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When assets become of negligible value in TP’s (taxpayer) ownership, TP may choose to make a negligible value claim. TP is treated as though he had disposed of the asset and immediately reacquired it at the time the claim is made, for an amount equal to the value which is specified in the claim. 

This is most commonly applied to shares where the company goes into liquidation.¹

Claim should be made via a tax return. Date of claim is date of submission of tax return.

Conditions for making a claim are:

• you must still own the asset when you make the claim²
• the asset must have become of negligible value while you owned it.

Set capital loss against income

Usually, capital losses are not allowed to be set-off against income, as capital gains are taxed at a lower rate than income tax.

But if certain conditions³ are met NVC loss can be set off against income.

Limit on losses

For losses made in 2013 to 2014 onwards, the total of all Income Tax losses which can be claimed against a year’s income is limited to £50,000, or 25% of that income if greater.

This limit does not apply to losses on shares to which EIS or SEIS relief is attributable. Helpsheet 204 Limit on Income Tax reliefs (2022) explains which reliefs are included in the limit.

Tax return

1. Provide details of negligible value claim in box 54, ‘Any other information’⁴, on SA108 pages and attach computations with your tax return.

2. Ensure loss is included in boxes 7, 19, 27 or 35 of the SA 108, as applicable, and use code ‘NVC’ in boxes 8, 20, 28 or 36, as applicable, and provide an accompanying computation.

3. To set-off capital loss against income complete Box 41 on SA108.

4. Complete box 42 for losses in shares of EIS or SEIS.

Sample Computation ^{5 and 6}

Deemed disposal proceeds                                                                      £Nil

Allowable costs:

Actual Purchase cost                     £15,000

Income Tax relief re SEIS               £1,000⁷                                      £14,000              

Allowable Loss  eligible to be set-off against income                      £14,000

Notes:

1. Tolley Exam Training 30.4
2. See Example 1 in HS286.
3. See HS286 for these conditions.
4. Information to include in this box is given in ` How and when to claim the relief` section of HS286.
5. See Example 4 in HS286.
6. Good computation examples given in Tolley Tax computations 227.2 and 15.5
7. Assumed less than 50% relief claimed in the year of investment due to insufficient taxable income.

In simple terms – annual PAYE process for most employers.

-Send final FPS: this is a check box in the PAYE software which needs to be ticked confirming that it’s the final FPS of the year.

– Issue P60: once step 1 has been completed, we need to issue P60 to all employees employed as at 6^th April. Some software send P60s to all employees even those who left. So ensure to exclude the leavers when sending P60s. Also save a copy in your records.

– Submit P11d forms to HMRC and ask employer to pay Class 1A National Insurance. Employee also needs a copy for their self assessment tax return.

– Update Software: all PAYE software must be updated once the tax year ended. Usually the software will prompt you automatically to update it once you logging. Alternatively, visit software provider’s website for instructions.

– Update tax code for the new year: please use HMRC guide P9X for this.

– Update staff salary with National Minimum wage. Adjust director’s salaries where required. Be aware National Minimum wage increases not from 1st April but from first pay reference period starting after 1st April. See ACAS link.

-Review eligibility for Employment Allowance in the new tax year. Also check for connected businesses.

-Review Pay/RTI dates ; sometimes software does not carry it forward correctly.

Bonus points:

1 – Before every payment run employers need to download tax notices from HMRC website. HMRC has made a very good free software – HMRC Desktop Viewer.  Most software will have an inbuilt facility to download PAYE notices.

2 – We are using MoneySoft payroll for our payroll. We find it easy to use and value for money.

3 – HMRC version of this guide.

4 – Payrolling of benefits delayed by one year to April 2027.

VAT late payment penalties are changing for VAT periods ending on and after 1^st April 2025.

			Penalty
	Days after deadline	Actions	Current	wef 1st April 2025
First penalty (Fixed percentage penalty)	0-15	Pay in full or arrange a time to pay before 15th Day	No penalty	No penalty
	16-30 inclusive	Pay in full or arrange a time to pay between 16- 30th day	2% on outstanding amount at day 15	3% on outstanding amount at day 15
	31 plus	Pay in full or arrange a time to pay after day 31	2% on outstanding amount at day 15 plus 2% on outstanding amount at day 30	3% on outstanding amount at day 15 plus 3% on outstanding amount at day 30
Second penalty (Interest like penalty)	31 plus	Untill paid in full or arrange a time to pay	At 4% per annum for the duration of outstanding amount	At 10% per annum for the duration of outstanding amount

No change in late payment interest rules. Interest charged from due date till payment date at 2.5% plus Bank of England Base rate per annum.

Source

Spring Statement 2025 (HTML) – GOV.UK

Bonus

1. Payment plan can only be set up if there is no other plan set up.

Every nation has sovereign right to tax its residents on their worldwide incomes. This may result in double taxation both in country of residence and country of source.

If there is a conflict between domestic law and treaty, treaty prevails as it’s an agreement between two sovereign nations. `Treaty override` is a case where a state takes a decision to reverse and give priority to domestic law; however, this is quite rare.

DTAA can only relieve tax, can never impose tax.

Rules for reliefs from UK tax are found in Taxation (International and Other Provisions) Act 2010 (TIOPA 2010). This Act complements the Income Tax Act 2007 for matters involving international taxation.

Treaty Models

OECD –   sample treaty between two developed nations. Emphasis is on right of `state of residence` to tax.

UN Model – sample treaty between developed and developing nations, to encourage flow of investments from developed to developing nations. A compromise between source principle and residence principle. More weight to source principle. India’s most treaties are based on UN model.

US Model – different clauses from both UN and OECD model.

How it works?

In order to make use of the treaty the tax payer should be, usually, resident of one of contracting states.

Resident could be different from tax resident as per domestic law, it is defined as `fiscal residence` in the treaty.

Interpretation of Tax Treaties

We can refer to following sources:

• OECD commentary
• UN Model commentary
• Internal Revenue Service (IRS) United States provides useful treaty and explanations, for example for US and UK treaty [click here]

Comments on some issues we faced:

1. “shall be taxable only” or “may be taxed”

“shall be taxable only” means taxable only in one state.

Example: UK India DTAA Article 19.2 states “Any pension paid by the Government of a Contracting State to any individual in respect of services rendered to that Government shall be taxable only in that Contracting State “i.e. Pension payable by Government of India (GOI) to an individual for services rendered to GOI, this pension income will be taxable only in India, even though individual getting the pension is resident in UK.

“may be taxed” means can be taxable in both countries; unless restricted by other Articles of the DTAA.

Example: UK India DTAA Article 6.1 states “Income from immovable property may be taxed in the Contracting State in which such property is situated” i.e. rental income from a property situated in India can be taxable in India and also taxed in UK.²

Methods of Elimination of Double Taxation

This is the main reason for DTAA.

There are two methods of elimination:

1. Exemption
   
2. Credit Method

1. Exemption Method

1.1 Full Exemption: Income earned in one state is fully exempt in other.

1.2 Exemption with Progression: foreign income is considered only for the tax rate purpose.

2. Credit Method

2.1 Full credit: Total foreign tax paid is allowed as a credit against tax payable.

2.2 Ordinary Credit: Credit allowed only to that part of income tax which is attributable to the income taxable in the state of residence. Usual method in UK treaties.

2.3 Tax sparing: Credit allowed for foreign tax deemed paid. Read our blog UK India DTAA NRE interest income.

Helpful numerical examples given in Tax and Treaty Guide by NK Bhat, Yogesh Thar and Mayur Nayak of Bombay Chartered Accountants’ Society

Another helpful book with examples – Interpretation and application of Tax treaties by Ned Shelton [Tolley International Series].

Notes

1. US UK treaty Article 11 Interest states – Interest arising in a Contracting State and beneficially owned by a resident of the other Contracting State shall be taxable only in that other State. Explanation note states Paragraph 1 generally grants to the State of residence the exclusive right to tax interest beneficially owned by its residents and arising in the other Contracting State.
   
2. See similar provision in US UK treaty Article 6 and explanation notes state – This Article does not grant an exclusive taxing right to the situs State; the situs State is merely given the primary right to tax.

Further sources:

• Introduction to Double Tax treaties from Baker Tilly International

Bonus:

UK India has a separate treaty for IHT ; link here.

Useful Links provided by HMRC

OECD – Model Tax Convention on Income and Capital

Gov.UK Links

DT Digest

DT Relief Manual

International Manual

Residency, Domicile and Remittance Basis Manual

Tax Treaties

DT Individual Formy

Details of MAP process and who to contact to request MAP assistance

SA Help-sheet Links

HS302 – Dual Residents

HS304 – Non-Residents – Relief under Double Taxation Agreements

HS263 – Calculating Foreign Tax Credit Relief

SA106 – Foreign Income Notes

SA109 – Residence Notes