UK: Weekly Tax Update - Monday 05 September 2011

Last Updated: 12 September 2011
Article by Richard Mannion


1.1. Updated HMRC DOTAS guidance

HMRC has updated their guidance on the Disclosure of Tax Avoidance Schemes (DOTAS) regime as at August 2011. The changes incorporated in its guidance cover the following:

  • Section 2.3.1 is amended to include the definition of Corporation Tax and explain why Bank Levy is within the scope of the rules.
  • Sections 3, 12, 14, 18 and 19 are updated/inserted to incorporate guidance as a consequence of new rules introduced in Finance Act 2010 which came into force on 1 January 2011. These were:
    • a change to the trigger point for disclosure of marketed schemes to ensure early disclosure of schemes;
    • an information power to allow HMRC to require intermediaries (an 'introducer') involved in the marketing of schemes to provide information leading to the identification of the promoter;
    • enhanced penalties for failure to comply with a disclosure obligation;
    • a requirement for promoters to provide periodic lists of clients who have implemented schemes.
  • Section 7 is updated to incorporate revised guidance published following changes made to the hallmarks introduced in SI 2010/2834. These also came into effect on 1 January 2011. The changes were to the confidentiality and premium fee hallmarks. The off-market terms hallmark was removed.
  • Section 7 is also updated to remove hallmark 8 – Pensions. This ceased to have effect from 5 April 2011.
  • Sections 10, 11 and 17 are inserted to incorporate previously published guidance following the extension of the rules to require disclosure of certain Inheritance Tax schemes. These changes took effect on 6 April 2011.
  • Clarification in
    • Section 12 (paragraph 12.8) on what constitutes a transaction forming part of a scheme, and the interaction with 'engagement letters';
    • Section 14 on client list requirements, in particular at paragraph 14.2.2 'when to provide a client's details';
  • Consequential amendments throughout to take account of the above.


2.1. iXBRL filing and format of accounts

HMRC has confirmed to us that it is perfectly acceptable to submit accounts to support a tax return where the accounts (prepared in Companies Act 2006 format) are tagged in a software package that changes the format of those accounts from those filed at Companies House, but does not change the information they contain.

2.2. When HMRC will treat clubs and companies as dormant

In addition to the traditional situation when companies can be regarded as dormant for corporation tax purposes, for example a non-trading company, HMRC operate a concessional arrangement for certain active clubs, societies and flat management companies. They must meet the following requirements:

a club or society with Corporation Tax due of £100 or less (known to HMRC as a 'small' club), or;

a flat management company that has been set up to manage a block of flats, which has no income other than interest income under £1,000 that is taxed at source.

Entities meeting either of these requirements will be considered by HMRC as dormant.

If HMRC are aware of this status they will contact the entity with respect to the concessional treatment and there may no longer be an obligation to file corporation tax returns. If HMRC has not contacted the entity in this way, the entity may contact HMRC to seek application of the concessionary practice.

2.3. Minutes of the 30 June meeting of HMRC's large business mid-tier agents forum

Minutes of the 30 June 2011 meeting of HMRC's large business mid tier agents forum are now available. They discuss: (i) the future relationship between the tax agent community and HMRC; (ii) the operation of HMRC's new powers; (iii) HMRC's High Risk Corporate programme (HRCP) and Managing Complex Risk programme (MCRP); (iv) employer asset backed pension contributions.

2.4. Electronic lottery machines and amusement machine licence duty

HMRC has issued Brief 33/11 setting out their position following the First Tier Tribunal's decision in Dransfield Novelty Company Ltd (Dransfield) & others v HMRC (

The Tribunal found that the type of electronic lottery machines supplied by Dransfield did not meet the definition of amusement machines subject to the licence duty (AMLD) for the periods between 10 July 2003 and 31 October 2006 and periods on or after 21 July 2009. The Brief indicates that while HMRC do not agree with the First Tier Tribunal's decision, they will accept it.

The decision and the Brief affects those small clubs and societies that used the machine subject to the dispute, as where the AMLD was paid in respect of the periods noted above, there may be an opportunity to make a claim to recover that duty.

The machines in issue contained an electronic "virtual" stack of lottery tickets. Those tickets had been put into a particular order before being installed in each machine, many of the tickets being "losing" tickets, and others being "winning" tickets of varying prize amounts. All that the machine did, when someone put in their coin and pressed the start button, was to access the next ticket in the stack. Instead of producing a paper ticket, the machine then activated an electronic display of spinning fruit wheels in the familiar manner for "fruit machines", but the rotation of the wheels and the point where each stopped rotating had no influence on whether the next ticket in the stack had been a winning or losing ticket. The next ticket in the stack governed the outcome, and the spinning fruit wheels were simply designed to stop rotating to match the outcome indicated by that ticket, and therefore to do nothing other than create a bit of excitement.

The machines operated as a lottery in the critical sense that they simply delivered the next ticket in the stack, and in total it was known what the total prize payout for the entire stack would amount to, once the players had "played" every ticket in the stack. They carried the label "This is a lottery machine" as required by regulation.

As a consequence of the First Tier Tribunal's decision, and subject to the normal rules on capping and unjust enrichment, HMRC will consider claims for repayment of AMLD in relation to electronic lottery machines of the type considered by the Tribunal for those periods where they were judged to fall outside the definition of an amusement machine for AMLD. HMRC has indicated it will not accept claims in respect of payments of duty made more than four years before the claim is made.

3. VAT

3.1. Appeal against VAT default surcharges

The First Tier Tribunal case of DWS Environment Limited ([2011] UKFTT 492 (TC) TC01339) concerned the striking down of a VAT default surcharge on the basis the notice had been addressed to the wrong (a previous) company name and also sent to an incorrect address (the previous address of the company). The serving of the notice at the wrong address and in the wrong name was despite HMRC having previously been informed of the name and address changes in a timely manner and on occasions subsequent to the initial notice of changes.


4.1. Company cars - advisory fuel rates from 1 September 2011

HMRC has published new advisory fuel rates for company cars, which will take effect from 1 September 2011.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Richard Mannion
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