News Archives - SHIPLEYS TAX ADVISERS

TAXING BEAUTY – HMRC’s new approach to VAT for cosmetic procedures

Shipleys Tax Admin — Sat, 14 Oct 2023 17:17:21 +0000

DUE TO THE rapid growth of the private cosmetic medical sector in the UK, some noticeable shifts have begun to appear in HMRC’s approach to VAT in the cosmetic medical sector. HMRC have reportedly now established a dedicated team to examine the VAT implications of treatments such as Botox, skin fillers and facial peels.

In today’s Shipleys Tax brief, we consider whether HMRC’s position is now seemingly leaning towards categorizing certain treatments as standard-rated for VAT rather than exempt.

Historical Stance vs. Current Direction

While traditionally, treatments aimed at medical purposes have often been exempt from VAT, those perceived as purely cosmetic have leaned towards being standard rated (20%). This distinct separation is becoming more blurred. Procedures that serve dual purposes, such as Botox, now find themselves in a VAT grey area. There’s a growing inclination from HMRC to classify certain ambiguous cosmetic treatments as standard-rated unless they solidly fit within the medical exemption.

There’s a growing inclination from HMRC to classify certain ambiguous cosmetic treatments as standard-rated unless they solidly fit within the medical exemption.

Recent court case

In one recent tribunal case involving a prominent skin clinic, these VAT issues were brought to the forefront. The clinic had applied for a VAT credit for a specific timeframe, a claim which HMRC challenged asserting that the services during that period were not exempt from VAT.

During the tribunal, a wealth of evidence was presented, including testimonies from the clinic’s lead practitioner, a highly qualified registered medical professional who had pivoted to ‘aesthetic medicine’ and operated the clinic, offering an array of cosmetic treatments.

While the tribunal acknowledged the lead practitioner’s expertise and dedication to professional ethics, it ruled that that cosmetic treatments provided by the clinic did not qualify for VAT medical exemption. It found that the treatments were for “aesthetic reasons” and not for clinical reasons.

The Impact

This evolving stance means that businesses offering cosmetic treatments need to be extra vigilant. The ruling underscores the importance of the nature and intent behind services in determining VAT status, emphasizing the need for meticulous record-keeping and understanding of HMRC’s evolving views on VAT exemptions in the cosmetic medical sector.

…cosmetic treatments provided by the clinic did not qualify for VAT medical exemption. It found that the treatments were for “aesthetic reasons” and not for clinical reasons.

How Shipleys Tax can help

With the landscape shifting, our Shipleys VAT team can help ensure that your practice remains compliant, anticipating and adapting to any changes in HMRC’s perspective on VAT within the sector.

Adapting to change is vital in today’s dynamic environment and ensuring your practice stays ahead and compliant is crucial to avoid falling foul of the legislation.

If you would like assistance, or would like more information, please call 0114 272 4984 or email info@shipleystax.com.

Please note that Shipleys Tax do not give free advice by email or telephone.

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NHS Doctor’s Pension Tax Trap II

Shipleys Tax Admin — Fri, 16 Aug 2019 15:35:16 +0000

The Doctor will not be seeing you now. Or in the near future.

The ‘pension tax trap’ that’s affecting senior NHS doctors has been getting plenty of media attention over the past few months. But if you’re one of the senior doctors and consultants that’s directly affected by this issue, you’ll already know about the detrimental effect on your earnings.

Some doctors have been advised to use the “NHS Scheme Pays” option as a solution, but this, as we will see below, has a secondary trap waiting for the unsuspecting pension patient. What a palava.

It works as follows. If you are subject to an Annual Allowance (AA) charge, you can either pay this directly to HMRC via the self-assessment system, or in some circumstances, you can ask your pension scheme to pay the charge on your behalf (Scheme Pays). NHS Pensions have confirmed to what extent Scheme Pays applies to members whose AA is tapered due to their level of earnings (refers to certain “earnings” generally above £150k).

The legislation will only allow Scheme Pays if the AA tax is over £2k and the growth in the scheme is above the £40k limit (not the reduced limit if an individual is subject to tapering). However, there is also a paragraph in the revenue’s personal tax manual (PTM056410):

“There is a maximum amount that a member can ask their scheme administrator to pay under these circumstances based on the pension input amount in the scheme which exceeds the annual allowance.”

This means that the NHS Pension scheme will only pay the tax charge on the excess over £40k. So if a member has a £60k growth in their pension and a tapered AA limited of £10K, NHS Pensions will only pay the AA tax on £20K, (being £60k – £40k). The member will have to pay the tax on £30k (i.e. £40k – £10k) via their Self Assessment return.

Any clients affected we can write to ask for a “voluntary” scheme pays option to be considered but it is unlikely any will be. The Department of Health (DoH) are currently monitoring the position as use of the Scheme Pays option is relatively low. If members are opting out as a result of not being able to use Scheme Pay on the whole amount, NHS pensions may well refer them to the DoH.

If you need advice on NHS pensions and how you can avoid the tax trap please call 0114 275 6292 or email info@shipleystax.com.

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Tax Efficient Profit Extraction for Companies

Shipleys Tax Admin — Fri, 16 Aug 2019 14:30:25 +0000

Changes to the rates and allowances impact on directors of personal and family companies looking to extract profits in a tax-efficient manner. As always, the optimal strategy will depend on circumstance, and professional advice should be sought.

It is generally beneficial to take a small salary, particularly where the recipient does not have the 35 qualifying years needed for the full single-tier state pension. Where the employment allowance is not available (as is the case for a company with a single employee who is also a director, or where it is utilised elsewhere), the optimal salary for 2019/20 is one equal to the primary threshold for Class 1 National Insurance purposes, which for 2019/20 is set at £8,632 (equivalent to £166 per week and £719 per month).

If the employment allowance is available, for example in a family company with a number of employees, the optimal salary is one equal to the personal allowance of £12,500, assuming it is available and not used elsewhere.

Above these limits, it will generally be more beneficial to extract further profits as dividends, making use of shareholders’ dividend allowances and basic rate bands, where possible.

Before extracting profits from your company, discuss your optimal profit extraction strategy with our professional adviser at Shipleys Tax.

Call 0114 275 6292 or email info@shipleystax.com.

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Don’t buy a new car until you’ve read this! Huge tax benefits for cars from April 2020

Shipleys Tax Admin — Thu, 04 Oct 2018 12:54:33 +0000

Buying a car through a company

As good accountants know, buying a car through a company is usually not the most tax efficient.

This is because the company car tax regime taxes both the employee and the employer company on the provision of a company car and the way car tax is calculated. The amount of tax payable is based on the ‘car benefit’ assumed to have been provided, this is calculated by reference to the List Price multiplied by a % based on the CO2 emissions of the car. But as the value of the car depreciates, the car tax benefit remains the same as the calculation is based on the List Price not “market value”, hence the tax payable remains constant and not representative of actual value.

New car benefit rates

However, things are set to get better for the long suffering company motorist. From April 2020, there will be a sharp reduction in the car benefit rates for ‘Ultra Low Emissions Vehicles (ULEV) i.e. electric company cars with CO2 emissions of less than 75g/km. This taxable car benefit rate will reduce from 9% (2018) to 2% in April 2020.

Example:

Jaguar I-Pace EV400; List price £63,440; CO2 emissions 0g/km.

Taxable benefit:

13% (2018-19)

16% (2019-20)

2% (2020-21)

Based on the above the car tax benefit charge will drop from £8,247 to £1269, a massive £6,978 saving!

So what now…

Well given that the new ULEV company car tax regime is set to become much more tax efficient from April 2020, you may want to consider deferring any new car purchase until April 2020, or at least choose a ULEV car which will then benefit from the much reduced car benefit rates applying from April 2020.

If you have any queries about this or any other tax planning, please contact us on 0114 275 62 92 or email info@shipleystax.com.

***Update 2019***

Things have got even better for the green motorist. In July 2019, the Treasury scrapped existing 2020/21 benefit in kind rates (BIK) and created two new rates – one for those driving a company car registered from 6 April 2020 and one for those driving one registered before that date.

The biggest change was the introduction of a zero per cent BIK rate for Electric Vehicles registered from 6 April 2020, rising to 1% in 2021/22 and 2% in 2022/2023.

The zero percent rate also covers all-electric cars registered before 6 April 2020, as well as hybrids registered after that date that emit 1-50g/km of CO2 and have a pure electric range of 130 miles.

The advice above is a general guide only and does not constitute advice. You must seek professional advice before taking any action.

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Claiming Child Benefit could mean you get more State Pension?

Shipleys Tax Admin — Wed, 14 Dec 2016 14:43:50 +0000

If your child is under 12 and you’re not working or don’t earn enough to pay National Insurance contributions, Child Benefit can help you qualify for National Insurance credits.These credits count towards your State Pension. They protect it by making sure you don’t have gaps in your National Insurance record.

Retirement may be the last thing on your mind when you’re looking after a new baby, but what you do now could have a big impact on your future finances.

Despite what you might think, no one automatically gets the full amount of State Pension when they retire. You’ll only get the full amount if you’ve paid, or been credited with, National Insurance contributions for 35 years.

The key word here is ‘credited’. Even if you’re not working while looking after your baby, you’ll get National Insurance credits when you claim Child Benefit until your youngest child is 12. The credits are automatically added to your National Insurance account when you claim Child Benefit, so you don’t need to do anything.

For more information please contact us on 0114 275 6292 or info@shipleystax.com.

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Further inheritance tax rule changes on Non-Doms

Shipleys Tax Admin — Tue, 23 Aug 2016 16:07:39 +0000

HMRC has published further details of its proposals to amend the inheritance tax rules for non-domiciled individuals.

The changes were initially announced at the 2015 Summer Budget which were aimed at preventing non-doms from escaping a UK inheritance tax (IHT) charge on UK residential property through use of an offshore structure, and thereby bringing to an end the permanent non-dom status for tax purposes.

The consultation document suggests that individuals who are non-domiciled in the UK currently enjoy a significant advantage over other individuals for IHT purposes. UK-domiciled individuals are liable to IHT on their worldwide property, whereas non-doms are only liable on property that is situated in the UK.

Any residential property in the UK owned by a non-dom directly is within the charge of the IHT. However, a common loophole is for such individuals to hold UK residential properties through an overseas company or similar vehicle. In such a case, the property of the individual consists of overseas shares which will be situated outside the UK and are thus excluded from IHT.

In an effort to curb such structures HMRC plans to bring residential properties in the UK within the charge to IHT where they are held within an overseas structure. This charge will apply both to individuals who are domiciled outside the UK and to trusts with settlors or beneficiaries who are non-domiciled. The changes will come into effect from 6 April 2017.

Shares in offshore close companies and similar entities will no longer be deemed excluded property if, and to the extent that, the value of any interest in the entity is derived, directly or indirectly, from residential property in the UK. Where a non-dom is a member of an overseas partnership that holds a residential property in the UK, such properties will no longer be treated as excluded property for IHT purposes.

The consultation will close on October 20. The effect of these proposals will mean structures set up to mitigate IHT will now need to be reviewed in light of the above and specialist tax advice sought.

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Higher tax rates for landlords?

Shipleys Tax Admin — Wed, 27 Jul 2016 12:01:41 +0000

What’s happening?

Upcoming changes to tax relief for landlords may result in them paying higher rates of tax as HMRC publishes guidance on how the interest relief restrictions would work.

We saw the changes announced in the summer budget of 2015 and HMRC have now published further guidance. The rules looks to restrict the interest relief a residential landlord can claim to calculate their income tax liability. The restriction is being phased in over four years with interest being restricted by 25% in each year until it takes full effect in April 2020.

How could landlords be affected?

Currently, landlords of residential properties can deduct all interest from rental income to calculate taxable rental profit. When the new measures take full effect, the interest will be completely disallowed and instead a tax credit equal to 20% of the interest will be given against the person’s income tax liability.

This could result in the individual having higher taxable income which could push them into a “higher” or “additional rate” of income tax. Furthermore, if individuals’ income exceeds £100,000 it could start to reduce their personal allowance, affect their entitlement to child benefit and restrict the amount on which they can claim tax relief for pensions.

What can you do?

These measures are controversial to say the least and a judicial review by a coalition of private landlords is currently in progress.

In meantime, Shipleys Tax strongly recommends seeking professional advice to help mitigate the effects of the changes above and take action to manage your property portfolio tax efficiently a there currently a few solutions available.

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HMRC backtracks on APN’s

Shipleys Tax Admin — Mon, 18 Jul 2016 12:52:09 +0000

HMRC has backtracked on hundreds of Accelerated Payment Notices (APN) after admitting defeat following an application for Judicial Review. This affects the notices it has issued to hundreds of taxpayers as a result of a Judicial Review lodged on their behalf. This is not the first time that HMRC has undertaken a withdrawal of APNs that they had previously issued.

APNs were challenged on a number of grounds including the argument that the Employee Benefit Trust arrangements under consideration were not ‘notifiable’ to HMRC, under the DOTAS regime. HMRC has now admitted that it did not have the right to issue the APNs in relation to these arrangements.

Shipleys Tax Planning partner, Shabeer Yousuf CTA, says “this case demonstrates, that a taxpayer in receipt of an APN should not automatically assume that HMRC has followed the correct processes and exercised its powers lawfully, the taxpayer should seek specialist advice.”

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