UK: Weekly Tax Update – Monday 7 October 2013

Last Updated: 11 October 2013
Article by Smith & Williamson

1 General news

1.1 Definitions in tax legislation and their contribution to complexity

The Office of Tax Simplification is carrying out a project to identify and measure the factors responsible for tax complexity.

As part of this project, it has considered the definitions used in tax legislation and published its initial findings. The report identifies commons themes and considers some suggestions and guidelines for a 'good' definition. www.gov.uk/government/uploads/system/uploads/attachment_data/file/246081/ots_revie w_of_definitions_in_tax_legislation.pdf

1.2 ATED returns

The ATED return is an annual obligation, whether a relief applies or not. Where a property is within the charge and a relief applies, it is important a filing is made each year to claim the relief.

The valuation for properties within the charge (whether a relief applies or not) that were held on 1 April 2012 is the value on that date for all returns required for the return periods up to the year ended 31 March 2018, on the assumption that there is no new valuation date triggered before that date.

A valuation date may be triggered by an intragroup transfer, or a new acquisition (eg an increase in the lease period or other acquisition transaction where the chargeable consideration for the acquisition of the interest is £40k or more) - see FA13 s102 & s103.

1.3 DOTAS and draft guidance on employment income hallmark

A new employment income hallmark (Hallmark 8) will come into force in early November 2013.

The Hallmark (which applies for both income tax and NIC purposes) is targeted at those arrangements which seek to circumvent the disguised remuneration rules (ITEPA Part 7A) as follows:

(1) Arrangements are prescribed if -

(a) Conditions 1 and 2 are met and Condition 3 is not met; or

(b) Conditions 1, 2 and 3 are met and at least one of Conditions 4 and 5 is met.

(2) Condition 1 is met if the arrangements involve at least one of the following -

(a) a relevant third person taking a relevant step under section 554B;

(b) any person taking a relevant step under section 554C or 554D [payment of a sum, transfer of an asset, making an asset available etc]; or

(c) B taking a step under section 554Z18 [earmarking] or 554Z19 [provision of a security].

(3) Condition 2 is met if the main benefit, or one of the main benefits, of the arrangements is that an amount that would otherwise count as employment income under section 554Z2(1) is reduced or eliminated.

(4) Condition 3 is met if, by reason of at least one of sections 554E to 554X [exclusions] or regulations made under section 554Y, Chapter 2 of Part 7A does not apply.

(5) Condition 4 is met if the arrangements involve one or more contrived or abnormal steps without which the main benefit in paragraph (3) would not be obtained.

(6) Condition 5 is met if the arrangements involve -

(a) a relevant step being treated as taking place; and

(b) Chapter 2 of Part 7A applying as a consequence of sub-paragraph (a).

(7) In this regulation -

(a) references to sections or Parts are to those in ITEPA unless otherwise stated;

(b) "B" has the meaning given for Part 7A by sections 554A(1)(a) and 554Z17(7) read together [employer, but not where acting as a trustee];

(c) "contrived or abnormal" has the same meaning as in section 207 of the Finance Act 2013; and

(d) "relevant third person" has the same meaning as in section 554A(7).

Draft guidance with examples illustrating HMRC's view of the conditions has also been published.

www.hmrc.gov.uk/drafts/dotas-empincome-draft.pdf

2 Private client

2.1 Marriage Transferable Tax Allowance

The Government has announced that from April 2015 married couples and civil partners will be eligible for a new Transferable Tax Allowance (TTA):

  • The TTA for married couples will enable spouses and civil partners to transfer a fixed amount of their personal allowance to their spouse.
  • The option to transfer will be available to couples where neither partner is a higher rate taxpayer.
  • For a couple choosing to use the TTA, one individual will be able to transfer £1,000 of their personal allowance to their spouse or civil partner. It will mean that the higher earner will be able to earn £1,000 more before they start paying income tax.
  • The policy benefits married couples, including same sex married couples and civil partners where one is a basic rate taxpayer (earns below £42,285 in 2015 to 2016) and one has unused personal allowance.
  • The claim will be made online and entitlement will be from the 2015 to 2016 tax year. Couples will be entitled to the full benefit in their first year of marriage.
  • For those couples where one person does not use all of their personal allowance at the moment the benefit will be up to £200.
  • The measure will come in from 2015 to 2016, and couples will benefit from summer 2016.
  • Over four million couples will benefit from the Transferable Tax Allowance, including 15,000 couples in civil partnerships. It will be of most benefit to those households on lower incomes.

At this stage it is not clear precisely how this system will work, but the reference to couples benefitting from summer 2016 suggests that the entitlement will be calculated retrospectively once the transferring spouse's actual income for 2015/6 is known.

www.gov.uk/government/news/marriage-transferable-tax-allowance-announced-by- government

3 Business tax

3.1 Health and Wellbeing Tax Plan

HMRC's next tax disclosure campaign will target healthcare professionals (other than doctors or dentists), and is due to start on 7 October 2013 and run until 6 April 2014. www.gov.uk/government/publications/health-and-wellbeing-tax-plan-your-guide-to- making-a-disclosure/health-and-wellbeing-tax-plan-your-guide-to-making-a-disclosure

3.2 Trade related property and HMRC/VOA practice note on apportioning the price paid for a business as a going concern

HMRC has published an updated version of their practice note on apportioning the price paid for the transfer of a business as a going concern where that involves a trade related property. Their note comments:

Following a discussion process with the Chartered Institute of Taxation (CIOT), the HM Revenue & Customs (HMRC)/Valuation Office Agency (VOA) Practice Note 'Apportioning the Price Paid for a Business Transferred as a Going Concern', has been updated. Discussions with the CIOT were constructive and helpful although differences of view on some issues still remain.

Paragraph 2.5 of the practice note discusses, amongst other things, apportionment under the intangible asset regime. It comments that if a company has not applied acquisition accounting correctly (i.e. the accounts are not GAAP compliant) and that failure is not material, then CTA09 s856(4) permits an adjustment for tax purposes. However s856(4) applies only if no values have been allocated in accordance with GAAP. Thus if values have been allocated in accordance with GAAP (and these allocations would need to be materially correct), then s856(4) can't apply.

Paragraph 9.1 of the practice note lists a number of difficulties and flaws HMRC has with the investment method of valuation (a rental yield based approach). These include the need for judgment, the availability of comparable rental evidence and assumption of hypothetical situations.

An alternative view might be that similar criticisms can be made of the 'reasonably efficient operator' method (a trade profits based method of valuation), although this is the preferred method recommended by RICS (though with their caveat for its use for tax purposes), and the basis for HMRC/VOA trade related property valuations. The comment is also made that the rental yield approach represents the value to an investor and not to an owner occupier, with the implication that it does not accord with the actual transaction in some way. However if the aim is to value the real property element of a transaction, an alternative argument would be that similar values should be arrived at using either valuation method , and presumably a just and reasonable apportionment requires a fair allocation between real property and business assets such as goodwill.

There are some selective extracts from FRS15 for the interpretation of valuation for accounting purposes, and no mention of FRS102. However these comments are caveated by stating that it is how HMRC considers the standard should be applied in the context of part 8 CTA09.

www.hmrc.gov.uk/svd/goodwill-overview.htm

www.hmrc.gov.uk/svd/practice-note.pdf

4 VAT

4.1 VAT and exports

SI 2013/2241 amends the VAT Regulation SI 1995/2518 with effect for supplies made on or after 1 October 2013 to:

  • extend zero-rating to goods supplied to businesses registered for VAT in the UK but established in another country, where those businesses export the goods outside the EU. This will assist export trade by removing a requirement for UK businesses and their customers to account for VAT; and
  • amend the VAT Regulations 1995 to correct an outdated reference to Excise law where businesses dispatch goods to other EU Member States.

www.legislation.gov.uk/uksi/2013/2241/pdfs/uksi_20132241_en.pdf

We have taken care to ensure the accuracy of this publication, which is based on material in the public domain at the time of issue. However, the publication is written in general terms for information purposes only and in no way constitutes specific advice. You are strongly recommended to seek specific advice before taking any action in relation to the matters referred to in this publication. No responsibility can be taken for any errors contained in the publication or for any loss arising from action taken or refrained from on the basis of this publication or its contents. © Smith & Williamson Holdings Limited 2013

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.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

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.