UK: Weekly Tax Update - Monday 11 June 2012

Last Updated: 21 June 2012
Article by Richard Mannion

1. General news

1.1. Consultation on CGT and annual charge on high value residential property

HM Treasury has published a consultation on an annual charge applicable to high value residential property (applying from 1 April 2013) and on applying CGT to gains made on such property by certain non-natural persons (for gains made on or after 6 April 2013).

The aim of both taxes is to prevent avoidance of SDLT and CGT by owners of high value residential property, to act as a deterrent to the enveloping of such properties and to create a more level playing field between UK residents and non residents. Both charges will only apply to residential dwellings with a value of more than £2m.

Neither the annual charge, nor the CGT charge for non-resident non-natural persons, will apply to nonresidential or commercial property, nor to any type of property valued at up to £2m, nor to any property held directly by a non resident individual. More detailed notes on the current proposals (subject to consultation until 23 August 2012) are included below.

Annual charge

There is recognition that enveloping of high value residential properties may be due to factors other than SDLT avoidance, such as protection of ownership, inheritance tax planning, family reasons and to comply with laws of foreign jurisdictions. However, the aim of the measures is to apply the annual charge where tax avoidance may be a significant factor.

It is proposed to apply the annual charge to the same categories of owners to whom the 15% SDLT higher rate charge would apply to. This means it would apply to corporate owners, and partnerships with a corporate member, whether UK resident or not, subject to the exclusion for companies acting solely in their capacity as a trustee, other than of a bare trust. The charge will also not apply to ownership by property developers who meet the requirements of the definition applying for the 15% higher rate charge. A further exclusion will apply to charities.

As noted above the charge will apply to residential properties to which the 15% higher rate SDLT charge would apply, i.e. those interests in individual dwellings valued at more than £2m. Where a property consists of a main dwelling with one or more parts suitable for use as staff accommodation, the value will be of the main dwelling in its entirety. Certain properties will be exempt from the charge, including boarding schools, hospitals, student halls of residence, military accommodation, care homes and prisons.

The charge will apply pro rata during a charge year, where a property or person newly comes within or falls outside the charge to the tax.

The charge will be assessed according to the property value assessed at five yearly intervals from 1 April 2013 according to the following rules:

  • The value of the property interest on 1 April 2012 if the interest was owned on that date.
  • The value on acquisition if the interest is acquired later.
  • The value on any later creation or cessation of a relevant subordinate property interest.

The value will be self assessed and the valuation will need to be submitted as part of the annual return process. The earlier valuation date for existing owners has been chosen so that valuations can be undertaken before the charge applies. Thus existing affected owners intent on retaining their existing ownership structure from 1 April 2013, will need to obtain a valuation as at 1 April 2012.

The valuation basis will be similar to the CGT market value basis, with an acceptable method of valuation being that applied by the RICS standard UKGN3. Valuations will be subject to checking by the Valuation Office Agency (VOA). The use of a professional valuation will reduce the chance of the need for the VOA to make an internal inspection of the property, and VOA will offer a pre-return valuation checking service to property owners.

The charge will be as noted in the following table (although not applicable if the value is £2m), and the rates will be indexed in April each year (commencing 1 April 2014) in line with CPI in September of the previous year.

The due date for payment of the charge will be 15 days after the commencement of the period of account. For existing owners this will be by 15 April each year, though for the first year of operation it will be the later of 1 October 2013 or 30 days after Royal Assent of Finance Bill 2013. Where a property leaves the regime part way through a period of account, there will be a mechanism for refunding the amount of overpayment due to the pro-rata nature of the charge.

CGT charge for non resident non natural persons owning high value residential property

For the purpose of the CGT charge applicable to non residents owning high value residential property the proposal is to use the same definition of high value residential property as for the 15% SDLT higher rate charge. The definition of non-natural persons will therefore include:

  • Companies and other bodies corporate.
  • Trustees (excluding bare trustees but including trustees who are themselves individuals) and collective investment vehicles.
  • Personal representatives.
  • Clubs and associations.
  • Entities that exist in other jurisdictions that allow property to be held indirectly.

The existing CGT reliefs or special treatments applicable for particular arrangements will apply where practical (though no examples or suggestions are given). A charity that is exempt from CGT will also be exempt from CGT on non-resident non-natural persons. Partnerships will be treated as transparent, so that any non-resident non-natural member of a partnership disposing of a property within the charge would be apportioned their share of the gain.

The charge will apply to the disposal or part disposal of relevant UK residential property, including the grant of an option over property. It will also apply to gains accruing on a disposal, whatever the form of disposal. Thus it is proposed that the charge would apply to the disposal of shares or interests in securities in a property owning company where more than 50% of the value of assets is derived from UK residential property (it is not clear that for the purpose of the definition of the company to which this would apply whether 'UK residential property' means property meeting the definition of properties within the charge on non-resident non natural persons, or all UK property).

The charge will apply to the total gain accruing in the period of ownership, not just the gain from April 2013. Losses realised on high value UK residential property will only be available for offset against gains on the same category of property of the same or future years. Non UK resident companies currently liable to corporation tax on gains from disposal of UK residential property will be charged at corporation tax rates. Those not within the charge to UK corporation tax on such gains will be within the charge to CGT (rather than CT), according to rates in force at the relevant time.

There will be a review of the interaction of the new CGT charge with existing charges such as TCGA s13, s86, s87 and also private residence relief. Anti-avoidance will be put in place where appropriate and it is intended the rules will be compatible with international tax agreements and EU law.

1.2. Charity relief

The Chancellor of the Exchequer has decided to remove donations to charity from his Budget proposals to limit tax reliefs for individuals to the greater of £50,000 or 25% of income with effect from April 2013.

2. Private Clients

2.1. HMRC draft guidance on Business Investment Relief

HMRC has issued guidance (which will be subject to any changes affecting the Finance Bill before it receives Royal Assent) concerning the new relief for non-domiciled taxpayers who remit funds to UK for the purposes of business investment.

This guidance includes the following comments regarding qualifying investments:

"2.14 To meet the requirements for a qualifying investment, the investment must be made in an eligible trading company, an eligible stakeholder company or an eligible holding company. The company in which the investment is made is referred to as a target company. (s809VC(2))

2.15 An eligible trading company is a private limited company which is;

  • carrying on at least one commercial trade, or
  • is preparing to do so within two years of the date on which the funds to be invested were brought to the UK (this is the 2-year start-up rule) and
  • carrying on a commercial trade is all or substantially all it does, or it is reasonably expected to do once it begins trading. (s809VD(2))

2.16 In most cases it is obvious when a trade exists, but where there is doubt you will need to fully investigate the facts and consider case law. Further guidance on what is trade can be found in the Business Income Manual at BIM20050. For business investment relief purposes, there is an additional requirement that the trade should be commercial, that is, conducted on a commercial basis with a view to making profits. Trade also includes:

  • any activity that is treated as if it were a trade for corporation tax purposes. This includes farming or market gardening, the commercial occupation of land (but not woodland) and the profits of mines, quarries and other concerns
  • a business of generating income from land. This will include profits arising from the renting or leasing of land or property.
  • a company carrying on research and development activities which are intended to lead to a commercial trade. However, preparing to carry out research and development activities is not itself a commercial trade for the purposes of the business investment relief.

The extension of the definition of trade to include generating income from land and research and development activities only applies for business investment relief purposes. It does not change the definition of trade for other tax purposes. (s809VE)


Advance assurance procedure for qualifying investments

2.29 An individual intending making a business investment will be able to ask HMRC (after Royal Assent) for their opinion on whether a proposed investment can be treated as a qualifying investment under the Business Investment Relief provisions. The remittance basis user, or a person authorised to act on their behalf, may make this request using the CAP1 service (How non-business customers or customers with a query about nonbusiness activities get advice on HMRC's interpretation of recent tax legislation). Where the investment is made by someone other than the remittance basis user, the remittance basis user will need to make the request."

2.2. Sportsmen and entertainers

Regulations have been issued to amend the Income Tax (Entertainers and Sportsmen) Regulations 1987 (S.I 1987/530) ("the principal Regulations") and come into force on 1st July 2012.

The principal Regulations provide for the deduction of sums representing income tax ("the tax payment") where certain payments or transfers are made to non-UK resident entertainers, sportsmen and sportswomen, or to a person who is connected to them, or an associate of them, in connection with activities performed in the United Kingdom. Regulation 4(3)(a) of the principal Regulations provides that where such payments or transfers for a tax year do not together exceed £1,000 the tax payment shall be a nil amount. Regulation 4(3)(b) of the principal Regulations provides that such payments and transfers made by any person who is connected with, or is an associate of any person who makes a payment or transfer to a non-UK resident entertainer, sportsman or sportswoman shall together be treated as constituting a single payment in determining whether they exceed £1,000.

Regulation 2 of these new regulations amends regulation 4(3) of the principal Regulations by substituting for the figure of £1,000 the amount of the personal allowance for income tax for the year in which the payment or transfer is made. The personal allowance for income tax is specified in section 35(1) of the Income Tax Act 2007 (£8,105 for 2012/3).

3. PAYE and Employment matters

3.1. Real Time information update

HMRC had previously announced that employers would be able to use the existing electronic data interchange service for submitting RTI information until April 2014, but it now envisages the use of this means of communication until at least 2016/17. The latest announcement includes the following comment:

"The introduction of RTI is not affected. The RTI pilot, which includes reporting by EDI and internet via Government Gateway, began as planned on 11th April 2012. The pilot is going well and was expanded from 8th May as scheduled when the first of a further 310 employers started reporting PAYE information in real time. The pilot will help us learn and iron out any wrinkles before most employers and pension providers start to use the RTI service in April 2013, with RTI routinely operating by October 2013".

3.2. Advisory fuel rates

Advisory fuel rates applicable from 1 June 2012 have been published by HMRC.

3.3. Short service refunds from pension schemes and changes to contracting out

Contracting out of the state second pension through a money purchase pension scheme has been abolished from 6 April 2012. HMRC has published draft regulations introducing consequential new tax rules for certain short service refunds to ensure that the contracting out changes do not adversely affect pension schemes which contain rules reflecting the effect of the contracting out rules (rather than cross referring directly to those rules) and which have not yet amended their rules.

3.4. Whether contributions to FURBS are liable to class 1 NIC

The Court of Appeal has overturned by a 2-1 majority the Upper Tier Tribunal's 21 February 2011 decision in Forde & McHugh Ltd concerning whether NICs were due on contributions to an employer funded unapproved retirement benefit scheme. The majority judges concluded that the decision in Tullett & Tokyo (which was a significant influence on the Upper Tribunal's decision) was decided incorrectly. They also concluded that the scope of earnings subject to NIC was different from earnings subject to income tax (which the dissenting judge disagreed with).

With respect to potential charges to NIC both on payments into a FURB and payments out of a FURB, there was some indication that HMRC's practice has been not to seek to levy class 1 NICs on payments of pension if the attributable payments into the fund have borne NIC. HMRC's guidance on the NIC position of payments into and out of FURBS (and EFRBs) is set out at NIM02155 to NIM02163 (before 6 April 2005) and NIM02705 to NIM02797 (after 5 April 2005).

Whether NICs were due on contributions to FURBs (funded unapproved retirement benefit schemes) prior to April 2006 has been a contentious area for some years. Prior to the changes to the pension legislation in April 2006, employers used FURBS both as an NIC avoidance device and to top up the pension entitlement of executives for whom contributions to an approved pension scheme were capped. Specific tax legislation meant that the contributions were liable to income tax when they were made but there was no equivalent charging provision under NIC law. It had been announced in July 1997 that clauses would be included in that year's Social Security Bill to bring contributions to FURBS into the charge for NIC from 6 April 1999, but later that year the Contributions Agency announced that there was no need to make a change in the law as the charge on contributions already existed. A press release was issued in November 1997 in which the Agency announced that they expected employers to comply from 6 April 1998.

The Upper Tribunal considered that the key issue was whether payments of gilts into the retirement benefit scheme amounted to "earnings paid" for the employee's benefit. The Upper Tribunal concluded that the payments were not chargeable to NIC following the decision in the income tax case of Tullett & Tokyo, [2000] EWHC (Admin) 350, where the High Court decided that employer contributions into a fund over which the employee held contingent rights did not constitute earnings.

The Court of Appeal considered the distinction between earnings for NIC purposes and earnings for income tax purposes in more detail. For income tax purposes Schedule E applied at the relevant time and ICTA s131 identified 'chargeable emoluments' for schedule E income tax purposes. Earnings for income tax is now defined in ITEPA s10, s62 (s62(2)(c) refers to emoluments), and s327, and while the reference to emoluments appears to be less important, the rewritten legislation does still refer to this term. Section 2(1) of National Insurance Act 1959 referred to emoluments, but its eventual successor, SSCBA 1992, no longer refers to 'emoluments'. Neither does SI2001/1004 contain the word emolument.

Lord Justice Rimer, the dissenting Court of Appeal judge, took the taxpayer's view that earnings for NIC purposes had to be very similar to earnings for income tax purposes and that earlier income tax case law (including the cases of Stretton (1904) 5 TC 36 and Edwards v Roberts (1935) 19 TC 618) could be applied to interpret the term for national insurance purposes, so that the payments into the FURB were not earnings for NIC purposes. Referring to SI 2001/1004 Sch 2 para 13 he commented:

"Paragraph 13 explains how, in the particular circumstances to which it is devoted, an assumed charging provision is intended to work. It has, however, overlooked that there is no charging provision in respect of which its provisions can apply."

Justice Ryder and Lady Justice Arden reached the opposite conclusion. They considered that any link between earnings for both income tax and NIC purposes was broken in the Social Security Act 1973, Lady Justice Arden commenting:

" my judgment, clear that the terms "emoluments" for the purposes of income tax and "earnings" for the purposes of national insurance do not have a common root, and that accordingly the tax base for income tax is not the same as the contributions base for national insurance".

They also concluded that the Tullett & Tokyo case had been wrongly decided.

Justice Ryder commented:

"In my judgment, it is not necessary for an employee to receive a proprietary interest in order for a benefit to be treated as earnings as long as the employee receives a profit from it. There is no doubt that the payments made by the employer in this case were for the employee's benefit. The Upper Tribunal found as much and accordingly those payments are caught by the plain meaning of section 6(1) SSCBA 1992. That benefit is not a benefit in kind nor is it contingent. It is a profit and is of a different character from a benefit in kind. It was not intended to be a benefit in kind. On this basis, the payment is caught by the plain meaning of the section 6(1)(a) of the Act."


"...the value of the benefit, i.e. the profit for the purpose of the charge, is the value of the gilts transferred i.e. the value paid for the benefit of the employee rather than the value subsequently received. That is what Parliament said and I am not persuaded that this court should depart from the plain meaning of the Act."

Lady Justice Arden gave five reasons for allowing the appeal:

  • The different origin and function of national insurance (NI was not a tax);
  • If the term earnings had the same meaning for NI as emoluments did for income tax, it would have been unnecessary for Parliament to link them in 1959 and 1965, but in any event that link was broken in 1973;
  • By using the word "paid" in s6(1) SSCBA 1992, Parliament demonstrated that the meaning of the term "earnings" for NIC was not the same as "emoluments" for income tax.
  • Parliament has demonstrated in other ways that "earnings" for NIC has a separate meaning, one instance being s10 of SSCBA 1992, where class 1A contributions are due in respect of an earner on so much of the emolument as falls to be left out of account for class 1 contributions.
  • The expression 'paid to or for the benefit of an earner' in s6(1) SSCBA 1992 catches any payments which constitute remuneration or profit from an employment and which meet the further condition that they are either paid direct to the employee or paid to a third party for his benefit. If earnings in s6(1) were meant to refer to earnings vested in an employee, the drafter would have referred to 'earnings received by an employee' and would not have had to refer to the possibility of earnings being received by a third person. In addition the s6(1) text of paid to or for the benefit of the earner treats the NIC point as when the amount is paid, not when it is unconditionally received.

Lady Justice Arden found it a serious point that Lord Justice Rimer considered SI 2001/1004 Sch 2 para 13 to be ultra vires since such payments could never have been earnings. She also commented on aspects of fairness and felt that to consider Lord Justice Rimer's view would require greater analysis of the implications for the Exchequer. With respect to double charging of NIC, Lady Justice Arden commented as follows:

"It is for obvious reasons a matter of concern if there could be two tranches of national insurance: one on the payment into a scheme and one on the payment out. But there are points that answer this concern. First, Part VI of Schedule 3 to the 2001 Regulations expressly recognises that possibility since it deals with the exemption of both payments out and payments into retirement benefit schemes. Secondly, any objection on the grounds of double-counting works both ways in this case. The risk of double counting arises on the respondent's interpretation too since Mr McHugh would be liable on his own interpretation on the face of the legislation to pay national insurance on contributions into the scheme and payments of pension out if the scheme had been funded from his own annual salary. Thirdly, we were assured by Mr Jones that in any event, in practice, the Revenue does not seek to levy class 1 NICs on payments of pension if the attributable NICs to the fund have themselves borne national insurance."

3.5. Amendments to pension scheme administration employer payments

The rules regarding authorised employer payments in Section 180 of FA 2004 are amended by SI 2012/1258: The Finance Act 2004, Section 180(5) (Modification) Regulations 2012 in connection with National Employment Savings Trust (NEST).

4. Business tax

X4.1. iXBRL minimum tagging requirement

HMRC has announced that it has agreed to retain the minimum tagging requirements, rather than move to full tagging.

There will be some changes at Autumn 2013, mostly improvements, one to put the same basic 'detailed P&L' tags into both the accounts and the tax computation taxonomy (so you can choose where to put the P&L, yet use the same tags) and to improve the technical linking behind tags.

4.2. EU Commissioner for Tax's recommendations for tax systems

EU Commissioner for Tax (Algirdas `emeta) commented on 30 May with respect to the quality of tax systems, making certain recommendations:

The quality of taxation can be a "make or break" factor in Member States' efforts to consolidate budgets and establish sustainable economic growth.

Our recommendations today in the field of taxation are focussed largely on 5 areas which are fundamental to quality tax systems.

First, labour taxation in many Member States is still too high, and not enough has been done to shift this burden towards more growth-friendly taxes. Taxation can incentivise work and employment, but only if smartly designed. The opportunity for a smart tax shift is too frequently being missed.

Second, within the context of this tax shift, environmental taxes are among the most growth-promoting. In fact, not only do green taxes support our goal of a low-carbon, resource-efficient economy, but they also encourage new industries, green innovation and job creation. Many Member States are still not exploiting the full potential of environmental taxes.

Third, we have asked some Member States to look again at their property taxes. Without a doubt, the debtfuelled consumption of the past decades has failed us. Therefore, taxation which incentivises debt and encourages housing bubbles must be phased out. Sensible taxation of property is growth-friendly, but it is not being utilised enough.

Fourth, Member States should look for the untapped potential in their tax systems. Where the base can be broadened and tax gaps closed, this should be done. A tax system full of tax breaks means less revenue and unfair burden-sharing across society.

Finally, ordinary citizens could potentially carry a lighter tax burden if everybody paid what they owed. However, tax evasion and avoidance lead to revenue losses of around €1 trillion a year. Many Member States could do a lot more to improve tax compliance and collection. Coordination at EU level is also crucial, which is why tackling tax evasion remains one of the priorities for my mandate.

Before I conclude, it is worth noting that most Member States did take on board the Commission's recommendations from last year in the area of taxation. Some have already used them to implement improvements in their tax systems. Others are still working on tax reforms.

I would urge Member States to also follow the tax recommendations we have made today. Their implementation will support the work for a stronger and more sustainable economy, and help to put Europe back on the path of growth and employment. ge=EN&guiLanguage=en

4.3. EIS and VCT funds

Draft EU laws to make it easier for start-ups to access venture capital and social enterprises to access social entrepreneurship funding have been amended by the EU Economic and Monetary Affairs Committee. The press release says that MEPs sought to facilitate access to both types of funding, whilst at the same time preventing speculative investors from hijacking the investment funds.

With respect to Venture Capital Funds, the following comments were made:

Innovative start-up companies also have great difficulty in accessing investment funds in the EU, where venture capital is severely underdeveloped compared to the US.

The adopted text, drafted by Philippe Lamberts (Greens, BE), amends the Commission proposal to ensure that neither venture capital funds nor their beneficiaries are established in tax havens.

To discourage speculative investors, and enable fund managers to take a long-term view, another amendment would require that funds invested would only be returned to the original investors after a specific period (i.e. after the liquidation of the fund), thereby making it impossible for investors to pull their money out before this time has elapsed.

To increase the likelihood that funds will go to real-economy small and medium-sized enterprises, the committee text also prohibits fund managers from investing in the innovative products of financial service companies.

Like the text on social entrepreneurship funds, this one also provides for a depository, so as to make the fund's management safer and more transparent and-social-entrepreneurship-funds-to-spur-growth

4.4. EIS and SEIS advance assurance form

The EIS advance assurance form has been updated to incorporate the seed enterprise investment scheme (SEIS). The form is used by companies seeking assurance, in advance of a share issue, that it will meet the qualifying conditions under the schemes.

4.5. Letter to Chairman of Treasury Select Committee, concerning retrospective taxation and taxpayer confidentiality

Bob Diamond of Barclays plc has sent a letter to the Chairman of the Treasury Select Committee expressing concern about potential damage to the UK's reputation as a place to do business and at what they considered to be the unwarranted treatment concerning Barclays.

4.6. Amendments to Finance Bill 2012 CFC provisions

Amendments have been proposed in six areas for the controlled foreign companies (CFC) provisions in Finance Bill 2012 (clause 180 and schedule 20) as follows:

  • Minor and consequential changes to trading assets and the BLAGAB (basic life assurance and general annuity business).
  • A refinement of the anti-avoidance applicable to banks and insurance businesses in relation to full or partial exemption from intra group non-trade finance profits, permitting them access to this relief that was prevented by the previous, broadly drafted legislation.
  • Correction of some drafting errors and clarification of certain terms.
  • The introduction of targeted anti avoidance applicable to apportionment calculations; the introduction of a provision permitting the Treasury to make regulations providing that certain companies not be included as CFCs by virtue of an accounting test in certain circumstances; extensions to the definition of 'interests in companies'.
  • Refinements to ensure the regime applies to permanent establishments as intended.
  • Other refinements to provisions and amendments to transitional and commencement provisions.

4.7. Six new task forces and targeting of online traders

HMRC has announced six new task forces targeted with raising more than £23m from "tax dodgers". The taskforces will target traders who do not pay the right amount of tax in:

  • Indoor and outdoor markets in London.
  • Taxi firms in Yorkshire and East Midlands.
  • Property rentals in East Anglia, London, Yorkshire and the North East.
  • Restaurants in the Midlands.

HMRC has also announced a time-limited opportunity, known as the e-Markets Disclosure Facility, for online market place traders who come forward between now and 14 June to register their intention to take part in a campaign aimed at getting their tax affairs up to date where they can benefit from lower penalties than those who HMRC catches up with at a later stage.

The campaign is aimed at people using online market places to buy and sell goods as a trade or a business and who are not up to date with their taxes. People who sell only a few personal items and who are not traders are unlikely to be liable to pay tax on what they sell, and are not being targeted by this campaign. 67af3.asp

X4.8. EU approval of EIS and VCT increased limits in schedule 7 & 8 Finance Bill 2012

The EU has raised no objections to the UK's proposed increase in EIS and VCT limits included in Finance Bill 2012 schedules 7 & 8 (increasing the employee limit to fewer than 250, increasing the gross asset levels to £15m before and £16m after fund raising, and increasing the maximum amount that can be raised by a company under the schemes to £5m).

4.9. Whether EIS relief was due

Mr Oyston has lost his appeal against the First Tier Tribunal's decision that a subscription of £4,147,413 by him for shares in Segesta Ltd was not eligible for EIS relief.

EIS relief is reduced where the individual receives value from the company. The relevant provision for this case is now included at ITA s216(2)(b) and TCGA Sch 5B para 13– where the issuing company repays any debt owed to the investor that existed before the date of the share issue, in pursuance of arrangements for or in connection with the acquisition of shares on which EIS relief is claimed.

Mr Oyston made significant gains in a number of transactions up to and including 1994 which he was seeking to defer using the EIS relief. He had substantial amounts owing to him from BFC.

The holding company for Blackpool Football Club Ltd (BFC), Segesta Ltd borrowed £4,147,413 from Nat West bank in December 1999 and advanced the funds to BFC. BFC then repaid Mr Oyston. Mr Oyston then used the funds to subscribe for shares in Segesta Ltd. However HMRC refused permission for the company to issue an EIS certificate in respect of the shares.

The First Tier Tribunal had upheld this decision in May 2010. The appeal to the Upper Tribunal was firstly on the grounds that the First Tier Tribunal had erred in law in construing para 13 of TCGA SCh5B, and if so that the case should be remitted to the First Tier Tribunal for a reconsideration of the reasons for the repayments (the taxpayer contending that these were in respect of repayment arising from what had been a previous fraud on the taxpayer and also due to incorrectly classified payments). However the Upper Tribunal agreed with the First Tier Tribunal's reasoning on the interpretation of the legislation in TCGA, and although consideration of the other matters was not required, did so and again agreed with the First Tier Tribunal's reasoning that these were within the scope of TCGA SCh15 para 13.

5. VAT

5.1. VAT: hot food and caravans

The BBC has reported that the Government has provided for amendments to Finance Bill 2012 to provide for a changed definition to hot foods subject to the standard rate of tax, and reduced the proposed 20% rate of VAT on static caravans to 5%.

5.2. Changes to VAT invoicing rules

In order to encourage the use of electronic invoicing rules, the EU introduced new rules and amendments to Council Directive 2006/112/EC in relation to the VAT invoice rules, to be implemented by 1 January 2013.

Under the new simplified rules individual member states can no longer impose conditions in relation to the use of electronic invoices. Instead, it is for an individual business to determine the method used and the only condition imposed is that the customer must agree to the use of electronic invoicing. In this sense, paper and electronic invoices are now treated equally.

The method used to ensure the authenticity of origin, the integrity of content and legibility of the invoices is a business choice and can be achieved by any business controls which create a reliable audit trail between an invoice and a supply of goods or services.

'Authenticity of origin' of an invoice means the assurance of either the identity of the supplier or the issuer of the invoice.

'Integrity of content' of an invoice means that the content required to be shown on an invoice has not been altered.

HMRC has therefore issued a consultation (until 12 July 2012) on changes to UK VAT invoicing rules that, if implemented, would be effective from 1 January 2013. The changes would remove the electronic invoicing and EDI requirements and make it clear that the choice is one for business to make.

It is also proposing to provide for a more general use of simplified invoices by VAT registered businesses making supplies in the UK to a taxable person where the value of a supply does not exceed £250.

The simplified invoice rule will only require the following particulars to be shown on the VAT invoice;

  • the name, address and registration number of the supplier;
  • the time of the supply;
  • a description sufficient to identify the goods or services supplied;
  • the total amount payable including VAT;
  • for each rate of VAT chargeable, the gross amount payable including VAT, and the VAT rate applicable.

At the moment, member states have a degree of choice with regard to the time limit for the issue of VAT invoices for EU cross-border supplies. A further change being introduced will align the rules on the time limits for issuing a VAT invoice, requiring the invoice to be issued by the 15th day of the month following that in which the goods are removed or the services performed. The existing UK rules require that a VAT invoice must be issued within 30 days of the tax point for cross-border supplies of goods or services. The changes will, in some cases, reduce the timescale for UK businesses to issue a VAT invoice. There are other minor changes proposed. pageLibrary_ConsultationDocuments&propertyType=document&columns=1&id=HMCE_PROD1_032093

6. Tax Publications

NTBN224 - Share Incentive Plan (SIP)

This briefing note provides basic information on share incentive plans (SIP) in the context of remuneration arrangements, including how they work, who they are suitable for and the accounting and tax implications.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Richard Mannion
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You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.