£27bn Covid relief fraud ‘may be tip of iceberg’

A report out this week by the cross-party Public Accounts Committee (PAC) reveals how relaxed controls combined with the speed of the coronavirus financial support packages created “a perfect storm for thieves”, with at least £27bn lost to fraud.


The coronavirus-linked sum is on top of around £50bn lost annually to criminals and through mistakes, according to government estimates, which counts for more than 40% of all reported crime in the UK.

Banks were also slammed for their careless approach to dishing out the money as they “don’t have enough skin in the game” to be concerned about losses, the committee found.

“This report makes very uncomfortable reading,” said Pete Miller at The Miller Partnership. “By that I mean uncomfortable as a taxpayer concerned about the way in which my taxes are being used by the government. We might disagree over the government’s spending priorities but I’m sure none of us are happy about over £50bn of taxes being lost to fraud or error.”

Despite their different definitions, there is little to distinguish “between people grappling with complex government forms in the hope of obtaining a grant, loan or some other subsidy to which they are entitled as against people deliberately targeting frailties in the system to obtain money to which they are not entitled”, Miller said.


“The report refers to fraud and error costing the taxpayer between £29.3bn and £51.8bn in 2018-19, of which £2.5bn and £25bn arose outside DWP and HMRC, although the latter figures are based on assumptions by Cabinet Office,” Miller said. “It is difficult to have any confidence in these numbers.”

The report states there are around 16,000 counter-fraud professionals throughout the civil service. “While 77% of them work within DWP and HMRC – which is logical, as these are the departments most obviously open to fraud or error – there must be some low hanging fruit in other government departments, if some of those staff were redeployed,” Miller said. “Most worrying to me is that we are told that it is optional for government departments to consult the Cabinet Office’s counter fraud function (CFF), which is absurd and shows a lack of common sense.”


“I’m sure I am not alone in thinking that any counter fraud function within government should be mandatory for all government departments and that the higher the risk, the more important it is to consult,” Miller told AccountingWEB. “One of the key messages throughout this report is a lack of coordination between government departments on issues relating to fraud and error.”


Extract from an article by Mark Taylor, published on AccountingWeb.co.uk

Read the full article here

Taxing matters

HMRC once advertised that “tax isn’t taxing”, which is catchy but untrue. 

Regardless of the rights and wrongs of the KPMG case, it has almost certainly arisen because tax is complicated, because the tax rules are frequently not clear and because the tax code doesn’t always fit easily with the reality of commercial transactions. 

We don’t really know what happened in this case but it’s not surprising that things go wrong occasionally.

So what can we advisors do to mitigate our risk? 

Firstly, only advise in areas where you are competent to do so. While KPMG has teams of people covering every aspect of the tax code, we don’t. If you’re asked to advise outside your comfort zone, you should either decline or insist on getting advice from an expert; don’t try and wing it! 

Secondly, make sure your client is aware of any risk areas, so that they have been properly warned about the risk and the tax at stake. If appropriate, consider a non-statutory clearance from HMRC or a formal opinion from a tax expert, to reduce the risk as far as possible. 

Even an expert opinion can’t guarantee the tax position, as we saw in the recent M Group Ltd case (TC08054), where Counsel’s opinion didn’t persuade (and nor did my article in Taxation). But specialist advice can prevent you from getting it wrong and should eliminate the risk of a penalty for a carelessly incorrect return. 

At the end of the day, however, mistakes are made, simply because tax is taxing, and that’s why we all carry professional indemnity insurance!


Extract of the article by Mark Taylor for AccountingWeb. Read the entire article by clicking this link (May 2021).

(Photo by BalkansCat, Getty Images)

Stamp Duty changes: Why you should take expert advice and avoid aggressive tax schemes

With coronavirus restrictions now starting to be lifted – and the huge implications this will have for businesses everywhere – you could be forgiven for having overlooked imminent changes to stamp duty rules.

However, it’s important that you are aware of the new rules as they could make your future corporate transactions more expensive.

In my past articles I’ve often talked about how the likes of management buyouts and demergers are generally free of capital gains tax, corporation tax and income tax.

Stamp duty doesn’t tend to get a mention, as unlike these other taxes, it’s often dismissed as trivial and not worth worrying about because it’s usually charged at 0.5%.

But 0.5% on a transaction worth £1 million is £5,000, which is not insubstantial.  And what if the company is worth £2 million or £5 million or even more?

The types of transaction that qualify for relief from capital gains tax, etc. are not quite the same as those that qualify for stamp duty relief. Some corporate transactions attract relief from all these taxes, while others qualify for capital gains tax, income tax and corporation tax relief but not for stamp duty relief.

For many years, we have managed these differences by structuring transactions to stop stamp duty arising, in ways that were apparently acceptable to HMRC. These mechanisms were well known to the Inland Revenue and, more latterly, HMRC and were considered uncontroversial, so tax advisers have been using them since the current rules were first introduced, in 1986! However, HMRC has now decided to change some of the rules, meaning that stamp duty will now be payable on some transactions which previously would have been free of it.

These changes will come into force in July this year when the current Finance Bill gets Royal Assent. There is another provision that softens the blow slightly, by preventing a double charge to stamp duty in certain cases, but it does mean that many transactions in the future will be more expensive.

I’m sure some clever people out there will come up with complex mechanisms for avoiding stamp duty on these transactions, and some businesses might be tempted to try them. If you encounter such a scheme, please walk away.

In my experience, many tax avoidance schemes don’t work as advertised and the tribunals and courts tend to bend over backwards to find against taxpayers where they feel that an abusive scheme is being used. It’s better to do transactions in a tried and trusted way and accept that you might need to pay some tax, rather than worrying for years after that HMRC might challenge your aggressive tax planning.

So, my advice regarding corporate transactions in future, is to acknowledge that they may be more costly but to make sure that yours is put together by somebody with many years’ experience in this specialist area.

That way you can ensure that your transaction qualifies for all the reliefs available to you and keep the tax cost down to the absolute minimum.

COVID-19 tax measures: advice for businesses

In these difficult days as we all struggle to adapt to new ways of working, it’s important we offer each other as much support as we possibly can.

While we at The Miller Partnership don’t usually get involved in compliance tax advice, we’re well placed to point businesses in the right direction.

In recent weeks, as the coronavirus crisis has deepened, the UK Government has introduced a raft of new measures designed to keep businesses operating and staff in employment, where at all possible.

This financial aid package also includes assistance for the self-employed as well as specific help for some of the industries hardest hit by COVID-19, including hospitality and retail.

According to latest media reports, up to a fifth of small and medium sized UK businesses fear they will run out of cash within the next four weeks, so it is vital that they are able to access this aid  without delay.

More detail on what’s available can be found here, on the Government website.

The Coronavirus Business Interruption Loan Scheme (CBILS)

One such initiative is the Coronavirus Business Interruption Loan Scheme (CBILS), which aims to ease the burden on businesses suffering cash flow problems caused by higher costs and disruption.

The CBILS provides lenders with a government-backed guarantee of 80% of the loans, so that they can lend smaller businesses up to £5m over a repayment term of up to six years. Interest and fees on the loan will be paid by the Government for one year.

For larger companies there is a separate corporate financing facility.

Aid for retail, hospitality and leisure businesses

The hospitality sector has been particularly badly affected by the pandemic, with pubs, hotels, bars, cafes and restaurants all having to close their doors.

To reduce pressure on all retail, hospitality and leisure businesses, the Government is allowing them to take a business rates holiday for the next 12 months.

Cash grants of up to £25,000 are also being made available to businesses in this sector who operate from premises with a rateable value of under £51,000.

Coronavirus Job Retention Scheme

The Coronavirus Job Retention Scheme (CJRS) enables employers to access Government support so they can carry on paying staff whose jobs don’t allow them to work from home.

The scheme, which allows employers to put staff on “furlough leave” rather than making them redundant, is open to all UK businesses. It is intended to run for at least three months initially but the Government has said it will be extended if necessary.

Under CJRS, HMRC will reimburse 80% of furloughed workers’ wages costs to a ceiling of £2,500 a month.

It is important that the relevant staff are furloughed, as once they are on this leave, they  cannot carry out any duties for the company. We understand that this rule may be relaxed slightly in the case of directors of owner-managed businesses, who may have to undertake certain statutory duties.

Unfortunately, directors/shareholders will only qualify in respect of their salaries in the relevant period. If they have taken most of their income in the form of dividends from the company, this won’t count towards either the CJRS or the CSEISS (below). This seems very unfair to people who chose to operate through a company, which is a perfectly legitimate business vehicle.

Employers will need to claim payments under the scheme, although you won’t be able to do so until the online service is available, at the end of April (we hope).

Small Business Grant Scheme

If your business premises qualify for Small Business Rate Relief or Rural Rate Relief, then you could be eligible for a one-off £10,000 grant under the Small Business Grant Scheme.

Qualifying businesses are set to receive the funding via their local authority in early April.

Coronavirus Self-Employment Income Support Scheme

Financial help is also available through the Government’s Coronavirus Self-Employment Income Support Scheme (CSEISS).

If you are self-employed or in a partnership, you might be able to claim a taxable grant amounting to 80% of your trading profits, capped at £2,500 a month for the next three months.

To be eligible, you must have submitted a self-assessment tax return for the 2018-2019 tax year, have traded in 2019-2020 and intend to carry on trading in 2020-2021.

Additionally, your trading profits from self-employment or partnership for 2018-2019 must be below £50,000 and must make up more than 50% of your total taxable income.

HMRC will look at 2018-2019 tax returns to assess who might be in line for this support. If you are eligible, HMRC will get in touch with you directly and ask you to apply.

It is, sadly, the case that people who have only just started a new business, or who started in 2019-2020, will not be eligible for this scheme. This appears to have left a large gap in the level of support being offered to the newly self-employed.

Three-month deferral for VAT payments

VAT due between March 20th 2020 and June 30th 2020 will not have to be paid until April 5th 2021. The three-month deferral is automatic – you don’t have to apply for it.

To take advantage of it, however, you should ensure you cancel your direct debit during this period.

July 31st self-assessment payment deferral

Any income tax payments and NICs you were due to make on account on July 31st 2020 have now been deferred until January 31st 2021.

Again, this deferral is applied automatically and you won’t receive any late payment penalties from HMRC. Since self-assessment tax is not paid via direct debit, you should not need to take any action.

Changes to IR35 rules postponed

The reform of the 1R35 rules for off-payroll working has now been postponed for 12 months.

These controversial changes, which will see off-payroll working extended to the private sector, will not now come into force until April 6th 2021.

The postponement is part of moves to support businesses during the Covid-19 pandemic but, says the Government, it is definitely a delay and not a cancellation.

Changes to the insolvency rules

New measures, designed to prevent businesses from having to file for bankruptcy because of coronavirus, have also been announced.

They will enable those companies which might need to undergo restructuring, or a rescue deal, to carry on trading during the current crisis.

Laws on wrongful trading will also be put on hold, allowing company directors to continue to pay their employees and suppliers.

Help for directors of small companies?

As we have explained, if you’re a director of a small company, you may not get any help from the above schemes, or you may get less help than you had hoped.

As a director, you may not also be an employee, so you may not be eligible under the rules for furloughed employees under the Coronavirus Job Retention Scheme. Also,  as you are not classed as self-employed, you  won’t qualify for assistance under the Coronavirus Self-Employment Income Support Scheme.

Even if you do qualify, in common with most directors of limited companies, you might draw a small salary from their company, with the lion’s share of your income coming from dividends.  Dividend income does not count as salary or as self-employment income for the purposes of the schemes, so you might only qualify – if at all – for a grant of 80% of your salary.

A lack of government financial support for directors of small companies is a big problem for many people at the moment, and it needs addressing.

And there’s more bad news!

In offering support to the self-employed, there was a strong hint from the Chancellor that the slightly favourable tax regime enjoyed by the self-employed might change when the crisis is over. One obvious possibility is that the lower rate of NICs paid by self-employed businesses might increase to something closer to the rates paid by employees.

Key messages

The most immediate message is that you must remember to cancel the direct debit for the quarterly VAT payment to take advantage of the deferral of payment.

In more general terms, keep an eye on the Government website, here, for more details about each of these measures.Finally, if you need more information on the measures  which are available – and how they might apply to your business –  please get in touch. We’ll do all we can to help you. Either email me at pete.miller@themillerpartnership.com or call on 0116 208 1020.



Some good news – and a big thank you


It’s been a very difficult couple of weeks for all of us, as we struggle to adapt to new working patterns, while trying to keep ourselves, our families and our colleagues safe. Please take all appropriate precautions so we can help protect each other and our NHS.

We are all in need of some good news, so I’m thrilled to tell you that, thanks to your generous donations, my recent zip wire challenge raised £2,500 for Leicestershire charity Alex’s Wish

I’d like to say a big thank you to everyone who sponsored me,  both personally and on behalf of  the charity. At the last count the challenge’s funds for Alex’s Wish had topped £10,000.

I’m proud to have been among a team of  30 to ride the world’s fastest zip wire over Penrhyn Quarry in Wales, in an event instigated by Leicestershire Law Society. Riding the zip wire was a fantastic experience, despite the weather being a bit blowy, to put it mildly, on one of the windiest days ever, and I’m so grateful to everyone for their sponsorship and support.

Alex’s Wish raises money to find effective treatments and ultimately a cure for Duchenne Muscular Dystrophy, an aggressive life-limiting muscle wasting condition which affects one in every 3,500 boys.

It was set up by Alex’s parents, Emma and Andy Hallam, in late 2012, after their son Alex was diagnosed with the condition.

The group of highfliers (pictured) were joined in their challenge by Alex, who is 13, and his mum.

As many of you will know, I’m always up for a challenge. I’ve never really thought of myself as a thrill-seeker, although I have also recently qualified as a technical scuba diver, so perhaps this is my mid-life crisis! So, I might well take part in another challenging activity for charity one day soon. I’m not sure what this will be, but a sky dive has been mentioned!

To find out more about Alex’s Wish and its upcoming events, please go to https://alexswish.co.uk/event/

Pete takes on fastest zip wire in world

On February 22 Pete Miller will be taking time out from the heady world of corporate taxation to ride the fastest zip wire in the world.

Pete is taking on this intrepid challenge for Alex’s Wish, a Leicestershire-based charity which raises money to help young boys who have Duchenne Muscular Dystrophy.

He will be soaring over Penrhyn Quarry in Wales,  admiring the breath-taking views while potentially reaching speeds of over 100 mph. Alternatively, Pete will be screaming in abject terror, while potentially reaching speeds of over 100 mph! Only time will tell.

He is among several high-flying businesspeople to sign up for this exhilarating experience, instigated by Leicestershire Law Society. Their aim is to help Alex’s Wish raise its first £1 million this year, so all support is most welcome.

Duchenne Muscular Dystrophy is  an aggressive form of Muscular Dystrophy affecting one in every 3,500 boys born and results in progressive muscle wasting. Every single muscle, including the heart and lungs, is destroyed due to a lack of protein. All money raised from the Charity Zip Wire will be going towards finding a cure for Duchenne.

Pete said:  “A big thank you to everyone who has already pledged their support. All donations are very welcome, so please give what you can.”


To sponsor Pete, please click the following link  https://uk.virginmoneygiving.com/fundraiser-display/showROFundraiserPage?pageId=1135261

Patent Box – both old and new regimes offer serious tax advantages for innovators

Patent Box – both old and new regimes offer serious tax advantages for innovators

Innovative UK businesses with patented products or services could, in our view, be taking greater advantage of tax relief available via the government’s Patent Box tax relief for companies.

Latest HMRC figures show that 1,170 UK companies claimed tax relief totalling £1,035 million under Patent Box in 2016-2017, but we believe that this is a small fraction of the number of companies who could benefit.

Introduced by the UK government in April 2013, Patent Box was designed to encourage UK technology innovation and entrepreneurship by providing a 10% reduction in corporation tax on income received from patents.

New rules, which made the calculations more complex, came into force on July 1 2016, but the old regime remains in place until 2021 for those companies who had joined Patent Box before then.

To calculate the profits available for relief, you firstly need to find the Patent Box profit, then make two main adjustments.

The policymakers were concerned that businesses might get the benefit of relief when they would have made those sales anyway without a patent. So, under what is known as the “routine return adjustment”, HMRC will reduce your claim by a proportion of some of your expenses.

You also need to allow for the “marketing assets return”,  whereby you have to subtract in your calculation the royalty you would have had to pay if the product was not your own brand. This figure is hard to work out, but if the number is small you don’t have to make the adjustment.

Patent Box profits under the original regime are usually computed on the basis of proportionality. This means we apportion the turnover by reference to sales of the patented item, then apportion the profits accordingly.

To illustrate these calculations, let’s say your company has a £1 million turnover, with exactly half of your sales coming from the item you’ve patented. Your total profits are £200,000, so £100,000 of that profit would be the starting point for your Patent Box calculations. This figure is then adjusted for the routine return and marketing assets return (if necessary), to get to the amount of relief you can claim. For most companies that would be the simple way of going about claiming.  You have a figure for turnover, and because one thing you can work out quite quickly from your records is what you’re selling,  computing the relevant profits should be pretty straightforward!

However, in some cases it is possible to use an alternative method, known as “streaming”, where you allocate the specific costs against the income from the patented items. We did this for a client operating in the global transport market and got a much better outcome – effectively wiping out the company’s corporation tax liabilities for three years.

This is because the client invented a patented product but someone else is using it and paying a  licence fee, so there are virtually no expenses associated with the income from the patent. By streaming the minimal costs against the income, we end up with a much larger figure for the relevant profits from the patent, which can then be the subject of the relief.

In this scenario, if only 50% of turnover came from the patented item,  under the apportionment method the Patent Box profit would have been much less, as we would have had to allocate half the company’s costs against the licence income.

This means that with streaming you can, like my client,  end up with a much better result.

Anyone who joined Patent Box after 2016 – and everyone from 2021, whenever they joined –  will have to stream their profits and expenses,  so people will need to think about their record keeping now to be sure they have the appropriate information. The regimes operate in broadly similar ways but there are subtle differences to the revised scheme which we will examine in a further blog.

As you can see, there are complexities associated with claiming Patent Box relief, but don’t let those outweigh the potential benefits. The Government wants to actively encourage businesses of all sizes and in all sectors to innovate and it is right that you benefit from the reliefs on offer.

To find out more about Patent Box – and for professional tax advice on whether the relief can be applied to your patent – please email pete.miller@themillerpartnership.com or call us on 0116 208 1020.

Demergers: The three main reasons why businesses break up

By Pete Miller, tax expert at The Miller Partnership

The Miller Partnership is often asked to advise on company demergers, but what exactly is a demerger and why would you want to do one?

Put simply, a demerger is the breaking up of a company into two or more smaller ones. In principle, it’s a straightforward process, but the tax aspects can be complex.  There are special exemptions and reliefs from tax which will allow you to demerge pretty much tax free, subject to certain conditions, so you will need expert professional tax advice.  The reason for the demerger is pretty vital, as HMRC will only allow a demerger if there are commercial reasons for it.

In my experience – I also used to be the Inland Revenue’s demergers expert – people demerge their companies for three main reasons.  Let’s look at the different scenarios in more detail:

  1. Selling your trade while retaining your premises

One of the most common reasons for wanting to demerge a business is so that the owners can keep control of the property – often the premises they work from – when they sell their business.

Let’s imagine you’re selling a carpentry business run through your company.  A potential buyer comes along who is interested in purchasing your trade, but not the workshop it operates from. It may well be that your purchaser already has premises so doesn’t want or require yours.

By demerging, you can sell your carpentry business without having to sell your premises. And, it’s an option many buyers choose if they want to actively keep the bricks and mortar assets as an investment property.

In this scenario I will set up a demerger arrangement which leaves you with a property company and a separate trading company, which you can sell. This allows you, the seller, to retain the property, and enjoy the rental revenue it provides, into retirement.

  1. Falling out with your business partner

The second demerger scenario I see very often is where business owners have fallen out and want to go their separate ways. This might sound rather dramatic, but often it’s nothing personal – it’s just that they have different, incompatible ideas about their business’s direction.

Let’s take, for example, a rental property company which is looking to diversify.

One owner might be keen to go into luxury apartments, investing heavily in designer kitchens and high-spec fittings. Meanwhile, the business partner is focused on volume rather than value and would prefer to go into the student flats market.  Clearly, these are incompatible, so a sensible response might be to separate the two interests, so that each shareholder can go their own way.

Another example might be where a professional services firm decides to divide its client base between the two owners.  Perhaps one runs the Leicester branch while the other partner is responsible for the Loughborough office, and they would both prefer to operate completely independently. Again, this decision won’t necessarily have been reached because the two partners can’t abide each other but it’s a perfectly sensible reason to demerge.

  1. Retirement planning

The third most common reason for demerging, falls somewhere between scenarios one and two. It might involve successful business owners who have got on fine for many years but are now planning for retirement and want to pass their wealth onto their children.

But, although the two have a good relationship, it might be that their kids don’t know each other well, and there is no guarantee they will get on or even want to be in business together. In such cases, it makes sense for owners to split the company and take their shares separately.  That way, they can each provide for their own children in the manner that they think most appropriate, avoiding any problems further down the line.

If you’re considering marketing your business, it’s important to start getting it ready for sale, which might include a demerger, at least two or three years before you plan to sell it. By doing so, you’ll be able to show that the demerger is for commercial reasons and it should be easier to get the appropriate advance clearance from HRMC.

We are experts in demergers so contact us today. Email pete.miller@themillerpartnership.com or call us on 0116 208 1020.

Entrepreneurs’ Relief – Cutting through the continuing confusion

Judging by the number of calls I’m receiving on this issue, changes to entrepreneurs’ relief are continuing to cause much confusion, with many shareholders unsure as to whether their transaction still qualifies.

Before former Chancellor Philip Hammond moved the goal posts last year, the situation was quite straightforward. Most people with shares in a trading company could expect to pay capital gains tax at the much more palatable rate of 10% rather than 20% when they sold their shares.

To be eligible they simply had to show that their shares were in a company that traded (i.e. not in an investment business), they were an officer or employee of that company and they held at least 5% of the shares (giving them at least 5% of the voting rights), all for at least a  year before the sale.

But, in the  2018 Autumn Budget, a new “test” of what defines “personal company” was announced, with shareholders now needing to have the right to 5% or more of the dividends as well as to 5% or more of the proceeds if the company is wound up or, alternatively, to 5% of the proceeds if it is sold.  And all the qualifying tests must now be satisfied for two years, not one.

Some worried business owners are unsure whether their transaction qualifies for capital gains tax at all. Their concerns relate to the anti-Phoenix rules which affect people who wind up their company but then carry on the same or similar business either in another company or in some other form.   In such cases the proceeds of the winding up might be treated as income from dividends, not as a capital gain, so the business owner pays tax at up to 38.1%, the highest rate of income tax on dividends.

This scenario is most likely to apply where somebody has sold the trade from the company, or simply run the trade down, and is now winding up the company to get the proceeds out.  Because of the uncertainty introduced by the new rules, I am frequently asked to write reports on whether those rules will apply.

To guarantee receiving entrepreneurs’ relief, some people have started selling their company when it is no longer trading.  In response to this practice, HMRC has recently published its Spotlight 47 guidance (https://www.gov.uk/guidance/attempts-to-avoid-an-income-tax-charge-when-a-company-is-wound-up-spotlight-47), which suggests that some of these arrangements might be sufficiently artificial or contrived for HMRC to apply the wide ranging general anti-abuse rule (GAAR).

To be frank, my personal view is that HMRC is being ridiculous here.  While there may be some extreme cases that might be caught, I would not expect a sale of a money-box company that has ceased to trade to be caught by the anti-Phoenix rule, far less by the GAAR.  This is just scare-mongering and I do not consider it acceptable behaviour from a public authority!

This issue – and my thoughts on it – are covered in my recent article in Taxation magazine: https://www.taxation.co.uk/Articles/why-selling-a-company-is-not-tax-avoidance

Another common issue on which I’m increasingly being asked to advise relates to whether a company is a trading company.  Defining a company’s status can be a problem for businesses that have accumulated large amounts of cash which they haven’t distributed to shareholders, or where profits have been used to buy investment properties, as investment activities are not trading activities. I do not generally believe that large cash holdings should cause a problem, although I have had to argue the point with HMRC a couple of times (successfully, of course!)  And a large and active investment portfolio certainly could taint the status of the company so that it no longer qualifies as a trading company and its shareholders would not, therefore, be entitled to entrepreneurs’ relief.

If you are concerned about how the rule changes affect you, please get in touch.

We are experts in entrepreneurs’ relief and can guide you through the complexities.

Email pete.miller@themillerpartnership.com or call us on 0116 208 1020.

The Big Chill? – Soft Touch Arts Fundraiser Winner at the 2019 Leicester Comedy Festival Community Award

2019’s Leicester Comedy Festival Awards were announced at St Martins House recently and Winner in the Community Awards category was The Big Chill? a Charity fundraiser for Soft Touch Arts organised by Tracey & Pete Miller of The Miller Partnership – Taxation Specialists.

Hosts for The Big Chill? were the award winning Chutney Ivy, situated in the heart of the Cultural Quarter, and Shaf and his team, who have been nominated again for Restaurant of the Year at the Leicester Curry Awards were magnificent.

Glynis Wright & Co Family Solicitors & Mediators were sole sponsors and Shazia Mirza from TV’s Jonathan Ross Show, HIGNFY and Celebrity The Island with Bear Grylls, was the star of the show.

This year the £4,000 profit takes the total amount to over £10,000 raised by The Miller Partnership in their 4 years of Leicester Comedy Festival events for Soft Touch Arts. Geoff Rowe and Katherine West from Big Difference Company have supported these shows each year enabling them to grow and develop.

Leicester’s business community comes together every year for this Comedy and Curry extravaganza, and fabulous prizes were donated by Winstanley House, Hanlon Hospitality, Curve, Queen Victoria Arts Club, Burleighs Gin, Owlhouse Day Spa, Eileen Richards Recruitment and Howes Percival, who also donated Carl Mifflin dressed as a Hot Chilli to encourage guests in their generosity.

Soft Touch Arts will fund their Creative Enterprise Programme which supports more than 50 young people each year who struggle to reach their potential because of difficult life circumstances and challenges with mental health & wellbeing.

The Creative Enterprise Programme supports the development of their individual creative talents, giving them both newly built confidence plus the invaluable building blocks of enterprise skills, so that they can learn to make, sell and market their own creative works.

Community collaboration is definitely at work here in Leicester.

Changes to Entrepreneurs’ Relief: Do you still qualify?

Until recently, most people with shares in a trading company could be confident of qualifying for entrepreneurs’ relief when they came to sell those shares.

Their shareholder status meant that they would only have to pay capital gains tax at 10% instead of the higher rate of 20%.

And, qualifying for this tax relief was quite simple. To be eligible, all you had to do was satisfy each of the following conditions for at least a full year up to the date of selling your shares:

•          The company had to be a trading company, which, simply put, means it must be carrying on a trade, rather than operating as an investment business.

•          The shareholder had to be an officer or an employee of the company for the same period. Once again, this was usually straightforward and, indeed, in most of the cases I’ve looked at, the individuals concerned were directors of the company.

•          The family had to be the shareholder’s “personal company”, which broadly meant that the shareholder had to hold at least 5% of the shares of the company and those shares had to give that person at least 5% of the company’s voting power.

So far, so uncomplicated, until, completely out of the blue, the Chancellor moved the goalposts by announcing two major changes to entrepreneurs’ relief in his Autumn Budget speech.

With immediate effect of his announcement, the definition of a “personal company” became more onerous, with shareholders now also having to have the rights to 5% or more of the dividends and 5% or more of the proceeds if the company were wound up. 

What the Chancellor had effectively done was introduce a new test relating to the level of economic interest the individual has in the company.

As a direct result of these changes, some people instantly lost their right to entrepreneurs’ relief, in some cases because they held 5% or more of the shares and votes of the company but did not have rights to 5% or more of the dividends that would be paid.

And, as if this wasn’t bad enough, the Chancellor’s announcement appeared to deny entrepreneurs’ relief to shareholders with what are known as “alphabet shares.

”Called “A shares”, “B shares”, and so on, alphabet shares are designed so that a different rate of dividend could be voted on for each class of share. 

But – under the new rule – even if two individuals between them held all the shares of a company, if they were alphabet shares, it is arguable that neither person had a right to any dividends until dividends were declared in respect of their class of share.  This meant that neither of the two shareholders would be entitled to 5% of the dividends!  My personal view was that this was not a problem, but the new test clearly made matters very uncertain.  Even HMRC were not sure of the correct analysis!

Fortunately, following pressure from various sources, the Government amended this rule to provide an alternative test of whether the shareholder would receive at least 5% of the proceeds if the shares were sold.  In most cases involving alphabet shares, this revised test should allow the shareholders to claim entrepreneurs’ relief, even if they are not entitled to 5% of dividends or the proceeds of a winding up.

The other change to entrepreneurs’ relief has extended the qualifying period from one year to two years, although this only comes into effect for disposals on or after 6 April 2019. 

So, if, for example, you hold qualifying shares which you acquired in November 2017, if you sell them between December 2018 and the end of March 2019 you will be eligible for entrepreneurs’ relief based on having held the shares for over a year.  But, if the sale is delayed until after 5 April, the new two-year qualifying period applies and you will need to defer your disposal until, say, December 2019.

If you are affected by these changes or would like more advice and information on entrepreneurs’ relief, please get in touch.

The Miller Partnership has wide experience and expertise in this area and can guide you through the complexities.

Transactions in Securitise rules and challenges from HMRC over share capital reductions: Why you must seek expert tax advice.

Clearly HMRC is taking – and will continue to take – a keen interest in the ways in which people are extracting money from their companies.

As my clients’ recent experiences reveal, the tax man is particularly intent on checking that company owners are paying income tax, either on earnings at rates of up to 45% (plus 2% national insurance) or on dividends, which attract tax at a rate of 38.1%.

In some cases, HMRC is seeking to apply the “Transactions in Securities” anti-avoidance rules which can allow it to tax capital payments to shareholders at dividend tax rates rather than at the capital gains tax rates (which may be as low as 10%). I’m currently assisting many clients who have been challenged by HMRC on this matter, and I’ve noticed a fact pattern emerging in which HMRC is enquiring into companies’ decisions to reduce their share capital.

Under new rules introduced by the recent Companies Act, it is now relatively easy for a company to reduce its capital and return cash to its shareholders.  Where this is done, the amount concerned is treated as a capital gain and taxed at 10% for a trading company or 20% in other cases.

Let’s imagine I set up a company using 100 £1 shares.   My company is very successful and five years later it is worth £1 million. At this point I put in place a holding company on top of the original company for commercial reasons. This allows me to issue 1 million shares in my holding company, increasing my share capital and making my balance sheet look stronger.

I later decide I don’t need such a large amount of share capital, so I reduce it to £100,000 and pay back the £900,000 to myself, leaving 100,000 shares in my company.

HMRC informs me that I should be taking any extra benefits from my company as dividends and paying income tax on them, but my defence is that I chose to reduce my share capital for commercial reasons.  In many cases, HMRC refuses to concede, leaving the Tribunals or Courts to decide who wins the case.  A lot of the cases on which I am currently advising involve companies which, like my imaginary example, had substantial share capital, often as a result of previous restructuring.

HMRC seems to be concentrating, for the moment, on transactions that occurred in the tax year 2015-16. For many of my clients, HMRC’s challenge will be unfounded, either because there was a genuine commercial reason for reducing the company’s share capital or because the Transactions in Securities rules do not apply for technical reasons.

Currently HMRC is on a fact-finding mission and is simply asking companies for information. Even if no formal challenge follows, fulfilling HMRC’s requests for information can be expensive and time-consuming.  Also, HMRC is not going to go away – this legislation isn’t used lightly, so all enquiries must be taken seriously from the outset.

Shareholders are understandably concerned at what HMRC’s challenge might mean for themselves or their businesses – and whether these draconian anti-avoidance rules apply to them.

The Transactions in Securities regime, introduced in 1960, is one of the most abstruse elements of the UK tax code, and because of the extent of its complexity, it is essential that companies seek professional tax help.

Accountants should also advise companies who might be considering a share capital reduction that HMRC might require an explanation of their reasons for doing so.

As an expert on this legislation, I have written extensively about the subject and have more than 20 years’ experience.  I can help with any challenges from HMRC, so please get in touch if you feel your reduction in share capital is being wrongly queried. Similarly talk to me if you would like further advice and information on the Transactions in Securities rules.

Tracey Miller’s three month dry spell raising thousands for Hope Against Cancer

Source: www.leicestermercury.co.uk/news/business/tracey-millers-three-month-dry-1978064

Corporate tax expert calls for end to “misleading” news reporting on companies’ tax bills

Ignorance about the UK’s taxation system, fuelled by inaccurate and often sensational media reporting on companies’ tax liability, is preventing sensible debate, claims a leading UK corporate tax expert.

Responding to the latest tax furore over online retail giant Amazon’s recent accounts for its UK-based businesses, tax consultant Pete Miller of The Miller Partnership said many news headlines were either accidentally or deliberately misleading.

Amazon UK Services tax liability fell to £4.6m from £7.4m 12 months ago.  The company also saw its tax liability reduced due to a £17.5 million adjustment relating to share-based compensation for its full-time employees.

And, while Amazon argues that it has paid all the tax it is required to by UK law, critics believe the company should be paying much more tax, given that its pre-tax profits have trebled from £24.3m to £72.3m.

Pete said that headlines which equated tax bills of companies with their turnover, “when companies the world over pay tax on their profits, not on their turnover,” were among the chief examples of media misreporting.

He added: “The other point which is constantly missed is that corporation tax is usually a very small proportion of a company’s actual tax burden.

“For example, Amazon will pay income tax and national insurance contributions to HMRC on the salaries of all its staff.  It will also be liable for VAT on the services it provides in many case, as well as paying local business taxes. The irony is that payroll taxes are at rates up to 47% on income, plus the 13.8% employer ‘s contribution, while the corporation tax deduction stands at 19%.”

Pete also takes issue with the word “claim” in news stories about compulsory tax deductions when writing about share-based compensation.

He added: “The reality is that these deductions are mandatory, both under the accounting standards and for tax purposes. There is no mechanism for a company to decide not to claim the deductions in its accounts or tax computations for its legitimate business expenses, so it would be unlawful for a company not to take the deduction.

“However, in various reports about Amazon, journalists talked about the company “claiming” tax deductions as though it were a matter of choice.  This amounts to very subtle misinformation, in my view, and is designed to suggest that companies should not claim the tax deductions needed to arrive at the correct figure for profits on which they should be taxed.”

Pete, who lectures to accountants and lawyers nationwide in his capacity as a corporate tax adviser and as a Fellow of the Chartered Institute of Taxation (CIOT), said the public’s general lack of understanding about tax was “depressing.”

He added: “It has been suggested that taxation should become part of our national curriculum for high schools, so that people not only understand why they need to pay tax but also understand, to a limited extent, how the system works.  But the national curriculum is already very full and there certainly does not appear to be any political will in this area.

“Overall, the current situation is somewhat depressing. Those of us who have the ability to make public statements continue to do so, but inaccurate reporting of the issues still seems to be controlling the public debate, despite our best efforts.”

Breaking up is harder to do – so make sure you take corporate tax advice before demerging.

I have written before about demergers; the act of dividing a company’s business into two or more companies so that shareholders can take different parts of the business and go their separate ways.

And, until recently, I would have advised clients considering demerger that “breaking up isn’t that hard to do” – as long as they seek professional taxation guidance before doing so.

However, changes to stamp duty rules introduced in Summer 2016 have made some demerger transactions a lot more difficult, and potentially much more costly.

Let’s imagine that John and Jane, who each own 50 per cent of a company, want to carry on their businesses separately. By demerging, we can effectively split up the company so that John and Jane each have separate companies carrying on ‘their’ part of their business.

Over the past few years we have developed a number of mechanisms for demergers like John and Jane’s, all of which start with getting a formal approval from HMRC. This advance clearance allows us to ensure that the demerger is pretty much free of all tax consequences, including income tax, capital gains tax, corporation tax, stamp duty and stamp duty land tax.

However, thanks to the new stamp duty measures introduced in 2016, gaining exemption from stamp duty has become more complicated in many cases. The stamp duty element of the transaction may only amount to 0.5 percent, but that equates to £5,000 for every £1 million that a business is worth, so the costs can soon mount up.

Because of the stamp duty traps sprung by the rule changes, many advisers are suggesting that John and Jane might now need to use a liquidation to achieve the demerger. But while liquidation might get around the stamp duty problem, it will also make John and Jane’s demerger more complex and expensive. More advisers will be needed, adding to the cost, and it will be riskier as the extra steps mean that there is more that could potentially go wrong.

Rather than going down the liquidation route, we have developed less risky mechanisms to achieve demergers without triggering the new stamp duty charges. And, as we are still able to obtain advance clearance from HMRC for the income tax, capital gains tax and corporation tax elements, our clients have the same degree of certainty about tax treatment as they had before the rule changes came in.

The new anti-avoidance rule changes have resulted in considerable collateral damage, with commercial transactions like John and Jane’s demerger now so much more difficult. And, despite the process becoming more onerous, their transaction still results in no actual loss or gain to the exchequer in terms of stamp duty.

In my view, HMRC’s changes go far too far, with commercial transactions that should not have been targeted now caught in the legislation. To navigate a way though the complexity and steer clear of stamp duty charges, it is even more crucial that businesses take professional corporate advice before embarking on a break-up.

Autumn 2017 Budget: period drama or zombie apocalypse?

Thompson Reuters Practical Law asked leading tax practitioners for their views on the Autumn 2017 Budget.

Pete Miller’s contribution:

“There doesn’t seem to have been much action on the corporate tax side in this Budget, which given the massive changes over the last few years is something of a relief. If anything, the picture from a corporate perspective is of tinkering around the edges and fixing things, rather than making any major changes. For example, the complicated regime for hybrids brought in by Finance Act 2016 and the even more complex regime for restricting the interest deductions for companies, which only gained Royal Assent a week ago, are both being technically amended in order to make sure that they work properly. This is not a suggestion of incompetence on the part of the original drafters, but rather a reflection of the complexity both of the U.K.’s tax code and of the commercial world in which it operates, in that however hard all the stakeholders work, the fact is that complicated regimes like this will impact commercial transactions in a way that was not intended in some cases. It is, therefore, only common sense that those bits of the regimes that don’t work should be fixed as soon as possible.

Probably the most noticeable amendment was the removal of indexation allowance from companies. Indexation allowance was originally introduced at a time of relatively high inflation, to allow you to index link the price of assets between the date of purchase and the date of sale, so that capital gains tax or corporation tax on chargeable gains would, in effect, only tax the genuine increase in value of an asset, not simply the inflationary increase. The indexation allowance for individuals and others who do not pay corporation tax was repealed in 2008, from 31st March that year, so that, for all future gains, no indexation allowance could be given. It is interesting that in removing the indexation allowance from companies, they will still be able to claim the accumulated indexation up to 31 December 2017, but no further indexation will be given from 1 January 2018. This is in marked contrast to the treatment of individuals in 2008, where the immediate abolition of the relief effectively doubled or trebled the latent gains in certain cases!

The other point of particular interest is that, hidden away in the Red Book is a promise to consult on the regime for intangible fixed assets. The regime for companies owning intangible assets is that, in many cases, the cost of an asset can be amortised or impaired for tax purposes. There are also a series of reliefs and exemptions from taxation which largely mirror the rules applicable to tangible assets within the capital gains regime for companies. One of the areas that has been a problem for some years, however, is that some of the new reliefs from corporation tax on gains, such as the amended degrouping charge and the substantial shareholding exemption, are not mirrored in the intangible assets regime. This means that the reliefs, which were intended to apply across the board, only apply to companies with older trades, and not with new trading companies with substantial goodwill. We have made many representations to HMRC on this point, and we can only hope that the proposed consultation will address some of these concerns, albeit many years later than we would have hoped.”

Read the complete article here.


Nelsons Solicitors Networking Drinks at Revolution Bar, New Walk, Leicester

Robert Radford (Nelsons), Pete Miller (The Miller Partnership) and Ziaur Rahman (Nelsons)

Robert Radford (Nelsons), Pete Miller (The Miller Partnership) and Ziaur Rahman (Nelsons)

Nelsons Solicitors recently held its quarterly business drinks reception and light buffet networking event at Revolution Bar just up from their offices on New Walk in Leicester.  Pete was in the area and attended along with around 40 other guests including staff members, contacts and clients of the firm who travelled from across Leicestershire.  Commenting on the event Pete said, “It was a really good event and a great opportunity to catch up with friends new and old informally over a beer and some nibbles.  I’m looking forward to their next event which, I believe, will be held in November.”

More photos from the event can be found here:


Leicester Festival of Postgraduate Research

The Miller Partnership sponsored and provided a judge for the Leicester University Festival of Postgraduate Research held on 29 June 2017.

During the Festival the University showcased its best research student talent and this year the standard of entries was very high. Expert judges were extremely impressed by the breadth and quality of work on display and the knowledge and passion for research demonstrated by our presenters.

Find out more at http://www2.le.ac.uk/staff/announcements/graduate-school-announces-winners-of-the-13th-festival-of-postgraduate-research.