UK: Tax Update - Monday 30 April 2012

Last Updated: 10 May 2012
Article by Richard Mannion


1.1. HMRC Agent Update 29

HMRC Agent Update 29 contains news on a number of consultation and discussion documents, as well as Budget updates and the latest news on Real Time Information (RTI). It also includes details of the new HMRC tax calculator, the agents' key tax deadlines calendar for 2012-13 and information on the new Learning Together video which covers HMRCs appeals and reviews process. There are links to the latest publications for employers, Working Together, pensions, VAT, and trusts and estates.

2. PAYE and Employment matters

2.1. Draft regulations – age 75 draw down forms and non-UK pensions

Finance Act 2011 removed a number of restrictions that previously applied to members of pension schemes from the age of 75 and also permitted individuals to draw unlimited amounts from their drawdown pension fund if certain conditions are met. Draft regulations have been published dealing with the changes as they affect members of foreign pension schemes, which contain funds that have received UK tax relief.

2.2. PAYE on share-based payments after employment has ceased

From 6 April 2012 the 0T (zero T) tax code must be used on a non-cumulative basis against share-based payments (those in the form of securities, interests in securities and securities options) made to an employee after their employment has ceased, where these payments have not been included in the Form P45.

HMRC has published a list of anticipated frequently asked questions.


3.1. Alternative Dispute Resolution (ADR) for SMEs

HMRC is running an Alternative Dispute Resolution (ADR) trial, which provides Small and Medium Enterprise (SME) customers with an alternative way of resolving tax disputes in compliance checks. In this stage of the trial ADR will be available to SME customers where a tax issue is in dispute, but before an appealable tax decision or assessment has been made by HMRC.

ADR covers both VAT and direct taxes disputes, and entering into the ADR process will not affect the customer's existing review and appeal rights.

The ADR trial is now available in the North West, South West, Wales and London regions. It is possible to make an online application to be included in the trial.

3.2. Whether a pdf version of a partnership tax return submitted as an electronic attachment was filed on time

A firm of solicitors (Fitzpatrick & Co) had filed the partnership tax returns for the years ended 5 April 2008 and 2009 via their agent submitting a pdf version of a partnership tax return using the online facility. They did the same thing for the 2009/10 tax year, with the online submission being made on 26 January 2011 (just before the 31 January 2011 deadline for 'online' submissions), and HMRC raised a late filing penalty.

The Tribunal judge did not consider HMRC's requirements as to the form of online submission in respect of the partnership return to be clear and at paragraph 20 & 21 of the decision commented as follows:

20. To my mind it is not clear that these materials constitute the "prescription "of an electronic return which does not include the online delivery of a PDF with another return:

  1. The first concerns the information at the front of the tax return which indicates that the recipient can use the Internet but will need third-party software. The words quoted could mean that unless you use such software your return will not be an "electronic return" for the purposes of the regulations but they could also be advice as too how best to submit the return online: they say "you will need", not "you must use". It is not clear that a requirement is being made.
  2. The second concerns the statement that HMRC does not provide a free online product. It likewise suggests that some sort of software may be needed. But it does not "prescribe" the use of such a product.
  3. In relation to (3) it is necessary first to say a little bit about what "Self Assessment Tax Return" may mean for the purposes of this web page. In this context I note that section 9 TMA provides that "every return under section 8 or 8A of the Act shall include a self-assessment". That provision does not apply to returns made under section 12AA ; that is plainly because the assessment of the tax is the level of the partners not the partnership. This suggests to me that it is not clear that a Self Assessment Tax Return is intended to include a Partnership Return. At best the indication is unclear.

    Even if this web information might be read as prohibiting the use of the self assessment tax attachments feature for partnership returns there is a difference between prohibiting something and prescribing something. HMRC may, by prescribing what is and what is not an electronic return, exclude from the meaning of that phrase a return delivered in a particular manner, but these words are not directed at the definition of what is and what is not an electronic return: they are not a prescription.

It seems to me that taking all these items together the reader would conclude that it was unlikely that HMRC would want a partnership return to be submitted as a PDF attachment to a self-assessment return, but I do not think it can be said that they "prescribed" something which excludes a return made by such delivery from being an electronic return..

21. I therefore conclude that the documents produced by HMRC do not prescribe the use of third-party software as the only way to make an electronic return. The best that can be said is that they prescribe the making of a return via the internet as constituting an electronic return.

The Tribunal judge also concluded that the pdf submission met the requirements of TMA Sch3A para 1 regarding electronic submission. The firm had been served penalty notices regarding the form of submission for the tax years 2007/08 and 2008/09 which had subsequently been withdrawn. In conclusion the Tribunal allowed the taxpayer's appeal against the penalty notice for the return relating to the 2009/10 year and decided the return was delivered in an appropriate form within the required time limit.

4. VAT

4.1. Zero rating and facades

The trustees of Eaton Mews Trust undertook the modernisation of a dwelling at 38 Eaton Mews North in central London, in the process demolishing the building save for retaining the side party walls and the rear wall (facades). A condition for gaining zero rating under VATA Sch8 group 5 was that the conversion was not a reconstruction or alteration of an existing building was undertaken and such works could not occur where the building ceased to exist. A building was deemed to cease to exist where part remaining above ground level consists of no more than a single facade or where a corner site, a double facade, the retention of which is a condition or requirement of statutory planning consent or similar permission.

The plans submitted for planning consent provided for the retention of the facade, which were approved. However the trustees submitted the retention of the facade was satisfied the requirement of statutory planning consent or similar, while HMRC contended otherwise (i.e. that acceptance of submitted plans did not mean the retention of the facade was required).

The Tribunal concluded that HMRC's view of the legislation was too restrictive as the legislation did not specify the form in which the planning consent had to require the facade to be retained.

4.2. HMRC Insurance Manual update

HMRC has updated its VAT Insurance Manual to include material on the new regulations taking effect from 31 December 2012 as a result of the Retail Distribution Review. There are new pages VATINS53111 – VATINS53114.

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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