Author Archives: lee blackshaw

Personal limited company financial risks highlighted by Covid19

Government financial help in response to Covid19 was implemented quickly, is generous and will save jobs and businesses. It is right that the state stepped in at a time of national emergency.

Covid19 highlighted many financial risk areas for personal limited companies. Most of these also arise even in “normal” times. Although the risks are well known and common financial errors, it is worth repeating these now, for future risk management.

Some key risks are:

  1. Lack of personal savings for emergencies and company cash reserves for emergency cashflow
  2. Not fully understanding that the company is a separate legal entity to the owner (and that you are “self-employed” only in the loose sense of the term)
  3. Failing to send tax returns and pay taxes on time
  4. When saving tax and NIC by the use of low salary, dividends, company retained funds, alphabet shares or the ability to time profit extraction, not being honest about it (eg when demanding help* from the Government)
  5. Following your accountant’s advice on tax saving, but not on financial management
  6. If you would have defended your “dividends are dividends, not salary” to the death with HMRC, don’t immediate flip to equating it with earnings or self-employed profits, when that becomes more convenient
  7. If your company is paying dividends, do it properly (and check that you are doing it properly, before HMRC check)
  8. If you claim to be “paid in dividends” prepare for a battle with HMRC
  9. In reality, being a disguised employee of one large company
  10. Thinking salary must be a fixed monthly amount
  11. Thinking “every business owner does it that way” – they don’t
  12. Running a business, so that it is reliant on each month’s income to pay each month’s outgoings, with no safety net
  13. Seeking the cheapest advice, internet free advice or the lowest tax rate
  14. Lack of insurance and protection (life cover, critical illness and income protection, self-insurance via savings, pension contributions, shareholders’ agreement, a will and lasting power of attorney)
  15. Lack of “what if”, crisis planning and a business plan
  16. Not understanding that every time you do something to save tax (or NIC), it could open up a potential known (or unknown) future problem – especially where tax is driving the structure or plan, instead of the commercial and practical reasons

Several of these are not self-inflicted errors. Some employers attempt to save NIC and other employee costs, by forcing employees into freelance personal service companies. Some accountants push tax savings and “solutions” before financial guidance. Many IFAs charging structures are confusing and opaque.

But, running your own business is more fun, flexible and rewarding than being an employee. By not falling into the above traps, and barring pandemics, you also should have a sound financial future in running your limited company.

*I think there should be some Government help here – but it’s complex, as the underlying company income should form part of the calculation (due to the lack of transparent taxable profits, compared to a sole trader/partner). Honesty around the tax and NIC saved would also help formulate an argument for reasonable financial help.

Coronavirus Job Retention Scheme – “just a little bit of work” risk?

Those with furloughed employees will have made claims from the Government under the Coronavirus Job Retention Scheme (“CJRS”). In doing so, they have ticked a declaration that it is correct and done in accordance with HMRC’s guidance.

CJRS has been implemented quickly, is generous and will save jobs and businesses. Employees will receive some pay and employers will receive state benefits to fund that pay. What might go wrong?

No work

Para 6.1(a) of the Treasury Direction says “An employee is a furloughed employee if…
the employee has been instructed by the employer to cease all work in relation to their employment”

HMRC’s guide says “The employee cannot do any work for the employer that has furloughed them.”

There is a relaxation of this for furloughed directors, due to their statutory duties, but not for staff.

Just a little bit of work?

If we ignore those who purposely abuse the scheme, are there some employers mistakenly not meeting the CJRS requirements? If so, are they exposed to refunding the furlough payments, penalties or even criminal charges (eg Fraud Act 2006 or Theft Act 1968)? Additionally, there may be consequences under the Criminal Finances Act 2017, for others who may have assisted in making the claim.

Are some taking the view that “just a little bit of work” is fine, “how will HMRC find out” or “surely HMRC are not going to attack a struggling business and put employees’ jobs at risk”?

HMRC will check

My general outlook to reduce risk is to assume HMRC know everything that you know, plus a little bit more!

But, more specifically, are there email trails, mobile phone records, social media posts, disgruntled employees, suppliers notes and third party evidence that will show that an employee has done some work? What if HMRC interviewed staff or customers? What if your accountant notices it and insists that you correct and reduce the claim?

Even if the risk of penalties and prosecution is thought to be low, would bad publicity affect the business? Would there be public sympathy or not? It is easy to see, in say 2023, political pressure to be seen to have policed the scheme robustly, including carrying out at least some prosecutions.

Casual risk messages

I have seen or heard phrases along the lines of “I’m furloughed at the moment but I’m just doing…XYZ”. If I hear such open public statements, fortunately not from any clients (yet!), it will be easy for HMRC to also see and hear these, to trigger or assist in an enquiry into CJRS.

Managing CJRS risk – a few tips

  1. Review the furlough letter agreed by the employee – does it state that no work is to be done?
  2. Is there an audit trail to show that no work is done?
  3. Does the employer and employee know that “no work” = no work?
  4. Is an “out of office” set and furloughed employee email accessed by, or diverted to, non-furoughed staff?*
  5. Is it clear that client or supplier enquiries to the employee are diverted to non-furloughed staff?
  6. Even if funds are tight, discuss the CJRS process and application with a specialist with knowledge of HMRC tax investigations (in writing this, I’ve spoken to Jon Preshaw, who can be contacted here and I also thank him for his very useful input).

*HMRC confirmed (although only by the webchat function) that a furloughed employee checking email, to forward on to an unfurloughed employee to action is fine, as long as it is not worked on by the furloughed employee. [items in green updated 30 April 2020]

Update June 2020: the draft legislation pushes known errors, not reported with 30** days, into the deliberate and concealed penalty category. This could result in a 100% penalty, in addition to the refund of CJRS support. For larger amounts, this could also trigger the “naming and shaming” rules. The ATT response to the draft legislation consultation is worth a read.

**Update July 2020: the 30 day rule has been extended to 90 days but the other provisions still apply (see clause 106 and sch 16 of the Finance Bill, which should receive Royal Assent in July).

5 April 2020 year end tax planning – in three minutes

A quick checklist before 5 April (and before the 11 March Budget, where lots of things may change!)

  1. Maximise ISA savings
  2. Review pension contributions
  3. Consider pension tax breaks for your children (even minors)?
  4. Use your capital gains tax allowance
  5. Use your £2k dividend 0% tax band
  6. 30% income tax relief, using EIS/VCT investments?
  7. Review and note gift aid tax relief
  8. Pay any outstanding 31 January 2020 tax before the end of February, to avoid a penalty
  9. Check your PAYE coding notice and benefits package
  10. Will your tax on rental income rise, due to the interest restrictions?
  11. Use personal allowances of spouse, children and grandchildren
  12. Are you paying high marginal rates of tax?
  13. Business – extract cash in a tax efficient way (salary, loan, dividend, rent, pension?)
  14. Trusts – create new ones; distributions from existing ones; close down old ones; do you need to complete the trusts register and keep sufficient records?
  15. Inheritance tax – gifts, update will or letter of wishes, create lasting power of attorney
  16. Get a fixed fee quote for your 2020 tax return
  17. Are you a Scottish or Welsh taxpayer?
  18. Are any overseas assets or income taxed correctly in the UK and overseas?
  19. Have you set up your online personal tax account with HMRC?
  20. Do you have a tax payment on account to make on 31 July 2020?

These are prompts rather than fine detail – for further information please contact me.

Tax tips

Here are my top ten tax tips:

  1. Have your tax return completed and submitted to HMRC as soon as possible after 5 April (ideally by 31 August);
  2. If you have substantial dividend income, or are self-employed, budget for your tax payment monthly;
  3. If your non-PAYE income is significant, understand the payments on account system as soon as possible (;
  4. Pensions tax relief and ISA allowances are very generous – save as much as you can as early as you can, to maximise the tax breaks;
  5. Before you worry about inheritance tax, make sure you and your family have wills, powers of attorney and adequate life insurance (and even after that, don’t worry about it too much);
  6. Don’t introduce tax risk into your finances (;
  7. If you buy a foreign holiday home (or even a helicopter or jet), at some point you will regret doing so (and, if you must buy one, don’t put a complex and costly structure around it that may work today but not tomorrow);
  8. If a slightly artifical structure (eg using a company for assets, paying yourself in dividends or loans) saves you tax today don’t assume that it will do so in a few years’ time (and don’t assume that it will be easy, in practical or tax terms, to collapse);
  9. Take advice before you do something – if the “something” is overseas, take foreign tax and legal advice first;
  10. If you run a business, remember that VAT and PAYE are not your money – don’t “borrow” or spend the taxes – instead keep an eye on your own business net cashflows.

Tax return required within 30 days of residential property disposal?

What has changed?

Tax returns are no longer required just once a year.

If you sell a residential property (eg rental property) after 5 April 2020, you will probably need to file a special tax return and pay the estimated capital gains tax within 30 days.

This is a major change. (At the moment a sale in, for example, May 2019 would not need to be reported and tax paid until 31 January 2021.)

What about my main home?

If you sell your main home and are certain that it is exempt, due to private residence relief, no return is required. But – are you sure it is fully exempt? If not, you are at the risk of penalties. Take advice several months before the sale.

When will your tax adviser know about the sale?

Will your tax adviser know? Often it is the estate agent and lawyer who know about the sale before the tax adviser. This now needs to change.

What action is needed?

Find out the property base cost, improvement costs, your estimated income and likely proceeds. Inform your tax adviser of these, as soon as possible before the sale.

Tax relief and losses

You can take into account losses made before the disposal in computing the 30 day tax estimate but not losses or other reliefs that have not yet crystallised (such as Enterprise Investment Scheme deferral, unless you have the EIS3).

What about the normal tax return?

The disposal still has to be reported on your normal tax return, with the final tax computation taking place and credit given for the capital gains tax already paid.

Key dates

The return is required 30 days after completion, even though the tax disposal date is exchange of contracts (the binding contract).

Why is this change important?

It is likely that, due to not being aware of the change, or making assumptions on tax or relief, that many taxpayers will face penalties for errors or late filing.


Inheritance tax & houses – common errors

General election time tends to cause a spike in views being expressed on IHT and houses. By a combination of lack of awareness, the complex tax system, and sometimes political intent, common errors arise.

Some examples from the December 2019 election campaign are:

  • Not realising that only around 5% of death estates suffer IHT each year – see
  • Not being aware that the residence nil rate band can increase the normal £325k nil rate band by £150k* – see
  • Thinking IHT is double tax, rather than often being partly or mainly the result of otherwise tax free growth (or not much worse “double tax” than VAT)
  • Hoping that giving away all or part of the house saves IHT – in many cases it makes things worse, due to reservation of benefit, pre-owned asset tax and loss of capital gains tax free uplift
  • Forgetting the instalment option – see
  • Worrying, when young and healthy enough that life cover can cheaply cover the IHT risk
  • Forgetting the transferable nil rate band – see
  • Focusing on “40%”, rather than what actual blended tax rate might apply – eg the estate of a married couple (or widow/widower) with £1.2m house might suffer 8.3% IHT on that asset
  • Not realising that a reduction in the IHT rate, or its abolishment, might be balanced by the removal of the tax free uplift on death or private residence relief
  • In hoping for IHT to be replaced with something else, that an annual wealth tax might cause more hardship than IHT on an elderly low income and valuable house owning taxpayer
  • Worrying about IHT but not taking advice

If any others are spotted, I am happy to add to the above list.

Some additions:

  • Even if IHT is payable on the house, there may be other resources to draw upon, such as the deceased’s pension fund
  • In some circumstances, where more than one generation live in the family home, it is possible to gift and share part of the property with the younger generation without it being a reservation of benefit – see

*it is this residence nil rate band that Labour’s 2019 manifesto suggests should be removed, leaving just £325k (but not £125k as some suggest, which is from an earlier report commissioned, but not written, by Labour).

More record keeping for trusts in 2020?

Guidance on record keeping obligations as at 2019 can be found here:

The change

This is likely to change and become more onerous once the UK adopts the 5th EU anti-money laundering directive (“5thAML”). The number of trusts affected by this may increase tenfold to 2 million. It will include many dormant trusts simply holding land or other non-income producing assets that currently do not need to formally register. In many cases the trusts will not have cash resources to pay for professional help to complete the database requirements and trustees could face personal penalties for non-compliance.

One hope is that the HMRC trust register will be improved. The current version appears to have been programmed by someone who does not understand the concept of either a trust or a database!


It may also lead to more transparency and information being available on trust asset ownership (which may be a good or bad thing, depending on ones views on privacy).

The use of trusts

As ever, it is worth remembering that trusts are a useful vehicle to protect assets, for example minors, vulnerable persons, plus inheritance tax and wills planning encouraged by the tax legislation.


The consultation can be found here:

The EU directive can be found here:

The ICAEW response to the consultation can be found here:

HMRC guidance on trust record keeping

In July 2018, HMRC updated its guidance on trust record keeping. This is a mix of tax and anti-money laundering requirements.

Dormant trusts may not have to complete a tax return or trusts register but there are still record keeping obligations, such as under para 44 and 45 of the The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.

I recommend that all trusts have an annual trust meeting, asset review and simple accounts (even if just one page). Whenever I am asked to advise on a historic trust problems (eg missed IHT charge) a common theme is lack of annual meetings and accounts.

Here is the HMRC website link

And a PDF version safari-30-jul-2018-at-1021.pdf

Don’t believe what you read in the press

This Telegraph article caught my eye. It explains a useful inheritance tax relief that can apply to larger gifts, after three years, in reducing the 40% rate. The original text made a common mistake in not noting that the gift needs to be in excess of the available nil rate band (otherwise it is tapering an already 0% tax rate).

It’s the type of article that can lead to a client saying “…but I read somewhere that…”.

(I sent a tweet to the writer, who corrected the original.)


Trustee obligations and the HMRC Trusts Registration Service

All trustees need to retain more information on the settlor, trustees and beneficiaries. In addition certain trusts need to disclose details to HMRC.

[updates highlighted in orange]

These notes quickly became out of date, as HMRC struggle to provide a suitable service and extend deadlines/update guidance. As at January 2018, the registration service remains awful (almost as if HMRC do not understand basics of both trusts and databases). For further details please contact me, check the STEP forum and HMRC helpsheet.

ATT have provided a good guide here:


STEP have provided a note on penalties, which can be found here.

HMRC Trusts Registration Service

There is a trust registration service for new and old trusts. Trustees can register now. Agents will be able to do so by the end of October 2017. It replaces the form 41G(Trust).

Update: there was a HMRC webinar on this topic on 10 August, one due on 8 September 2017 and 17 November 2017.

New obligations on trustees

The legislation is contained in the The Money Laundering, Terrorist Financing and Transfer of
Funds (Information on the Payer) Regulations 2017, which came into force on 26 June 2017. This is part of the implementation of the EU Fourth Anti-Money Laundering Directive (4AML). A copy of the regulations can be found here.

Paragraphs 44 and 45 of the regulations are the key ones for trusts. The former requires trustees to keep written records of beneficial owners and provide those, if requested, when entering into business relationships or to law enforcement authorities. The latter requires HMRC to keep a register of certain trusts.

Which trusts need to register?

At the moment, it is just trusts with a UK tax consequence that need to register. The register is online only. It collects details of the settlor, trustees and beneficiaries. This includes date of birth, NI number (or address and passport number). It seems to require known discretionary beneficiaries to be logged, even if they have not (and may not) ever receive funds* from the trust. In some trusts, that could be a huge number of beneficiaries.

*Update: HMRC now appear to accept that that a beneficiary of an unnamed class (eg “the children of the settlor”) does not need to be provided until they receive funds.

The trigger for registration is “UK tax consequences*” which includes: income tax, capital gains tax, inheritance tax (eg 10 year or exit charge) and SDLT (eg buying land).

*Update: as noted on the STEP forum on 1 September 2017, this also includes stamp duty reserve tax, so looks like it includes the purchase of any shares.

The deadline for new trusts is extended to 5 January 2018.

For dormant trusts that have a taxable event, the event needs to be after 26 June 2017.

Agents will need to use a new Agent Services account, which does not appear to be part of the normal Government Gateway.

The register also collects details of the original trust assets but not additions or changes.

The HMRC software cannot handle all circumstances, in which case the online logging needs to be followed up by letter.

Future changes

There remain mismatches between the legislation and what HMRC require.

Penalties for not complying with the rules are separate from the usual tax penalties (eg failure to notify changeability) and part of the regulations, so much wider and severe.

It is possible that after the EU Fifth Anti-Money Laundering Directive (5AML), all trusts will need to register. Although cumbersome, that does make more sense from an AML point of view than just taxpaying trusts.


Obtain/update details on settlor, trustees and beneficiaries, both for the register or if any entity the trust enters into a business relationship with requests the information.