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The legislation in the statutory residence test allows for some days to be ignored in applying certain of the statutory residence tests where the “exceptional circumstances” condition is met.

We approached HMRC as we had a client who did not expect to be UK resident for 2019/20, as he expected to be here for less than 90 days, but who is now unable to leave and will therefore go over the 90 day limit.

They’ve pointed us to their updated advice, (updated 17th March), unfortunately it has not been well-publicised, hence this article.

HMRC say;

“Whether days spent in the UK can be disregarded due to exceptional circumstances will always depend on the facts and circumstances of each individual case.

However, if you:

• are quarantined or advised by a health professional or public health guidance to self-isolate in the UK as a result of the virus
• find yourself advised by official Government advice not to travel from the UK as a result of the virus
• are unable to leave the UK as a result of the closure of international borders, or
• are asked by your employer to return to the UK temporarily as a result of the virus

the circumstances are considered as exceptional.”

This applies for some of the day counting tests but not all, see RDRM 13230

If an individual spends 90 days or more in the UK in 2019/20 (for example as a consequence of COVID-19), then this may not in itself make them UK tax resident for 2019/20 (their ties may allow them to stay here for 120 days) but it does mean that they will then have the “90 day tie” for 2020/21 and 2021/22. Therefore, this guidance may also be relevant for individuals who are not UK tax resident for 2019/20, but want to know what the impact of extra days spent in the UK will be on their tax residence status for 2020/21 and 2021/22.

It is worth noting that the number of days in a tax year which can be disregarded is always limited to 60. This would take us to 5th June 2020; after that, a day spent in the UK as a consequence of the virus would count for all the statutory residence tests as things stand. However, if travel bans continue that prevent individuals leaving the UK we would hope that the government amend the 60 day limit in the interests of fairness.

For individuals who are not UK domiciled, they may wish to claim the remittance basis for 2020/21 if they do become UK tax resident. We would be happy to advise on planning to be undertaken before 5th April for individuals to establish appropriate clean capital arrangements and manage remittances.

The statutory residence tests are complex and we can advise on individual circumstances.

This tax year HMRC has introduced rules that seek to bring almost all non-resident owners of UK land within the scope of UK tax on their gains. Under the new regime, effective from 06 April 2019, where a seller (regardless of their tax residence) generates a gain from the disposal of UK property then:

• individuals and trustees are subject to capital gains tax (NRCGT, at up to 28% for residential property and up to 20% for commercial property); and

• companies are subject to corporation tax (currently at 19%).

Certain non-residents also for the first time became liable to UK tax on gains generated from the disposal of shares in “property rich entities”. This new charge applies to sales of shares in companies that derive at least 75% of their value from UK property.

The new regime also includes targeted anti-avoidance provisions to counteract amongst other issues attempts to restructure property holdings to artificially defeat the property rich test. There has also this year been a targeted campaign of “nudge letters” undertaken by HMRC against non-resident property owners and their tenants, as well as the introduction of accelerated submission and payment dates for CGT returns from April.

In contrast, rebasing allowances were introduced for both residential and commercial property holdings of non-residents which can provide the ability to ring fence and exclude some historical gains.

The general direction of travel in recent years has seen an increase in the tax and compliance burden on existing UK property structures and in this light, investors and their professional advisers must review and determine the suitability of existing vehicles and structures. The scrapping of the scheduled Corporation Tax rate reduction and the rebasing opportunities available currently means that there exists currently a narrowing window of opportunity.

At Trident Tax we will be considering some of the above issues further at the next session of our regular Breakfast Tax Club held in Bedford Square WC1, following our last event which focused on some of IHT issues arising for overseas property investors in the UK. At our next event we will also discuss our diagnostic service which is intended to assist in navigating some of the practical client issues currently being faced when determining the suitability of existing UK property structures.

If you would like to receive an invitation to the next session of the Breakfast Tax Club once announced or receive further information on our anonymous diagnostic service then please email or contact Stephen Davies directly on 07710 319690.

In our December and January Newsletters we considered some of the main issues arising out of the Government’s changes to the “loan charge” legislation which were announced following publication in December of the independent review by Sir Amyas Morse.

An, as yet, unanswered question asked in our January Newsletter, was whether HMRC would change its approach, as a creditor for disguised remuneration liabilities, in cases where the employer company is now insolvent. It seems likely to us, based on the current backlog of open enquiries into disguised remuneration schemes that a significant number of cases will need to be brought before the courts, by the liquidator or administrator of now insolvent employer companies, if HMRC wish to pursue their claims for unpaid PAYE and National Insurance Contributions (“NICs”) against the former directors, in such cases.

One of the first decisions of the courts in such cases was the October 2019 judgment handed down in Toone & Ors v Ross & Anor, re Implement Consulting Ltd [2019] EWHC 2855 (Ch.). In that case, Judge Briggs deciding in favour of the joint liquidators held that payments made by the insolvent company under 3 disguised remuneration schemes covering the period from 2009 to 2013, were unlawful distributions under Company Law and, therefore, the shareholders were legally obliged to repay those distributions to the company.

The case is perhaps an unusual one, in so much that the liquidators had claimed that payments made under the disguised remuneration schemes by the company were distributions to Mr Ross and Mr Bell in their capacity as shareholders, rather than remuneration paid to them as directors.  It is also important to note that the case was not a tax appeal, but a claim made against the directors/shareholders by the liquidators on behalf of the company and the decision has no direct bearing on the tax treatment of the underlying disguised remuneration schemes.

There were specific facts found in the case which supported the decision made by Judge Briggs, in particular the fact that payments were made pro rata to the relative amount of the shareholdings of Mr Ross and Mr Bell in the company and also an acknowledgement, in Mr Bell’s oral evidence in the hearing, that he and Mr Ross “were interested in the tax planning as a way of … providing a return to shareholders in the most tax efficient manner”.  Such a fact pattern may not have been replicated in the disguised remuneration schemes used by many other companies.

However, that is not the end of the story in Toone v Ross, as Judge Briggs also accepted an alternative claim made by the liquidators, that the directors had breached their fiduciary duties to the Company in making the payment under the final disguised remuneration scheme in 2013. The judge held that at that point in time the Company was insolvent taking into account, as it should have done, the contingent tax liabilities which HMRC had claimed were due under the 2 earlier disguised remuneration schemes.

Whether HMRC will modify its approach in insolvency cases in consequence of the Morse Review, or if, alternatively, it will be emboldened by the judgment in Toone v Ross, only time will tell.

In our view, any former director or shareholder who is, potentially, facing personal liability for unpaid PAYE and/or NIC liabilities, in respect of historic disguised remuneration schemes, should now consider taking specific professional advice on both the tax and insolvency aspects of HMRC’s claim or potential claim against them. Each case needs to be considered on its own merits and establishing all of the relevant facts and circumstances will always be the starting point in providing such advice.

If you would like more information on any of the points covered in this Newsletter, or you would like to discuss any of the issues arising from it, or from the loan charge changes which were the subject of our December and January publications, please do not hesitate to contact us for an initial, confidential discussion.

Recent figures published by HMRC show the number of settlements under the Contractual Disclosure Facility (CDF), also known as the Code of Practice 9 (COP9) procedure, has fallen by almost 20% in the two years to March 2019.

It might be thought that the huge amounts of information received by HMRC from over 100 countries under the Common Reporting Standard (CRS) since October 2017 means they have no need to offer the CDF to taxpayers and can pick off the cases they like for prosecution.

However, the reality is more likely to be a little different. HMRC appears to have used CRS information relatively sparingly until the deadline for Requirement to Correct (RTC) offshore tax issues expired on 30 September 2018, waiting to see how much tax could be collected from voluntary disclosures by taxpayers.

However, in the last 12 months we have seen an upsurge in the use of “nudge letters” where HMRC indicates it has received information about offshore income or gains and invites the taxpayer to consider a voluntary disclosure. In some cases, the amounts are large and the issues are complex and this may result in an application for the COP 9 CDF procedure being made by the taxpayer.

In smaller and simpler cases, using the Worldwide Disclosure Facility (WDF) may be a more appropriate route.

However, in cases which HMRC believes very large amounts of tax are at stake and where it suspects serious tax fraud, the CRS report may prompt further research by HMRC’s Fraud Investigation Service (FIS) that leads to a registration of the case for investigation under COP9 or, in some cases, criminal investigation. In recent years, HMRC has been criticised for the absence of criminal prosecutions in corporate cases, particularly larger companies, and we would also expect increased effort from HMRC in targeting larger cases for criminal prosecution.

In conclusion, it seems likely that a reversal of the recent downturn in the number of COP9 cases will be seen in the near future, as the increased use of CRS information by HMRC translates to settlements under the CDF and proactive applications for COP9 CDF by well-advised taxpayers in advance of any HMRC intervention; proactive disclosures result in lower penalties.

HMRC will want to increase the number of tax fraud prosecutions by using CRS data but it simply does not have the resources to make criminal investigation the normal route. Therefore, when significant amounts of tax are at stake it will make sense for both taxpayers and HMRC to make appropriate use of the COP9 CDF procedure.

The team at Trident Tax has many years of experience in COP9 cases, including time spent as HMRC investigators. If you would like to discuss the COP9 CDF procedure, please contact us.

You may have seen our recent article on the partial abolition and major changes to the disguised remuneration loans charge

As we await draft legislation and guidance from HMRC we have identified further issues that will need to be considered by taxpayers, their advisers and HMRC.

Will those who repaid loans to avoid the loans charge as an alternative to settlement by voluntary restitution be allowed to re-borrow?

Will amendments to the disguised remuneration legislation be made to ensure that refunds of voluntary restitution settlement don’t result in a new and separate tax charge being made because a taxable relevant step was taken by trustees or other lenders when writing off  loans following settlement with HMRC?

In cases where settlement was made by voluntary restitution and an inheritance tax exit charge was also paid on the loan write-off, will the IHT be refunded in addition to the tax?

There are cases where multiple tax years are involved and some of those years have been settled under voluntary restitution; will partial refunds be made?

There are also a number of less obvious aspects that arise directly or indirectly from the findings in the report of Sir Amyas Morse.

In some cases, taxpayers will have settled with HMRC rather than disputing the validity of Regulation 80 PAYE Determinations because they believed the alternative would be to pay tax under the loans charge. Neither the report of Sir Amyas Morse nor the initial guidance from HMRC comments on this and it seems unlikely that any concessional treatment will be available to allow those affected to look afresh at whether it would have been worthwhile to challenge the validity of the Regulation 80 Determinations.

However, if settlement is still under consideration and the loans charge will not apply as a backstop charge it may be worth re-assessing the position. For example, this might apply in the situation where a director was considering funding a company settlement because the company has insufficient funds.

If HMRC considers that the decision in Glasgow Rangers applies with the effect that contributions to the trust are redirected earnings, it is unlikely that the debt could be transferred to the individual. However, the individual may nevertheless have been prepared to fund the company settlement in the knowledge that the loans charge liability of the company could be transferred to them.

If the loans charge will no longer apply, the individual should re-assess their position and that of the company before deciding whether to settle and if so, on what terms.

Another effect of the reduction in scope of the loans charge may be that HMRC will alter its approach to cases where it has protected its position by issuing Regulation 80 PAYE Determinations. It is difficult to predict how things could change, but broadly, HMRC could decide to pursue these cases even more vigorously than before or it could take a more measured view and heed the criticisms levelled at HMRC in the Morse report.

If the Morse report is taken seriously, HMRC may decide to take a softer approach in the following situations:

  • Where it opened enquiries and/or made a protective assessment but has not made contact for several years
  • Where HMRC issued Regulation 80 Determinations more than 4 years after the end of the relevant tax year and, therefore, the validity of the Determinations relies on “careless behaviour”
  • Where HMRC is seeking penalties and the reason given is that the employer was careless by virtue of using a disguised remuneration scheme

However, even if HMRC does not proactively alter its approach when these features are present it will be worth considering whether arguments can be made to improve the taxpayer’s position.

We are also aware that many insolvency practitioners are now having to deal with disguised remuneration arrangements as part of their duties and it will also be interesting to see whether HMRC’s approach alters in this area in view of the findings in the Morse report.

Until the new legislation and HMRC guidance is published – and we hope and trust this is imminent – it will be difficult to provide any firm advice other than to delay committing to any course of action.

There are also individuals who did not settle with HMRC because the cost of the loan charge would have been lower than settling historic liabilities with HMRC.  Those individuals will be in the happy position of no longer being required to pay the charge. However, they will face questions about what to do with existing loans, the costs of maintaining trusts and the prospect of ongoing IHT charges. Careful thought will be required to understand the best way to deal with outstanding issues without creating further tax problems.

If you would like to discuss any of these issues please contact us.

The government has announced a significant overhaul of the 2019 loan charge following a much publicised review by Sir Amyas Morse. It will have huge consequences for individuals and employers who either faced the prospect of massive tax bills in the New Year or some who have already paid tax to HMRC in respect of historic liabilities to avoid a worse tax bill if the loan charge applied. We have set out the changes below.


The 2019 loan charge has been discussed at length in our earlier newsletters. Broadly, it is a charge on loans made to employees through tax avoidance arrangements, typically employee benefit trusts, that were not otherwise be charged to tax as income in the past. The loan charge was initially designed to be wide ranging and applied to any outstanding loans made after 5 April 1999. The result was a significant number of individuals were facing a tax liability for loans that related to employment income from many years ago.

The changes

The major changes are as follows:

• the loan charge will apply only to outstanding loans made on, or after, 9 December 2010
• the loan charge will not apply to outstanding loans made in any tax years before 6 April 2016 where the avoidance scheme use was fully disclosed to HMRC and HMRC did not take action (for example, opening an enquiry)
• HMRC will refund payments made where settlement was made by voluntary restitution where the loans in question were made before 9 December 2010 and loans made up to 5 April 2016 where the loan was fully disclosed to HMRC but no enquiry was opened
• Where the loans charge will still apply, there are changes on time to pay arrangements and a new measure to spread the taxation of the loans charge over 3 separate tax years
• There will be no penalties charged where loans are not disclosed in 2018/19 personal tax returns

These changes follow recommendations made by the House of Lords. The first change reference the date on which HMRC announced significant new provisions to prevent the payment of income or benefits through third parties like EBTs; known as the disguised remuneration rules. The logic for this change is to presumably recognise that from this date, HMRC made clear its intention to change the way in which loan arrangements via third parties would be taxed. Those that went ahead with such a loan did so in the knowledge that they were going against the new law and practice for taxing employment loan from third parties.

The second change is an issue that was central to the complaints made by people in contractor loan schemes. They argued that they fully disclosed how they were being paid, declared that they were using tax avoidance planning and were taxed on loans as benefits. HMRC often did not challenge these arrangements but the loan charge effectively allowed it a second bite of the cherry that made up for earlier failure or deficiencies on HMRC’s part.

HMRC has said that it will repay on request those who has settled earlier years in this way on a voluntary basis and would not have been required to pay the loan charge under the new rules.

HMRC has also offered standard terms for spreading the effect of the loan charge for those still caught. People can now elect to spread the amount of their outstanding loan balance (as at 5 April 2019) evenly across 3 tax years: 2018/19 to 2020/21. There are many who have significant loan balances that were built up over years that would have been taxed in one single 2019 loan charge with the result that they wold be required to pay more than if the loans were taxed when they were made e.g. because significant amounts of income would now be taxed at the top rate of 45%. The election will allow the income to be spread so that more basic rate, higher rate band income can be used over a three year period with the effect of limiting the potentially negative effect of taxing loans in one year.

HMRC has also repeated the offers to help people spread the burden of the loan charge over time: if you do not have disposable assets and earn less than £50,000, HMRC will agree Time to Pay arrangements for a minimum of 5 years. If you earn less than £30,000, HMRC will agree a minimum of 7 years to pay and they have also said there is no maximum time limit for a Time to Pay arrangement

Next steps

The change of approach is going to require changes to the legislation. That will happen next year, but it will mean that repayments will not be made until the summer of 2020. HMRC appears to be saying that it will write to taxpayers to advise them of potential repayments or if the loan charge is still due. HMRC face a mountain of work to unpick previous settlement to understand which were wholly or partly voluntary settlement. We suggest that this is too important to leave to HMRC. Anyone who thinks they may have settled any historic liabilities voluntarily or may still be required to pay the loan charge should check their position as soon as possible.

For example, what will happen in those cases where settlement was made by voluntary restitution and the trustees then forgave the loan, in the knowledge that although this was a relevant step no tax was payable because its value was reduced to zero as a result of the settlement being reached?
Will HMRC be prepared to make refunds and accept no tax charge arises on the loan forgiveness?

No doubt many other questions will have to be considered in the context of each case.

HMRC have said that those who have not filed their tax return, or agreed a settlement with HMRC, should still submit a Self Assessment tax return for the 2018 to 2019 tax year. You can either submit by 31 January 2020, giving your best estimate of the tax due, or file by 30 September 2020. The extension of the filing deadline appears to be a generous concession but we need to understand the effect of pushing back the filing deadline for other income and gains included in a return in order to understand whether there are any consequences for filing by the later date e.g. will HMRC also suspend the 5% late payment penalty if income other than employment loans from a third party is involved?

There are many more issues for individuals and employers to work through e.g. those with open enquiries, instalment arrangement, employers who have reported through real time PAYE, etc. The HMRC website covers these but anyone affected should take advice if they are not clear on where they stand.

An apology from HMRC?

Should HMRC apologise for the way it has pursued its recent policy. The HMRC website is silent in this regard but the Government’s response to the review is more reflective:

“HMRC is sorry some people who used DR avoidance schemes experienced delays and a fragmented experience from different parts of HMRC. HMRC are also concerned that some people considered the department’s approach towards them aggressive.”

An increasing number of individuals are setting up Family Investment Companies; these are simply companies within the scope of UK corporation tax which invest family money and whose shares are owned by family members. These companies are used for long-term investment of family wealth, because the relatively low-tax environment allows for the compounding of after-tax investment returns more effectively than if the investments are held personally. If money is paid out from the company as a dividend, then income tax is payable on the dividend, so again, the companies are used as a long-term vehicle, as the benefit is relatively limited if the company pays out all investment returns as they are realised.

The use of such companies has arisen primarily because of the difference in corporation tax rates (currently 19%) paid by companies on income and gains, and income tax and capital gains tax rates (up to 45% and 28% respectively) paid by individuals.

The Conservatives have said that they will not implement the proposed reduction of corporation tax from 19% to 17%, whereas the Labour manifesto proposes to increase the rate to 26%. However, Labour also propose to increase the top income tax rate to 50% and to increase the top capital gains tax rate to 50%.

What this means is that, if the Labour proposals are implemented, the benefits of a family investment company would be only slightly eroded, in terms of reducing the ongoing tax on the investment return as compared with the tax paid by an individual making the same investment.

The following table shows the effect for investment income.

Investment return of £100 taxed as income Current rates Proposed rates
Individual can reinvest £55 £50
Company can reinvest £81 £74
Company can reinvest more than individual by £26 £24


Currently, the income tax rates on dividends are lower than the rates of tax on other income, in effect to take account of the fact that dividends are paid out of company profits which have already been subject to corporation tax. Labour are proposing to tax dividends at the same rate as other income, up to a top rate of 50%. Therefore, using savings to equity-fund a Family Investment Company will increase the total tax liability if the company pays out the investment return as a dividend at the end of the year, so that you are worse off than simply investing as an individual. However, such a company still has value as a long-term deferral strategy.

The proposal to align capital gains tax rates with income tax compared would create a greater incentive to use family investment companies when investing for gains.

Investment return of £100 taxed as a capital gain Current rates Proposed rates
Individual can reinvest £80 £50
Company can reinvest £81 £74
Company can reinvest more than individual by £1 £24


Additionally, a combination of the proposed abolition of entrepreneurs’ relief (which reduces an individual’s effective rate to 10%), and the ability of companies to utilise the substantial shareholder exemption to allow qualifying sales of stakes in trading companies to be free of corporation tax, would make companies more attractive.We have advised on a variety of different circumstances in which Family Investment Companies can be used, and there are other potential advantages in addition to the tax rate on returns. If you would like to discuss setting up such a company, contact Trident Tax Ltd.

A recent First Tier Tribunal case found that trustees of a UK resident trust were entitled to pay CGT at 10% rather than 20% on a disposal of shares, READ MORE because they qualified for Entrepreneurs’ Relief (“ER”) in a circumstance where HMRC’s guidance says that no relief is available. In the course of the hearing, Counsel for HMRC said that if their opponent was correct, trustees could take action immediately before the disposal to obtain the tax relief.

The case concerned a situation where an individual who met the ER conditions for his own disposal of shares on the sale of a trading company was also a beneficiary of a trust which held shares in the company. The individual had been given an interest in possession in the trust before the trustees sold the shares, but less than a year before that sale. The judge held that on a plain reading of the legislation, it was not necessary for the individual to have held the interest in possession for the year before the sale, and so the trustees were entitled to the relief.

Thus, before a sale of shares in a trading company (or the holding company of a trading group), trustees of a discretionary trust can, where the trust deed permits, give an interest in possession to such an individual, and claim relief from Capital Gains Tax. Note that giving the interest in possession doesn’t give that individual rights in relation to the proceeds of sale, which are capital. It would give the individual the entitlement to investment income realised on the proceeds. Note also that property development companies can qualify as trading companies, and that companies which meet the conditions for furnished holiday lettings can also qualify, so the effect of a claim to Entrepreneurs’ Relief could be a tax reduction of 18% not just 10%.

So, trustees should consider this, and also ensure that they consider whether there could be any adverse tax consequences of taking such an action. Trustees of non-UK resident trusts which are settlor-interested should note that James Kessler QC considers that trustees of a trust within s86 can claim Entrepreneurs’ Relief. We would be happy to advise on this.

We want to recruit a Tax Advisory specialist at Manager or Senior Manager level to support continuing growth.

Trident Tax is a tax advisory and tax resolutions practice established 10 years ago, comprised of former Big 4 and HMRC specialists.  We operate from offices in London, Birmingham and Manchester.

Our advisory practice provides specialist tax advice across business, personal and trust taxes for corporates, High Net Worth and Ultra High Net Worth clients based in the UK and overseas.

We also work extensively on referrals from other professionals: accountants, solicitors, trustees and wealth managers.

The quality and complexity of our work is comparable with that of the largest accountancy and law firms.  Our work frequently involves property transactions, corporate projects and planning, exit planning, overseas trusts and companies, residence and domicile issues, offshore funds, private equity and succession planning.

We are a close knit, owner-managed team with an informal but highly committed approach to our work.  You’ll find a conspicuous lack of bureaucracy or office politics within in our organization.

You must be CTA qualified with very strong technical knowledge and desire to develop it further. It’s also essential that you work well in small teams and are able to brainstorm within the team to help develop solutions to complex problems.

You will be client-facing and must be able to develop strong and enduring relationships with clients and other professionals.  Ideally, but not essentially, you will be based in the Midlands.

We offer flexible working in terms of office and home working and hours of work with highly competitive salaries and an innovative bonus scheme that rewards your contribution directly.  Your integration and development will be closely supported by the rest of the team and you’ll find our culture is friendly and informal.


Please send your CV to Alan Kennedy: