems operate in New Zealand, China, parts of the US and Canada, and the UK following the UK’s departure from the EU.

22 April 2022

The government’s recent consultation on a proposed redomiciliation regime raises important questions about the scope and tax implications of changing a company’s corporate citizenship.

On several occasions recently, I have been asked the following question in some shape or form: ‘Can a company redomicile from the UK to another jurisdiction?’ Implicit in the question, but somewhat hidden, is the follow-on question of what are the tax implications, if any, of redomiciliation. Redomiciliation comes in different shapes and sizes and it all depends on what you mean by the word.

22 April 2022

While enterprise management incentive schemes can provide substantial benefits for option holders, diligence exercises can uncover a range of issues leading to increased costs or even disqualification.

In the midst of the ‘Great Resignation’, and strong competition for talent, it has become key for businesses to look at different methods of retention for key members of staff and to attract new senior team members. Enterprise management incentive (EMI) schemes are not new, and we assume here that readers are familiar with the EMI benefits and qualifying conditions. In our experience, EMI comes up a lot on due diligence exercises (it is the most popular HMRC approved share plan). With the potential upside for individual option holders – namely, beneficial tax treatment on exercise and on any capital growth – come a raft of potential stumbling blocks for both the company and for the option holders themselves.

22 April 2022

Construction Industry Scheme reforms could result in tax simplification

David Westgate

What’s the issue?

Tenant incentives

The facts of the case

Enterprise management incentive schemes: some common pitfalls

The loss-carry back rules following an increase in earlier profits

A new plastic packaging tax came into force in April 2022

Construction Industry Scheme reforms could result in tax simplification

How to use P11Ds: reporting obligations for benefits

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Construction Industry Scheme reforms could result in tax simplification

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David Westgate

What’s the issue?

Tenant incentives

The facts of the case

Enterprise management incentive schemes: some common pitfalls

The loss-carry back rules following an increase in earlier profits

A new plastic packaging tax came into force in April 2022

Construction Industry Scheme reforms could result in tax simplification

How to use P11Ds: reporting obligations for benefits