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NIC liability where there is more than one employee.
I am aware that the employment allowance cannot be claimed by single-director companies. But I am confused about the position where the company has a second employee.
HMRC says that there must be a secondary National Insurance contributions (NIC) liability in respect of that second employee at some point in the tax year. But I have seen commentators suggest that all that is necessary is that there is a second employee and that an NIC liability is not necessary.
I’m interested in readers’ view on the correct interpretation of the legislation but would especially like to hear of cases where a claim for employment allowance has been accepted by HMRC in cases where there is no NIC liability on the second employee’s earnings.
Query 20,267– Hopeful.
Should I apply to HMRC for a closure notice?
My client has been involved in a long running technical dispute with HMRC over whether a particular transaction is caught under the Ramsay principle – the details are not relevant here.
The dispute is going nowhere at the moment and has got stuck in endless rounds of correspondence which don’t progress matters. It seems that the only way forward is to apply to the tribunal for the issue of a closure notice. I am nervous about this because anecdotally I have heard that this will only harden HMRC’s position and lead to a closure notice which gives the worst possible outcome for my clients.
I would be interested in hearing from readers about their experiences in applying for closure notices and whether in fact it was of benefit to their clients in the long run.
Query 20,268 – Prevaricator.
Valid and ethical way to reduce SDLT on purchase?
My clients are a husband and wife and, together, they own their main residence. In fact, this house was bought originally by the husband before he met his future wife. Not long after they married, he transferred a half share of the property into his wife’s name.
The couple would now like to buy a holiday home which, I understand, will cost about £500,000. From what I gather, they are likely to have to pay an extra stamp duty land tax (SDLT) charge because this will be their second property.
I think SDLT will apply to consideration over £250,000. Usually this would be at 5% (up to a cost of £925,000) but an extra 3% would apply here – in other words an extra £7,500. Perhaps this is not a large amount in the great scheme of things, but is there a valid way of avoiding this?
I assume that the fact the wife has not actually bought a property (having been gifted a share) is not sufficient for it not to be treated as a second property?
However, if the existing property was transferred wholly into the husband’s name and she bought the holiday home in her own name, could this be treated as her main property rather than a second one? Further, might she be treated as a first-time buyer so that SDLT at 5% would only be payable on consideration above £425,000?
I would not like to encourage my clients to undertake unethical behaviour, but nor would I like to find that there was a simple lawful way to reduce their potential SDLT liability.
Thoughts from Taxation readers on whether the SDLT liability could be minimised in such circumstances would be welcomed.
Query 20,269 – Housebuyer.
Issuing VAT invoices after registration number arrives.
One of my clients waited a long time to obtain her VAT number from HMRC. For this reason, she issued invoices that charged VAT in the meantime – however she did not show the VAT separately in her invoices. In other words, she would issue an invoice of £120 including VAT rather than £100 plus VAT.
At long last, the VAT number has arrived and my client needs to issue VAT invoices to enable her customers to claim input tax on the retrospective invoices.
How should she go about this? I wondered whether my client should issue a credit note to cancel the original invoices, ie a credit note for £120 including VAT and a new invoice for £100 plus VAT?
If so, should both documents be backdated because the customers would – I guess – have claimed input tax according to the original date?
Alternatively, should my client just issue a VAT only invoice which makes mention of the original invoice? If so, does this create a problem for the customer because they will have two documents that duplicate the VAT, ie an invoice for £120 and a VAT only invoice for £20?
Readers’ thoughts on the best approach to take here would be appreciated. Query 20,270 – Ledger Les.
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