09
May

Progress made towards one-day cheque clearance

A new system that allows UK banks and building societies to scan cheques and clear them digitally rather than using the paper cheque for clearing is expected to be introduced from October 2018. The Image Clearing System (ICS) for cheques will cut down the clearing times from up to six days to just one day.

The changes will facilitate more banks offering their customers the opportunity to pay in their cheques electronically using banking apps. There had been moves to try and phase out the use of cheques altogether, but research found that cheques are still widely used especially by older people and in certain sectors of the economy.

In November 2017, HM Treasury consulted on proposals to make provision for two measures to support the introduction of the ICS. These measures seek to ensure that the introduction of the ICS will have no detrimental impact on existing cheque users.

The first measure will allow for a copy of a paid cheque together with other relevant information to be provided to the payer upon his or her request, and that the copy can be used as evidence of payment.

The second measure will ensure that if a customer paying using a cheque incurs a loss in connection with the presentment of a cheque under the ICS (that did not result from gross negligence or fraudulent activity on their part), and has not received compensation, the payee’s bank must compensate this customer for this loss. Whilst the current system achieves a similar result, the government was keen to ensure that the necessary legislation is in place to ensure this is the case for cheques cleared using the ICS.

 

 

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09
May

Are you making money from a hobby?

The ‘badges of trade’ tests whilst not conclusive are used by HMRC to help determine whether an activity is a proper economic / business activity or merely a money-making side line to a hobby. However, there is a point where careful consideration needs to be given to deciding whether your hobby has in fact become a taxable trading activity.

It is clear from the significant amount of case law on this subject that a decision on whether there is a business activity is often not black and white. In fact, both HMRC and the courts are clear that it is important to look at the whole picture rather than looking at each ‘badge’ in isolation or even relying too heavily on the badges of trade at all. In some cases, taxpayers will seek to argue that their hobby is actually a trade in order to benefit from certain tax reliefs, usually related to having a trading loss.

HMRC will consider the following nine badges of trade as part of their overall investigation as to whether a hobby is actually a trade.

  • Profit-seeking motive
  • The number of transactions
  • The nature of the asset
  • Existence of similar trading transactions or interests
  • Changes to the asset
  • The way the sale was carried out
  • The source of finance
  • Interval of time between purchase and sale
  • Method of acquisition

Planning notes:

The introduction of the trading allowance from April 2017 can help taxpayers making small amounts of money from their hobby. Even if HMRC consider that the activities in question are a trade, taxpayers can make up to

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