Author Archives: Graeme Blair - Partner

About Graeme Blair - Partner

T +44 (0)20 7874 8835

Graeme helps guide businesses through the corporate tax world. He is particularly expert at issues that property companies and professional practices have to navigate and therefore often manages large and complex assignments, many of which have an international element.

As a client of Graeme's wrote "I am increasingly impressed that when I pick up the phone to Graeme I receive robust and appropriate advice."

Seed EIS

Graeme Blair - Partner - gblair@goodmanjones.com

Posted on 10th December 2012

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I have noticed a marked increase in questions about the Seed EIS scheme. Perhaps the forthcoming 31 January tax payment date is leading people to consider tax efficiency more closely!

The scheme is for companies which are seeking early stage funding in the first two years of their trade. There is a 50% income tax relief available for qualifying investments. Shares held for three years can be sold without capital gains tax. Capital gains made in 2012/13 and reinvested in this tax year into Seed EIS companies can be eliminated entirely. Other gains are deferred until the year that the Seed EIS company’s shares are sold.

The tax breaks are generous. This is a reflection of the high risk nature of such businesses. There are many conditions about the size of the business which also need to be satisfied in order for Seed EIS to be relevant. There are also practical considerations that need to be considered. The practical considerations include:-

A Seed EIS qualifying company cannot be under the control of another company. This sometimes leads to difficulties if a company is bought off the shelf from a company incorporator. HMRC have confirmed that companies set up by incorporating agents ( in situations where the incorporator is itself a company) will lead to loss of Seed EIS. This is because the incorporating agent controls the trader and therefore there is a time when the trader is under the control of another company.

Similarly there are certain steps which a subscriber should follow if they are also to be seeking Seed EIS relief. This is to prevent them accidentally tripping one of the conditions surrounding share ownership levels.

The conclusion is that Seed EIS, for qualifying activities, is a valuable and generous relief. However, it needs to be treated with care and the detail of the legislation understood and followed.

The information in this article was correct at the date it was first published.

However it is of a generic nature and cannot constitute advice. Specific advice should be sought before any action taken.

If you would like to discuss how this applies to you, we would be delighted to talk to you. Please make contact with the author on the details shown below.

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Capital Allowance Claims for Fixtures in Second Hand Properties

Graeme Blair - Partner - gblair@goodmanjones.com

Posted on 9th November 2012

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April 2012 and April 2014 changes to tax law have considerable impact on property transactions which, if ignored, can lead to wasted tax relief.

Since 1996 the extent that a purchaser of commercial property can claim capital allowances on assets within a property has been limited to the disposal value brought into the tax computation by the vendor, or by a previous owner. Purchasers have therefore had to make enquiries into the property’s capital allowance history.

The above led to the introduction of a joint election between the purchaser and seller that state the amount of the sales price that is apportioned to fixtures. The amount specified in the election cannot be greater than the vendor’s costs of the fixtures. Typically purchasers would wish the sum to be high and vendors wish it to be low. The election is often one of the more emotional aspects of purchase negotiations.

The election only covers assets subject to claims from 1996 onwards. This does not prevent purchasers of older buildings identifying assets on which a claim has never been made and making a “late” claim on those assets installed within the building before 1996.

The Finance Act 2012 changes the administrative processes and scope for tax planning.

At present, the joint election is good practice. From April 2012 it is mandatory for the value of fixtures being transferred to be identified. If a joint election is not used then the only alternative is that the Tax Tribunal process determines it for the parties. From April 2012 it has been important that there is certainty as to the transfer value as, unless the value of fixtures is determined, the purchaser (nor any future purchaser) is prevented from making a capital allowances claim on those fixtures.

From April 2014 capital allowance claims will only be possible to the extent that assets have been subject to an earlier claim. This will lead to owners having increased documentation requirements to substantiate claims and purchasers seeking sight of that evidence during the commercial negotiations. A further impact is that it will prevent late claims for pre-1996 expenditure. Taxpayers therefore have until March 2014 to make the first ever claim on pre-1996 property expenditure.

The information in this article was correct at the date it was first published.

However it is of a generic nature and cannot constitute advice. Specific advice should be sought before any action taken.

If you would like to discuss how this applies to you, we would be delighted to talk to you. Please make contact with the author on the details shown below.

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Employee Shares

Graeme Blair - Partner - gblair@goodmanjones.com

Posted on 1st November 2012

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The Government recently confirmed its intention to introduce a new type of employment contract in which it would be lawful for employees to waive certain statutory employment protections.

In exchange for reduced employment rights, employees would be offered shares in their employer with a value between £2,000 and £50,000. Although the acquisition of the shares would be subject to income tax (and national insurance, if relevant) the eventual sale of those shares, by the employee, would be exempt from capital gains tax.

Details released to date suggest that the legislation is principally intended for small and medium sized companies, but companies of any size will be able to use this opportunity. Rights which may be forfeited include unfair dismissal, flexible working, maternity leave and redundancy payments.

There will be flexibility in the legislation which permits the opportunity to be offered to employees recruited after the legislation is enacted or both future employees and current employees.

Some beneficial share option schemes, such as Enterprise Management Incentive, have restrictions as to their use if employees already hold shares in their employer. Current proposals imply that these existing share option schemes will not be adversely affected by the new legislation.

It has been suggested that legislation will be enacted from April 2013 and the Government will consult with Industry as to the practical implications of the proposals before then. Obvious practical considerations which need to be ironed out include the impact of numerous employees having an influence on the strategic direction of a private company and the alternatives should an employee leave the company whilst holding shares in their employer.

The information in this article was correct at the date it was first published.

However it is of a generic nature and cannot constitute advice. Specific advice should be sought before any action taken.

If you would like to discuss how this applies to you, we would be delighted to talk to you. Please make contact with the author on the details shown below.

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International Secondments of Staff

Graeme Blair - Partner - gblair@goodmanjones.com

Posted on 15th October 2012

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As businesses grow and expand into the UK it is quite common to send employees into the UK to oversee the expansion. There are various strategies to ensure that employees coming to the UK can do so tax efficiently.

Detached duty relief

An assignment to the UK may be a short term secondment. The UK allows those on short term assignments to receive certain benefits free of tax. If correctly structured the assignment can permit the individual to receive accommodation without a tax charge and permit flights back to their home country, for them and their family, to be provided free of tax. These make the UK an attractive destination for internationally mobile workers. The social security consequences of the secondment should not be overlooked and will be subject to separate considerations.

Dual contracts

If the individual is to be in the UK for a longer period of time then a split contract arrangement may be appropriate. These are suitable if the duties performed by the individual can be clearly separated between those undertaken in the UK for the benefit of the UK business and those the individual may undertake in other countries for other parts of the international group. Due to certain legislation it is only the UK element of the employment which will be taxed in the UK. Split contracts are a well understood technique which need appropriate circumstances to implement. To be effective they need to be correctly documented and have on-going recording obligations. As with secondment planning we have a number of clients who use this opportunity.

Tax equalisation

Tax equalisation is becoming more popular in the international market. Equalisation seeks to promote mobility amongst the staff by ensuring that they are not disadvantaged by going to another country whose tax rate may be higher than that of the home state. At a basic level equalisation ensures that the post-tax salary of the employee remains unchanged irrespective of the country in which they operate. There are variations on this theme. For example, one way tax equalisation (sometime known as tax protection) is for the sole benefit of the employee. If the tax rate in the overseas country is less than that of the home state, the employee keeps the benefit of the differential whilst the employee is protected should the overseas tax rates be higher than that of the home state.

Cost of living equalisation

Tax is only one aspect of the costs incurred by internationally mobile workers. Different countries have different cost of living and different governments provide different services to their residents. This is leading to the developing concept of cost of living equalisation. This form of equalisation looks at the total cost of living in a country compared to that of the home state and seeks to equalise the two. For example, state sponsored health care is free in the UK whilst some countries require the individual to take out a mandatory insurance plan. Moving to the UK would negate the costs of the insurance plan and therefore the cost of living in the UK would be different from that of another country. Conversely property rental in the UK is higher than many other parts of the world. Cost of living equalisation attempts to take account of these variations.

The information in this article was correct at the date it was first published.

However it is of a generic nature and cannot constitute advice. Specific advice should be sought before any action taken.

If you would like to discuss how this applies to you, we would be delighted to talk to you. Please make contact with the author on the details shown below.

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The squeezed middle

Graeme Blair - Partner - gblair@goodmanjones.com

Posted on 23rd March 2012

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Many of the commentators on this week’s budget have used the term “the squeezed middle”. In recent years it has become a rallying call of the middle classes and intended to suggest that they are bearing the worst of the budget rises. I believe that there are many squeezed middles, and some of them are not even in the middle.

At the bottom end of the income scale the nation has many families whose financial security is reliant on tax credits and similar payments. With wholesale reform of welfare benefits, some of the families will have their incomes reduced and therefore may feel squeezed. Families are not the only groupings who will be feeling the pinch. Pensioners have received the news that their age related personal allowances will be frozen and eventually phased out. This is a tax cost to the elderly and therefore they are also being squeezed.

Personal allowances are due to rise, which is commendable. Unfortunately, the rate at which the 40% tax band starts is due to fall from £35,000 down to £34,370. Not only does this increase the tax liabilities of many hundreds of thousand middle earners, it also increases their tax administration burdens; a double whammy of increased taxes and increased administration. Is the correct term a “double squeeze” or a” tight squeeze”?

The middle are most effected by the taxation of child benefit for incomes over £50,000. Although this increase in tax is tapered to prevent a cliff edge effect, it does represent a considerable cost to the family whose income level is starting to be sufficiently high that they may pay for private education or private medical insurance. Those families may revert back to reliance on the state system. Could this taxation increase the budgetary requirements of the NHS and Department of Education?

In my mind the most heavily squeezed are those earning between £100k and £116k. Their marginal rate of tax is in excess of 60%. That hurts them, and it should be priority of the government to eliminate this distortion.

Those earning more than £150k will be feeling the opposite of squeezed. Their tax burdens are falling, unless of course they are thinking of buying a property for more than £2million in a company.

If a wealth tax is imposed in a future budget the highly remunerated may suffer. The inequality of a wealth tax is that it is not necessarily backed by money with which to pay the tax bill.

The information in this article was correct at the date it was first published.

However it is of a generic nature and cannot constitute advice. Specific advice should be sought before any action taken.

If you would like to discuss how this applies to you, we would be delighted to talk to you. Please make contact with the author on the details shown below.

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Inward investment in the UK – tax certainty and fairness

Graeme Blair - Partner - gblair@goodmanjones.com

Posted on 2nd March 2012

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One of the difficulties that Government have is to strike the three way balance between tax certainty, tax simplicity and tax fairness. The recent headlines around Barclays Bank’s tax structuring brings this dilemma into focus.

The UK is seen as having a tax regime which is stable (i.e. certain) and businesses are treated fairly by the taxing authorities. Despite this we have one of the, if not the, longest tax codes in the world. This does not imply simplicity.

The UK is often held as an example of a fair tax system. Many non-British nationals find it hard to believe that we have a self-assessment regime for individuals and corporate which effectively require the taxpayer to self-determine their liabilities. The tax calculation is not necessarily subject to any form of review by HMRC. Compare that with for example the recent European convention on human rights case where a shopkeeper in the Ukraine claimed that their human rights had been violated by the actions of a tax police squad who, during a premises visit, allegedly, assaulted a business employee. Even the concept of a tax police is alien to a UK national.

The UK enhances its reputation for certainty by consulting with the taxpayers before implementing wide ranging legislation and by avoiding retrospective legislation.

Fairness and certainty are two of the many reasons that the UK is an attractive place for inward investment. Our tax code attracts investment with incentives such as tax free perks for immigrating staff, the non-domicile regime, a wide network of tax treaties, the lack of dividend withholding tax and the substantial shareholding exemption. Some of these incentives have been varied in a way which reduces their impact. An example being the introduction of the remittance base user charge. Even when they are varied the changes have been well trailed by HMRC which demonstrates that it is possible to change legislation whilst still retaining the certain nature of the UK’s tax code.

Recent actions to retrospectively close down Barclays tax structuring may be understandable in the context of the tax at stake and the perceived artificiality of the arrangements. My concern is that this retrospective legislation will have a long term disadvantage of reducing the UK’s standing in the area of certainty. Only time will tell.

The information in this article was correct at the date it was first published.

However it is of a generic nature and cannot constitute advice. Specific advice should be sought before any action taken.

If you would like to discuss how this applies to you, we would be delighted to talk to you. Please make contact with the author on the details shown below.

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Overseas holiday homes purchased through a company

Graeme Blair - Partner - gblair@goodmanjones.com

Posted on 16th June 2011

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It is quite common for overseas holiday homes to be purchased in companies. Typically this is to circumvent overseas inheritance rules. Historically the use of a company has lead to a UK income tax and national insurance liability which was treated as a “cost” of the structure.

Pressure was placed on the Government to eliminate this cost, and in 2008, they revoked the income tax liability but not the national insurance liability. The national insurance liability has now been retrospectively revoked and reclaims of national insurance can be made for any prior year, even those earlier than 2008. Any refund must be claimed before 2015.

The information in this article was correct at the date it was first published.

However it is of a generic nature and cannot constitute advice. Specific advice should be sought before any action taken.

If you would like to discuss how this applies to you, we would be delighted to talk to you. Please make contact with the author on the details shown below.

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The Business Payment Support Service

Graeme Blair - Partner - gblair@goodmanjones.com

Posted on 5th January 2009

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One announcement of the Pre-budget report of 25 November was a new service for businesses in temporary financial difficulty that were unable to pay their tax bills. They would be able to spread their bills over a timetable they could negotiate with the business support service of HMRC. This service would cover all taxes paid by the business, including Corporation Tax, VAT, PAYE, Income Tax and National Insurance Contributions. Although interest would be charged on late paid tax it is anticipated that this rate would be lower than that of bank borrowing.

A key requirement is that contact is made with the business payment support service’s helpline before the due date of payment of the tax. The helpline would only be able to deal with requests in advance of the tax being due. If approach is made after the due date then it would not be dealt with by the helpline, but rather by the local tax district dealing with the business’ tax affairs. The local district may be less sympathetic than the dedicated helpline.

Since November, HMRC have issued guidance on the operation of the service. The guidance is welcomed as it covers some very practical matters, such as mechanism where a partnership (or partner of a partnership) is experiencing cash flow problems.

Two particular matters within the guidance that caught my eye were the review of agreements and the interaction with the Construction Industry Scheme (CIS).
The guidance accepts that a payment agreement may be negotiated in good faith but the taxpayer then experiences unexpected, further, cash flow problems and who cannot meet the agreed payment profile. HMRC will consider such circumstances on a case by case basis. Again, the key is to notify HMRC of the further problems before a payment is due.

CIS allows certain contractors in the construction industry to receive payments gross of tax. There are very strict conditions to be able to qualify for gross payments. The guidance confirms that negotiation of a payment profile with HMRC will not deny “gross status”. This is a welcome confirmation as receipt of invoices net of tax can only exasperate a cash flow problem.
In the round the business support service is a welcome announcement and HMRC have issued some helpful guidance. Well done!

The information in this article was correct at the date it was first published.

However it is of a generic nature and cannot constitute advice. Specific advice should be sought before any action taken.

If you would like to discuss how this applies to you, we would be delighted to talk to you. Please make contact with the author on the details shown below.

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