UK: Weekly Tax Update - Monday 5 November 2012

Last Updated: 7 November 2012
Article by Richard Mannion

1. GENERAL NEWS

1.1. Code of Governance For Resolving Tax Disputes

In February 2012 HMRC announced there would be a range of changes to improve transparency and strengthen their governance of significant tax disputes and it subsequently published a draft Code of Governance for disputes.

HMRC has now issued the final version of its 'Code of Governance For Resolving Tax Disputes' which includes:

  • tables detailing the decision making process in standard cases and those impacting more than one taxpayer;
  • specific approaches for complex cases and sensitive cases (which include those involving tax of at least £100 million);
  • a specific approach for transfer pricing cases;
  • a new approach to review settled cases.

www.hmrc.gov.uk/adr

2. PRIVATE CLIENTS

2.1. High Income Child Benefit Charge

Although announced and referred to in the media as a withdrawal of Child Benefit, it should be noted that what actually emerged is a tax charge which can be 100% of the child benefit received by someone or their 'low income' partner. Going about it this way is no doubt cheaper than means-testing prior to payment but is not the same as an automatic removal of income from the recipient.

However, referring to it as the withdrawal of benefit is misleading and causes confusion.

There is a claw-back of child benefit on those with incomes over £50,000 by way of an High Income Child Benefit tax charge. For taxpayers with income between £50,000 and £60,000, the amount of the charge will be 1% of the child benefit received for every £100 of income over £50,000. For those with income above £60,000, the amount of the charge will equal the amount of child benefit received.

The charge is added at the final step in the calculation of the income tax liability for the tax year so will be reflected in the balancing payment for 2012/13 due on 31 January 2014, as well as the interim payments for the following tax year.

It should be noted that the fact the charge due for 2012/13 is part of the tax liability of 2012/13 may have been overlooked by people claiming to reduce their interim payments for the current year.

The key points are:

  • child benefit should always be 'claimed' so as not to lose out on the associated NIC credits for children under 12;
  • if income/highest income is likely to exceed £60k annually the recipient might consider electing not to receive to avoid the charge applying (especially if it keeps them or their partner out of self-assessment); but
  • a couple – particularly the low income party - might prefer the cash flow with the low income person (possibly non-working spouse) continuing to receive the income stream with the high income one in effect paying it back.

The election not to receive can be revoked at any time and this revocation back-dated, within two years, if the income/highest income for year was under £60,000 and the full charge would not have applied. This backdating of the revocation will be in point should income drop and/or reliefs are carried back. When considering the effects of loss relief options. The potential to recover child benefit will need to be added to the mix.

The charge applies to child benefit entitlement from 7 January 2013 so those wanting to make the election should take the necessary action well as soon as possible and well before Christmas. Child Benefit recipients can make the election online at HMRC's website.

HMRC will no doubt over the next few months be trying to identify those households continuing to receive child benefit that have an high income individual. Where that high income individual is employed, HMRC is likely to adjust the PAYE coding so as to incorporate the charge and may also issue them with a self-assessment return.

Anyone who is not automatically issued with a tax return that has a tax liability for a tax year due to the charge, or for any other reason, has an obligation to notify HMRC of this fact by 5 October following the end of the tax year.

The Treasury estimated that 1.2 million families will be affected by the charge, with 70% of these losing all of their child benefit and 0.5 million people being added to the self-assessment population.

2.2. Child benefit and non-UK domiciliaries with the remittance basis charge.

An individual meeting the 7 or 12 year residence test claiming the remittance basis has an additional tax charge. This £30,000 or £50,000 charge is effectively created by way of nominating sufficient unremitted income/gains to be taxed on the arising basis to give rise to an additional tax liability equal to the relevant remittance basis charge.

For such individuals their 'net adjusted income', as used for the High Income Child Benefit charge test, will therefore include this nominated income. The combination of UK source, remitted and nominated income therefore all need to be considered and compared with that of their partner.

The amount of income and gains needing to be nominated is set out in ss809C and 809H ITA 2007 so as to create an amount of 'relevant tax increase' to equate to the remittance basis charge. The 'relevant tax increase' is the amount of income tax and capital gains tax payable for that year (which will be calculated including the nominated income/gains) less the amount of income tax and capital gains tax if the remittance basis did apply to the nominated income/gains.

This could have two implications:

  • the amount of income, as opposed to gains, nominated could bring the individual into the scope of the High Income Child Benefit charge, possibly in place of their partner; and
  • if brought within the scope of the High Income Child Benefit charge by nominating income the difference in tax liability will incorporate the additional High Income Child Benefit tax charge so reducing its impact.

2.3. Tackling tax avoidance: Spotlights

HMRC publishes details of tax avoidance schemes which it believes are ineffective on the 'Spotlights' section of its website. Two new Spotlights have been added recently as follows:

Property business loss relief schemes

The Government announced on 13 March 2012 that it had acted to close down tax avoidance schemes which set out to abuse tax relief available to property businesses with agricultural land. However, HMRC has evidence that some people have continued to take part in such schemes after the date that the new legislation took effect. HMRC is concerned that these people may not fully understand the serious risks and consequences that may follow. HMRC is relentless in pursuing those who seek to bend or break the rules and they will challenge all users of these schemes, regardless of when they entered into them.

These schemes generally involve a series of highly artificial transactions intended to create an artificial tax loss which can be used to avoid tax properly payable on other income. Although the land itself and the business owning it will exist, the transactions are not part of a genuine agricultural business.

Legislation brought in by S10 Finance Act 2012 stops relief for such a loss when it arises from tax-motivated arrangements. This new legislation applies to transactions or arrangements made on or after 13 March 2012. This makes it clear that these schemes do not work for anyone who joins or has joined a partnership on or after 13 March 2012 in order to reduce their tax liability by claiming property loss relief.

If you're thinking of using one of these schemes to avoid tax HMRC strongly recommends that you seek independent advice. Remember - you are responsible for making sure that your tax return is correct.

Taxing the rewards for work carried out for a UK based employer

HMRC is aware that new tax avoidance schemes that seek to avoid Income Tax and National Insurance contributions (NICs) are being advertised to contractors, highly paid employees and those using recruitment agencies. It is claimed that these schemes get around new disguised remuneration rules.

Arrangements may involve payments passing through a series of companies, loans from a third party or an offshore alleged employer, a deed of covenant, secondments from one employer company to another or claims of self employment, etc. In HMRC's opinion, these arrangements do not succeed in avoiding the tax and NICs due. HMRC will challenge these arrangements and litigate where necessary to recover unpaid tax and NICs.

Current legislation ensures that rewards and recognition from working for UK-based businesses are charged appropriately to UK Income Tax and NICs. This legislation applies whether the rewards are routed through employee benefit trusts, employer funded retirement benefit schemes or through any other intermediaries, either as loans, transfers of assets or other payments. The legislation will also apply to such third party arrangements where an employment is disguised as self employment or a contractual arrangement.

Those intent on avoiding Income Tax and NICs by using trust arrangements should also be aware that there could be adverse Inheritance Tax and trust tax consequences regardless of whether they themselves set up the trust. These include Inheritance Tax charges when contributions are made to the trust, when funds are transferred from a trust to a sub-trust or removed from the sub-trust, when uncommercial loans are made by the trustees and at the ten year anniversary of the trust.

www.hmrc.gov.uk/avoidance/spotlights.htm

2.4. The Swiss/UK Tax Co-operation Agreement and HM Revenue & Customs (HMRC)

HMRC has issued a factsheet designed to inform UK taxpayers with assets in Switzerland how the Swiss/UK Tax Co-operation Agreement (expected to come into force on 1 January 2013) will affect them. It comments:

"What is the purpose of this factsheet?

Following the signing of the Swiss/UK Tax Co-operation Agreement, the purpose of this factsheet is to inform UK taxpayers with assets in Switzerland how the agreement might affect them. It also outlines the action that they can take to ensure that their tax affairs are brought up to date. It is for guidance only and supplements Frequently Asked Questions published at the time of the signing of the agreement.

The terminology used in this factsheet has the same meaning given to it as that used in the agreement itself and associated documents, which are available on the HMRC website at www.hmrc.gov.uk/taxtreaties/ukswiss.htm

Background to the Swiss Agreement

The Swiss/UK Tax Co-operation Agreement was signed on 6 October 2011 and is expected to come into force on 1 January 2013. The agreement provides for you:

  • to be subject to (1) a one-off payment on 31 May 2013 to clear past unpaid tax liabilities and/or (2) a withholding tax on income and gains for the future from 1 January 2013; or
  • to authorise your bank or paying agent to provide details of your Swiss assets to HMRC.

The one-off payment will clear those tax liabilities relating only to assets included in the figure of capital used in the payment calculation. In most cases, this will be the account balance either at 31 December 2010 or 31 December 2012. Amounts taken out of the account before the relevant date may not be cleared. There are separate rules for non-UK domiciled individuals.

The Swiss Federal Tax Authority has produced its own helpsheet about the agreement on its website.

Options available under the agreement

1) One-off payment and/or withholding tax.

If you do nothing, a one-off payment will be deducted from your Swiss assets.

The payment is calculated in accordance with an agreed formula which is based on capital and income/gains, the length of time that the account was held and the rate of balance increase over the relevant period. See the HMRC website for further details.

www.hmrc.gov.uk/taxtreaties/ukswiss.htm

You will still be able to authorise disclosure at any time in the future to avoid having withholding tax deducted for the following tax year. If you continue to do nothing, future income and gains arising on those assets will be subject to a withholding tax each year in the future.

In the case of the death of the UK resident beneficial owner of a Swiss account, a charge of 40% of the account balance will also apply when the Swiss authorities are not instructed to provide the UK with details of assets forming part of an estate following the death of a relevant person.

2) Choosing to authorise disclosure.

When approached by their bank or paying agent, an alternative option available to UK residents will be to authorise disclosure of details about their Swiss assets to the Swiss authorities for onward transmission to HMRC. If you take this option, you will not be subject to a one-off payment or withholding tax.

HMRC will in due course review the information provided. If you take this option, you have not been relieved of your obligation either in the past or the future to include all taxable income and gains on your UK tax returns.

Additional Information

The agreement is designed to be an effective mechanism for HMRC to recover previously unpaid UK tax liabilities in respect of assets located in Switzerland. If you think you may have unpaid tax in relation to Swiss assets, you should consider making a disclosure directly to HMRC. This will bring your tax affairs up to date and provide certainty that they are in order.

1) Making a voluntary disclosure directly to HMRC.

Whether you have been subject to the one-off charge/future withholding tax or authorised the release of relevant details, you may at any time take the opportunity to bring your tax affairs up to date by making a direct disclosure to HMRC. If undisclosed liabilities are not cleared under the one-off charge or future withholding tax, then the normal tax rules will apply.

Depending on the nature of the underlying behaviour, a tax-geared penalty may be due where tax has been unpaid as a result of careless or deliberate conduct. For further information on penalties that may be due, please see the following helpsheet www.hmrc.gov.uk/compliance/ccfs7.htm

2) Liechtenstein Disclosure Facility (LDF).

Subject to the relevant entry conditions being satisfied, then it is possible for you to make your disclosure through the LDF. Please refer to LDF 1 Liechtenstein Disclosure Facility: making a disclosure (available within the Liechtenstein Disclosure Pack) and the associated material available on the HMRC website at www.hmrc.gov.uk/disclosure/liechtenstein-disclosure.htm

3) Contractual Disclosure Facility (CDF).

If tax may have been underpaid as a result of fraud, HMRC may offer the Contractual Disclosure Facility as a means of bringing your tax affairs up to date. Further information can be found here www.hmrc.gov.uk/admittingfraud/help.htm

HMRC set out its position in relation to the criminal investigation of relevant persons for past liabilities incurred before the date of this Agreement in respect of relevant assets in a letter dated 6 October 2011, available at our website www.hmrc.gov.uk/taxtreaties/letter-hmrc.pdf

More generally in terms of a disclosure, failure to make a full disclosure could result in a civil/criminal investigation. However a person who makes a full, accurate and unprompted disclosure to HMRC or has all unpaid tax liabilities cleared under the terms of the agreement is unlikely to be subject to criminal investigation by HMRC.

Contact point for Swiss Agreement

HM Revenue and Customs Offshore Co-ordination Unit 3rd Floor City Centre House Birmingham B2 4AG Email contact: swissagreement.hmrc@hmrc.gsi.gov.uk

These contacts are available to discuss the process of making a disclosure. Please note that a disclosure may be dealt with elsewhere within HMRC and you will be advised of the appropriate contact point."

2.5. Error in capturing information shown on tax return

The First-tier Tribunal has recently considered the case of Alan Churchill v HMRC (TC02328).

On 29 February 2008 Mr Churchill received about £100,000 as a termination payment from Post Office Counters. This was correctly entered in his return for the Year 2007/2008 which was received by HMRC on 31 October 2008.

HMRC issued an assessment for 2007/8 which omitted to take into account the termination payment because of an error in capturing the information shown in the return onto its computer systems. Neither the taxpayer nor his accountant alerted HMRC to the error.

HMRC carried out an enquiry into the 2008/9 tax return without amendment, but issued a further assessment in respect of 2007/2008 charging the compensation payment.

Mr Churchill appealed against the 2007/8 further assessment on the grounds that the return was not amended within nine months following the date on which it was filed in accordance with s9ZB TMA 1970. HMRC applied for the appeal to be struck out on the basis that there was no reasonable prospect of the Appellant's case succeeding.

HMRC argued that Section 9ZB was not relevant as there had not been a "correction". It had not set out to alter the return; it was curing a fault in its processing systems which had not captured accurately the information contained in the return. Consequently the time-limit applicable was four years from the end of the relevant year of assessment, as provided for in s34 TMA.

HMRC also relied on the terms of Section 114 TMA which confirmed that an assessment was not invalidated because of an error in the amount of tax charged.

HMRC argued further that it was reasonable to expect the taxpayer and his advisers to have noticed the error in the calculation. The termination payment should have given rise to a substantial additional tax liability, rather than the amount of £4,854 charged.

The tribunal agreed with HMRC's interpretation of the legislation saying:

"Section 9ZB TMA operates in circumstances where there is a correction or amendment of the Return made by HMRC. I agree with Ms Cowan that the Return and its contents were not corrected here. There was an additional assessment, made once HMRC appreciated their error. Thus HMRC is not circumscribed by the time-limit of Section 9ZB, but rather is enabled by Section 34 TMA to make a further assessment within the four year period prescribed therein. Section 114(2) also supports the stance of HMRC.

Mr Churchill fulfilled all his obligations in providing an accurate Return for 2007/2008. Happily I do not consider that he has been prejudiced. The additional assessment represents the tax due in respect of the admittedly taxable receipt – no more, no less – and the penalty is related to the 30 day period running from the date of the later supplementary assessment, not from the earlier date when it would have been due had HMRC's original calculation been correctly made."

A further issue which arose in the course of the hearing was whether the Tribunal had jurisdiction to review the possible application of Extra Statutory Concession A19 and the judge ruled that it did not.

2.6. Award of Tribunal costs

The First-tier Tribunal recently considered the case of Paul Curren Garrett and decided that the payment of interest in advance (in respect of loans used to fund onward loans to close companies) was deductible under what was then ICTA s360 (now ITA s392). The loans were used to fund onward loans by the taxpayer to close companies set up to trade or develop property.

As a result of the decision there was no dispute between the parties as to the entitlement of Mr Garrett to costs, but there was a dispute as to the basis on which those costs were awarded. The case has therefore been back to the First-tier Tribunal for a ruling.

Where indemnity costs are ordered there is a shift in the onus to establish that the costs are reasonable. Whereas in the case of a direction on a standard basis the onus is on the party in whose favour the costs direction has been made, where indemnity costs are directed the onus shifts to the party ordered to pay the costs. Furthermore, in the case of indemnity costs there is no requirement that the costs are proportionate to the importance of the case, the amount at stake, the complexity of the issues and to the financial position of the parties. However, whichever basis is directed, there remains the requirement that costs must not be unreasonably incurred or unreasonable in amount.

The Tribunal concluded that HMRC's contention that Mr Garrett had failed to disclose material facts in relation to the Settlement Agreement amounted to a serious allegation of impropriety in this case.

Considering HMRC's case against Mr Garrett as a whole, rather than "cherry-picking" certain aspects of it, the Tribunal could not consider that overall HMRC's case could be characterised as "thin" or "far-fetched" so as to merit an award of indemnity costs.

Mr Garrett contended HMRC had exhibited dilatory behaviour, changed their pleadings and had undertaken other unreasonable and/or inappropriate behavior. The Tribunal judge concluded that even if these allegations could all be established, he did not consider that individually or collectively, and taking account of all the circumstances, they amounted to conduct that was unreasonable to a high degree so as to take this case out of the norm and to justify the penal nature of an indemnity costs order. He therefore concluded that this was a case where it was neither appropriate, nor in the interests of justice, to award costs on an indemnity basis.

Mr Garrett had applied for an interim payment of £750,000 representing approximately 60% of the costs incurred. HMRC contended that a significant portion of the costs were either unreasonably or disproportionately incurred. Having considered the matter further, the Tribunal Judge determined that £650,000 was a reasonable interim amount to pay.

Mr Garrett applied for an order for interest to run, at 3% over base rate, from a period prior to the Tribunal's decision, namely from the dates on which he had from time to time paid the costs incurred. However the Tribunal judge left this as a matter to be decided by a High Court costs judge who would then have the detailed information on which to base a decision in this respect.

http://www.financeandtaxtribunals.gov.uk/judgmentfiles/j6804/TC02327.pdf

3. PAYE AND EMPLOYMENT MATTERS

3.1. Getting ready for Real Time Information (RTI)

Employers with 5,000 or more employees on the payroll should have received a communication from HMRC explaining what is required to prepare for full implementation of RTI reporting of PAYE data in April 2013, (though it may be possible to agree a different start date with HMRC between now and 5 October 2013).

All other employers not in the pilot will be required to join RTI in April 2013 when the universal credit pilot is scheduled to start. Those dates are fast approaching and there have been concerns about:

  • the ability of HMRC's systems to cope with the capacity of RTI information;
  • the ability of employers to meet the 'on or before' reporting requirement aimed at facilitating the interaction between PAYE and the universal credit system;
  • how practice will change concerning common PAYE practices which will no longer be possible when RTI commences;
  • a number of other operational issues.

HMRC is expected to issue an update on the 'on or before' reporting requirements shortly. Meanwhile HMRC's guidance on getting started on RTI reporting can be found at

www.hmrc.gov.uk/payerti/getting-started/rti.htm

HMRC's guidance on what to report can be found at www.hmrc.gov.uk/payerti/reporting/what-to-report.htm

It states:

You must report your payroll information to HMRC on or before each time you pay an employee - including payments on standard paydays, and any additional payments or amounts recovered from the employee.

There are other reports you'll need to send in various other situations, for example if you want to recover statutory payments, or you pay expenses or benefits, or provide a car.

You report your payroll information by submitting Full Payment Submissions (FPS) and Employer Payment Summaries (EPS). These submissions and other returns and reports are sent electronically by your payroll system to HMRC.

There is a reference table listing the information required to be sent. It is expected the coming update will provide a table listing those payroll items that will not need to be reported on or before the time of payment.

The latest Smith & Williamson information note on RTI reporting can be found at:

www.smith.williamson.co.uk/uploads/publications/RTI5-6_months-what-next.pdf

3.2. Taxation of international sportspeople and the CJEU

The ECJ has considered whether application by the Netherlands of withholding tax to payments to foreign service providers constituted a restriction on the EU principle of the freedom to provide services within the EU.

The circumstances involved a Dutch company (X NV) making payments in 2002 and 2004 to two semi-professional UK football clubs in respect of matches played in the Netherlands. The clubs did not forward any part of those payments to the players. Under Dutch law, there is a 20% withholding tax requirement on payments to foreign workers or employers and in particular involving the services of an artist or professional athlete on short term contract. Since January 2007 the withholding tax obligation may be removed if the foreign company is resident in a country with which the Netherlands has concluded a double tax treaty.

The CJEU concluded that while the Dutch withholding tax obligations in these situations did constitute a restriction on the freedom to provide such services within the EU, the restriction was justified to ensure the effective collection of tax, notwithstanding the opportunities for mutual assistance procedures to mitigate the effect of withholding. Whether the foreign service provider deducted the Dutch withholding tax from the tax liability in its state of residence was irrelevant in reaching this conclusion.

Thus it seems the provisions operated by many countries on remuneration provided to foreign artists and sportspeople in line with OECD model treaty article 17 are not contrary to EU freedom of provision of services principles.

http://curia.europa.eu/juris/document/document.jsf?text=&docid=128644&pageIndex=0&doclang=EN&mode=lst&dir=&occ=first∂=1&cid=1726863

4. BUSINESS TAX

4.1. Business records checks resumed

HMRC has announced that the redesigned checks process will be rolled-out on a region by region basis between late November 2012 and early February 2013, as follows:

  • London / London and Anglia – 26 November 2012.
  • South East England / Scotland / Northern Ireland – 14 January 2013.
  • Central – 21 January 2013.
  • East of England / North Wales & the North West – 28 January 2013.
  • South Wales & the South West – 4 February 2013.

HMRC has stated that the re-launch will initially involve them writing to customers who they believe may be at risk of keeping inadequate records, advising them that it will be calling them to discuss their business records using a questionnaire. The customer's response to this conversation will then enable HMRC to assess whether (i) no further action is required, (ii) the customer could benefit from tailored educational support, or (iii) a BRC visit is required.

www.hmrc.gov.uk/businessrecordscheck/index.htm

The CIOT President commented as follows:

"HMRC has listened to some of our concerns and recast how Business Record Checks will be carried out, but the fundamental issue of in-year penalties remains. HMRC has still not provided a satisfactorily clear reasoning to justify their belief that they can charge penalties in-year before the return goes in for keeping records below the standard they consider is adequate. In our view it is questionable whether HMRC have the power to do this.

HMRC has consulted representative bodies to define more clearly what constitutes 'adequate' records and we understand that this is to be included in guidance for HMRC staff. It is important that the approach taken with different kinds of businesses is appropriate. It is unrealistic to expect smaller businesses to have perfect records written up every day.

Tax agents, and the businesses they advise, need to work closely with HMRC and ensure that, following any BRC visit, any conditions set by HMRC and accepted by the business are fully achievable. They must also check before any revisit that the conditions have been complied with, otherwise a penalty may be charged.

Unrepresented small businesses need to follow the same recommendation, but may want to take some advice before they sign up to HMRC conditions. Many advisers offer a free initial meeting or pro bono help to those on very low incomes, so it may not be costly to get some help.

Since the selection process for BRCs is based on risk assessment it is more likely that cash businesses will be chosen for BRCs. Such businesses in particular will need to ensure they are keeping adequate records going forward.

Tax advisers are strongly supportive of efforts to improve record keeping by business, but up until now HMRC has been going about it the wrong way, increasing burdens disproportionately. A good programme to improve business record keeping will involve HMRC and tax advisers working together to educate businessabout good practice and support them in improving their systems, as well as warning about the risks of poor record-keeping."

4.2. Patent box guidance incorporated in HMRCs CIRD manual

The Patent Box technical note and guide to the Finance Bill 2012 clauses was published on 29 March 2012 together with the associated explanatory notes and clauses . Guidance contained in the technical note has been incorporated into HMRC's Corporate Intangibles Research & Development manual.

www.hmrc.gov.uk/ct/forms-rates/claims/patent-box-guidance.htm

www.hmrc.gov.uk/manuals/cirdmanual/CIRD200000.htm

4.3. US Foreign Tax Compliance Act (FATCA) due diligence

On 25 October the IRS issued an update on the implementation of FATCA obligations for those foreign financial institutions (FFIs) potentially affected by the 30% withholding that can arise on withholdable payments with a US source. FFIs will be subject to FATCA obligations if they are involved in certain financial activities for specified US persons. The US reached agreement with certain countries that certain FFIs can report information to the tax authority of their home country provided certain agreements between the US and the foreign country were in place. One such agreement was with the UK and HMRC is consulting on the format of those rules.

If reporting is required direct to the IRS, the timetable for due diligence is summarised in the following table set out in the 25 October IRS communication. It summarises the dates by which withholding agents and financial institutions must fully implement new account opening procedures to identify account holders and the dates by which withholding agents and financial institutions must complete the review and documentation of all pre-existing accounts for purposes of applying the relevant Treasury regulations.

 

New Individual and Entity Accounts (Implementation of new account opening procedures)

Preexisting Accounts of Prima Facie FFIs (Date by which due diligence must be completed for all accounts)

Preexisting Accounts of Entities other than Prima Facie FFIs

Preexisting High Value Accounts of Individuals

Preexisting Accounts of Individuals other than High Value Accounts

Withholding Agents other than Participating FFIs and Deemed- Compliant FFIs

By January 1, 2014

By June 30, 2014

By December 31, 2015

N/A

N/A

Withholding Agents that are Participating FFIs

By later of January 1, 2014, or effective date of FFI agreement

By the later of June 30, 2014, or 6 months after the effective date of the FFI Agreement

By the later of December 31, 2015, or two years after the effective date of the FFI Agreement

By the later of December 31, 2014, or one year after the effective date of the FFI Agreement

By the later of December 31, 2015, or two years after the effective date of the FFI Agreement

Withholding Agents that are Registered Deemed-Compliant FFIs

By later of January 1, 2014, or date of registration

N/A

N/A

N/A

N/A

Under the inter-governmental agreement between the UK and US, UK financial institutions (UKFIs) will report to HMRC, however the UK/US agreement does not cover the UKFI's foreign subsidiaries and branches located in a non-UK FATCA partner jurisdiction. The timetable to be followed by those subject to the UK/US inter-governmental agreement can be summarised as follows:

  • Accounts opened before 31 December 2012 will be deemed 'pre-existing' accounts.
  • Enhanced review procedures must be complete by 31 December 2014 for pre-existing high value individual accounts (accounts with balances exceeding $1m);
  • By 30 September 2015 there needs to be an exchange of reportable information in respect of calendar years 2013 and 2014;
  • By 31 December 2015 the review procedures for pre-existing entity accounts and low value individual accounts (those with values between $50,000 and $1m) must be complete;
  • By 30 September 2016 there needs to be an exchange of reportable information in respect of calendar year 2015;
  • Rules for requiring US taxpayer identification number (US TIN) to be collected as part of the requirements of reporting under the UK/US agreement should be published by 1 January 2017 (UK financial institutions do not need to report US TINs before this date unless they already have them on record);

http://www.irs.gov/pub/irs-drop/A-12-42.pdf

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageLibrary_ConsultationDocuments&id=HMCE_PROD1_032308&propertyType=document

4.4. Tax Treatment of Financing costs and Income (Debt cap)

Part 7 of the Taxation (International and Other Provisions) Act 2010 deals with the tax treatment of financing costs and income of companies which are members of a worldwide group. Draft regulations (for comment by 30 November 2012) have been issued to make provision for two such companies to elect that one of them is to take sole responsibility for the discharge of the corporation tax liability of the other where that liability arises as a result of Part 7.

http://www.hmrc.gov.uk/drafts/121024-draft-regs.pdf

5. VAT

5.1. Local authorities and car parking

The First-tier Tribunal has considered further evidence produced by local authorities on whether their activities in the off-street car parking market would distort competition. There had previously been some disagreement between the local authorities and HMRC on the interpretation of the ECJ decision on the previous questions referred to it in case C-288/07.

Accepting that there was competition between commercial off-street car parking providers and themselves, the local authorities who took this lead case contended that non-taxation of their car parking activities would not change their behaviour and/or that motorists were not sufficiently price-sensitive to parking charges for the competitive position of commercial car park operators to be affected in any event.

However the First-tier Tribunal dismissed the local authorities' appeals, concluding that

  1. the ECJ's decision did not permit the Tribunal to presume that the non-taxation of Local Authority off-street car parks would distort competition; but
  2. they found as a fact that it would do so to a more than negligible extent.

www.bailii.org/uk/cases/UKFTT/TC/2012/TC02320.html

6. TAX PUBLICATIONS

NTBN237 - Transfer pricing in the UK

This briefing note provides a brief summary of the UK transfer pricing requirements.

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 Mondaq.com.

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

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Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

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 Mondaq.com’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.

Disclaimer

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.

Registration

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 unsubscribe@mondaq.com 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.

Cookies

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.

Links

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.

Mail-A-Friend

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.

Security

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 webmaster@mondaq.com.

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 EditorialAdvisor@mondaq.com.

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 enquiries@mondaq.com.

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