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Who better to discuss the complex subject of tax at this time of year but the main man himself. So pour yourself a glass of mulled wine, pick up a mince pie and read what we had to say…
Ho, ho, ho…
ETC: Hello, ETC Tax
Father Christmas (“FC”): Ho, ho, ho, Father Christmas here. I’m looking for some tax advice.
ETC: Well, you’re in the right place.
FC: That’s good, I’m in a bit of a pickle.
ETC: Fire away.
FC: Well, as you will know… usually I am resident for tax purposes in Lapland so don’t have a UK tax exposure… but I think I have a problem this year.
ETC: OK, what’s the problem?
FC: Well, just after last Christmas, my brother, invited me to his farm in the UK to recuperate. Well it was all going fairly well until… bloody COVID. First of all, when you’re hundreds of years old and eat as many mince pies as me, you’re in the ‘at risk’ category. So, I have stayed with Farmer Christmas on his estate since February. Mrs Christmas is a real stickler for the rules, you know. But, it transpires that I have now become resident under the Statutory Residence Test. Apparently, the Government only allows a measly 60 days for exceptional circumstances.
ETC: Oh dear, that’s unfortunate. We’ve had quite a few clients affected by this.
FC: Quite. So, it looks like I now have to sign up for Self-Assessment. Now, I might be able to deliver presents to all the world’s girls and boys in one evening, but managing to sign up for HMRC online… no chance.
ETC: I’m sure we can assist.
FC: Good, but that’s not it. In better news my brother and I have started a new UK company. We have researched and created a brand new hydrogen powered sleigh. Zero emissions.
ETC: Are emissions a problem?
FC: Absolutely. There’s nothing worse for the environment than one night of magic reindeer methane production. All those carrots that the kids leave out… sprinkled in glitter. Lethal combination.
ETC: I’m surprised you’re so concerned about climate change
FC: Well, dear boy, you’d be an ‘early adopter’ if you lived on a glacier.
ETC: OK, sorry, tell me about the sleigh.
FC: Well, it’s going to be called the E-Sleigh or the I-Sleigh… not sure which. As, I say, 0% emissions. Runs on a totallynew design.
ETC: Have you considered R&D tax relief?
FC: No, tell me about that.
ETC: Well, where you incur expenditure on qualifying R&D expenditure then it is possible to a get a tax deduction of 230% against your profits.
FC: Sounds good, but can’t see we’ll make a profit for a little while. Could do with some bunce now, really, old boy. It’ll soon be Christmas.
ETC: Well, to the extent the relief creates a loss you could surrender the loss to HMRC… and they’ll send you a cheque for 14.5% of the amount.
FC: Really? Seems too good to be true!?
ETC: In this case, it isn’t. The Government still seems keen to ‘invest’ in R&D.
FC: Well, dear boy, I’d like you to make a claim for me. Will I get my money before Christmas?
ETC: That might be a bit too tight.
FC: OK, I’ll leave that with you. One other thing I’d like you to look at is whether the business could provide me with the new sleigh. However, the wise old elf – he started his accounting exams – has told me about how I might have a ‘Benefit of being Kind’ on it. That sounds good. There’s no one kinder than me. What’s the benefit?
ETC: Hmmmmm, not quite. I think he’s got the wrong end of the candy stick there, FC. A benefit in kind is where an employer provides you with something, say, the use of an asset free of charge or at an undervalue. A cash equivalent of that ‘benefit’ is subject to tax.
FC: That’s not good.
ETC: Were it a zero emission car, then there would be no benefit in kind… and the Company could write off the purchase in the first year through the Annual Investment Allowance.
FC: Sounds good. But you said ‘were it’.
ETC: Well, its not a car is it?
FC: Errrr. Define car.
ETC: Mechanically propelled road vehicle.
FC: Well the new sleigh is mechanically propelled… and it could go on a road… if there was snow!?
ETC: That’s quite an optimistic view.
FC: OK. Let’s leave that there for now. I also want some advice on CGT. As you know, I’ve been UK resident this year and I’ve sold a load of the reindeer as, going forward, they won’t be able to earn their keep… and frankly, they ponga bit.
ETC: Well, that should be OK, they’re wasting assets… they have a predictable life of 50 years or less. As such, they are exempt from CGT.
FC: Well, the magic ones can live a bit longer than that….
A few centuries longer, in fact.
ETC: I am not sure the tax code envisages a position where the wasting asset is enchanted. I’ll have to have a think about that.
FC: Please do. But my real concern is about what I did afterwards. I invested the proceeds in Bitcoin in March. It’s quadrupled in value since then. Between you and me, I’m loaded.
ETC: I’m pleased for you.
FC: Thanks… But I’m about to sell it all and have no idea how it will be taxed.
ETC: Don’t worry, we’ve been advising crypto clients for many years. It sounds like your gain will be a capital gain and subject to capital gains tax. You’ll need to put it on your tax return. We could look at whether we could use your non-domicile status here. HMRC’s view is that it would be a UK asset but we think this view is arguable.
FC: Don’t worry about that abominable…non-dominable…non-domicile status or whatever, dear boy, Father Christmas always pays his fair share.
ETC: You are kind.
FC: Indeed, speaking of the bloody reindeer. I have a major issue with Rudolph. He’s been living in Spain during COVID. However, his offshore image rights structure has come to bite him in the hind quarters. The Spanish authorities are all over him. Apparently, he was next on the list behind Messi. Can you help?
ETC: I don’t think so. If he was in the UK then we could assist but he needs a local adviser. I can give you a name.
FC: That would be helpful, thanks.
ETC: Anything else?
FC: As a matter of fact, yes. The Elves have also dispersed across the world. They’ve become ‘digital nomads’ and are all working from sunny rocks around the world.
ETC: Can an elf work remotely?
FC: Of course they can’t. But my HR adviser said the union would be all over us if I refused… and believe me, I’ve had some run ins with them in the past. The elves are panicking and have started talking about PE and can I help. I’ve told them my PE days are behind me… with my back…and knees… and dodgy hip. I was born in the 15th Century.
ETC: Well, I think they might be talking about a different type of PE – a Permanent Establishment. There might be a risk that the elves’ activities in their host country might create a permanent establishment – or taxable base – in that country.
FC: Bloody elves.
ETC: I think there might be some other issues to look at in the host country as well.
FC: Smashing! Look, I’ve got to go. Mrs Christmas has organised a remote office Christmas Party. We’re playing Family Fortunes over Zoom.
ETC: Sounds great.
FC: No it doesn’t. I might need a stiff drink or two.
ETC: OK, I think I’ve got enough to go on. We can start working on some of these things straight away. We’ll need to take you on as a client.
FC: What do you need?
ETC: You’ll need to satisfy our Anti-Money Laundering Checks.
FC: How hard could that be.
ETC: Usually, its quite straightforward, but… well… erm…
FC: Spit it out dear boy.
ETC: I think we might need to do some enhanced checks on you.
ETC: Well, from what I can see, you procure items for the entire world’s children – and I’m not clear on the source of the funds by the way – and you then simply give them away. This seems an unusual pattern of transactions to me.
FC: Unusual? I represent the spirit of good cheer at Christmas. I bring peace, joy…good food… and wine.
ETC: Of course, you do. But I can’t see any exemption in The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 for any of those things…Also, you seem to have a number of different names, Father Christmas, Santa Clause, Old Saint Nick Weihnachtsmann, Papa Noel, Babbo Nat…
FC: That’s not my fault. I am the personification of the most wonderful time of the year. Why does it matter what they call me in different countries?
ETC: I know, I know. We just have to do our due diligence on all our clients. Look on the bright side, I don’t think you’re a Politically Exposed Person.
FC: Well, that is a relief?! What do you need? Wise Old Elf is already dressed up as Gino D’Campio ready for the Christmas do. He’s taking it very seriously. Just set out what you need in an email. Merry Christmas.
ETC: Merry Christmas.
From all at ETC Tax…. Have a great Christmas and a happier new year
This is a dramatic reconstruction of a telephone call. Some, or all, of the contents of this transcript may be completely made up. There is no implication that Father Christmas – or any of his aliases or doppelgangers – is involved in terrorist financing. A spokesman for Father Christmas says that he pays all taxes in all jurisdiction as required by law.