The View from No 50





November 2016


K P Bonney & Co

Chartered Accountants and

Chartered Tax Advisers

50 Cleasby Road  Menston

Ilkley  LS29 6JA

Tel:  01943 870933

Fax:  01943 870925







A few weeks ago I circulated a note in which I outlined the government’s proposals to move business reporting into the digital age.  My main concern is that if the proposals go ahead unchanged businesses, including landlords, will have to report certain of their income and expenditure details to HMRC every three months.  This is on top of the requirement to file annual figures, as now.  If you would like to receive a copy of my note please let me know. 


Thank you to everybody who, having read my note, has responded to the government’s consultation.  It is evident some of you share my concerns about the burden these plans will place on businesses.


The consultation ends on 7 November.


If you are anxious about the proposals and haven’t yet responded, please make your voice heard by emailing





Following the reduction in bank base rate on 4 August to just 0.25%, the rate of interest charged on tax paid late was reduced from 3% to 2.75%.  The rate of interest on overpaid tax remains unchanged at 0.5%.


Companies can earn interest at 0.5% by paying corporation tax early.


Individuals in the income tax self-assessment system earn interest when they pay their default payments on account and these prove to be too high.  For individuals, interest on overpaid tax is tax free.


In these days of ridiculously low interest rates there are opportunities here for companies and individuals to use HMRC as a secure, decent interest rate paying bank.


Of course HMRC would rather you did not do so.





Mr Daly grazed horses on a particular piece of land.  Upon enquiry by a Mr Love, Mr Daly explained that the land belonged to the estate of a lady who had died recently.


In due course the land was sold for development.


Mr Daly received £90,000 from Mr Love.


The transaction came to the notice of HMRC because Mr Love claimed the payment as a deductible expense in his tax return.


Mr Daly had not declared his receipt of £90,000 on his tax return.  HMRC wanted to know why.  Mr Daly claimed he had not provided any services to Mr Love and that the money was a gift.


By the time of the tribunal hearing Mr Daly and Mr Love had fallen out so Mr Love could not be called as a witness.  The only worthwhile evidence to be put before the tribunal was an invoice obtained by HMRC in the course of their enquiry into the affairs of Mr Love.  The invoice contained the words “As agreed 50% profit achieved at Westfield”.  The invoice was signed by Mr Daly.


The task before the tribunal was to decide whether, on the balance of probabilities, the payment was consideration for something done by Mr Daly for Mr Love (a service provided by him) or simply a gift.


The tribunal found the invoice was evidence of an agreement between Mr Daly and Mr Love.  This suggested Mr Daly was paid for the provision of a service.  Mr Daly was therefore taxable on his receipt.


The learning point here is that if you do something for reward you are chargeable to income tax.  If somebody makes a gift to you, you are not chargeable to tax.  It will usually be obvious from the facts whether a payment going in one direction is consideration for goods and services going in the other.




With Christmas on the horizon now is good time to remind ourselves about the tax exemption for ‘trivial benefits’.


No tax is due on a benefit provided by an employer to an employee or a member of his or her household if certain conditions are met.  These are that the benefit


·           is not cash or vouchers


·           does not cost more than £50 (incl. VAT)


·           is not provided as part of a salary sacrifice or other contractual arrangement and


·           is not provided in recognition of particular services performed by the employee as part of his / her duties.


There is a fifth condition which applies where the employer is a close company (basically this means a family company but contact me if you want clarification) and the employee is a director of the company or a member of the household of such a person.  The condition is that the cost of benefits covered by these provisions does not exceed £300 in a year.


These rules apply typically to gifts made on occasions such as birthdays, Christmas, baby arrivals and the passing of exams.


The exemption for office parties is quite separate from and additional to the exemption for trivial benefits.


There is nothing to stop a company, and that includes an owner-managed company, providing tax free trivial benefits to its directors.  How do you feel about that?   Are you the type who sees a legitimate tax exemption and grabs it?  Or are you the type who feels it would be morally wrong to take advantage of such an exemption?  For some these can be difficult decisions. 


When I last looked, John Lewis had 23 types of hampers in the price range up to £50.


Happy Christmas.





HMRC and the government bang on about how we should all pay our fair share of tax.  It follows from this that we should expect to get our fair share of tax relief when we make a real loss.  So the case of Hardy v HMRC might leave the layman quite bemused.


Mr Hardy contracted to buy a flat, off-plan, paying a deposit of £72,000.  When the time came to complete the purchase, he wasn’t able to do so therefore under the terms of the contract he lost his deposit.   He claimed that for capital gains tax purposes he had made an allowable loss of £72,000 and he sought to offset it against his capital gains.


HMRC contended that when a seller and a buyer enter into a contract for the sale of land, the seller does not dispose of an asset and the buyer does not acquire an asset.  Of course, if and when the contract is completed disposal is normally treated as taking place at the date of contract but if the contract is never completed (as was the case here) there is simply no disposal and no acquisition.


The tribunal agreed with HMRC.  Mr Hardy had not disposed of a chargeable asset (e.g. land or rights).  He had lost cash.  Cash is not a chargeable asset.  He was not entitled to relief for his loss.


That is the right answer in law.


Is it fair?


I don’t expect anyone at HMRC or in government is going to be rushing around trying to fix this unfairness. 


For your information, where an unfairness favours the taxpayer it is called a loophole and is fixed at the earliest opportunity.




An American farmer was on holiday in Yorkshire.  He took himself off into the Dales to explore the hill farms there.  At lunch time he dropped into a pub and fell into easy conversation with a local farmer.

'How big is your spread?' asked the American.

'Well, it's about twenty acres,’ said the farmer.

‘Only twenty acres!’ the American spluttered.  ‘Back home I can get up at sunrise, saddle my horse and ride all day.  When I return at supper time, I'll be lucky to cover half my farm.’

‘Aye,’ said the Yorkshireman.  'I had horse like that once.   I sent him to the knacker’s yard.'


Copyright:  K P Bonney & Co LLP 2016.  All rights reserved.  No part of this publication may be produced, stored in a retrieval system, or transmitted in any form or by any means, electronic mechanical, photocopying, recording or otherwise without prior written permission of the publishers.  Disclaimer:  The publishers have taken all due care in the preparation of this publication.  No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by the authors or the publisher.

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