UK: Weekly Tax Update - Monday 2 December 2013

Last Updated: 4 December 2013
Article by Smith & Williamson

1 GENERAL NEWS

1.1 Automatic exchange of information agreement with Gibraltar

The UK has signed an automatic exchange of information agreement with Gibraltar.

www.hmrc.gov.uk/fatca/uk-gibraltar-imptax-comp.pdf

2 PRIVATE CLIENT

2.1 Consultation on legislative changes to permit paperless self assessment

HMRC has issued a consultation proposing that those registered to use its Self- Assessment Online service will be able to provide their consent to HMRC using electronic communications in connection with their tax affairs rather than receiving paper notifications and outputs by post.

Those who opt in to the new service will be sent a message by HMRC informing them information has been delivered to their secure mailbox and is available to view via their online account. Taxpayers logging in to their online account will be able to read the delivered notice or reminder, and if necessary act on it. Statutory notices and reminders made available to them in this way will have the same legal validity as a paper statutory notice and reminder sent by letter and post. Where possible, the taxpayer will be able to respond to the statutory notice or reminder and complete their transaction online.

The specific areas in Self Assessment that are within the initial scope of this proposal include:

Statutory notices – tax returns, enquiries, determinations and assessments

  • Notice requiring a customer to file a tax return;
  • Notice of a correction of a customer's tax return by HMRC;
  • Notice of the opening of an enquiry into a customer's tax return;
  • Notice requiring information or documents as part of an enquiry into a customer's tax return;
  • Notice of the amendment of tax during an enquiry to prevent loss of tax;
  • Notice of the completion of an enquiry into a customer's tax return;
  • Notice of the determination of tax by HMRC where no return has been delivered;
  • Notice of amendment of partnership statement where loss of tax discovered.

Statutory notices – penalties

  • Notice of penalties where return is late or not delivered;
  • Notice of penalties/surcharges on unpaid tax;
  • Notice of penalties for failure to comply with an information notice or deliberately obstructing an HMRC officer's inspection;
  • Notice of penalties for errors in a tax return.

Reminders and other tax related communications

  • Self Assessment Statement is available to view online;
  • Confirmation of payments and repayments made;
  • Reminders to file a tax return;
  • Reminders to pay tax due;
  • 'Exit' message for customers deregistering for self-assessment.

The proposal is for a staged introduction to fit in with the availability of HMRC's technical capacity.

www.gov.uk/government/uploads/system/uploads/attachment_data/file/261228/digital_self_assessment.pdf

2.2 Capital Taxation and the National Heritage

HMRC has updated its guidance on Capital Taxation and the National Heritage. It now includes further guidance in Appendix 15 on chattels that qualify for:

  • conditional exemption;
  • support by a maintenance fund.

Paragraph 4 of Appendix 3 has also been amended to reflect changes regarding when interest is charged on objects exempted from Estate Duty which are sold at auction.

www.hmrc.gov.uk/inheritancetax/conditionalexemption.pdf

2.3 Guidance on the taxation of unauthorised transfers to pension schemes on the QROPs list

HMRC has issued guidance concerning transfers of sums or assets which took place before 24 September 2008 from a registered pension scheme to a scheme that was included within the list relating to qualifying recognised overseas pension schemes (QROPS). The guidance will operate in relation to the small number of transfers where the scheme was not a QROPS when the transfer took place. The guidance is related to the case of R (Gibson) v Commissioner for HM Revenue and Customs.

www.hmrc.gov.uk/pensionschemes/transfers-to-qrops.pdf

3 PAYE AND EMPLOYMENT MATTERS

3.1 Employment-Related Shares & Securities Bulletin

HMRC has published the eleventh Employment-Related Shares and Securities Bulletin providing information and updates on developments relating to employment-related securities, including the tax-advantaged employee share schemes.

www.hmrc.gov.uk/shareschemes/erssbulletin11.pdf

3.2 PAYE for employers: Advisory fuel rate updates

HMRC has published revised advisory fuel rates to operate from 1 December 2013.

www.hmrc.gov.uk/payerti/forms-updates/rates-thresholds.htm#7

3.3 Consultation on changes to real time information (RTI) reporting

HMRC has issued draft regulations and a technical note for comment by 24 January 2014 on changes to the RTI regime under the following broad headings:

  • To provide for direct collection where HMRC is satisfied that it is not practicable for the employer to deduct tax by reference to the tax tables, for example where an employer has no place of business in the UK, and no special arrangements have been made, unless the employee objects within 30 days of receiving written notification of the Direct Collection procedure;
  • To provide for those who are exempt from on-line filing to submit their data quarterly rather than at the time of payment;
  • To provide for late filing penalties (the penalty level is set according to number of employees) and late payment penalties (there is a £100 tolerance in assessing whether a payment is late) and to remove the application of the penalty applicable to the last return filed late each year for returns relating to tax year 2014-15 and onwards.

www.gov.uk/government/uploads/system/uploads/attachment_data/file/262312/real_time_information_legislative_changes.pdf

4 BUSINESS TAX

4.1 Community amateur sports clubs (CASCs)

Following consultation in August 2013 HMRC has issued a consultation response setting out new rules applicable to community amateur sports clubs. The new rules will provide for the following:

  • Clubs that charge more than £520 a year must make special provisions for members on a low or modest income to participate for £520 or less, subject to an upper membership fee threshold of £1,612.
  • Clubs will be able to pay any number of players to play up to a total limit per club of £10,000 a year (including the cost of any benefits).
  • Clubs will be able to pay reasonable subsistence expenses and club tours subject to limits that will be set out in HMRC guidance.
  • At least 50 per cent of a club's members must be participating (sporting) members.
  • A participating member will be defined as a person who participates in the sport at least 12 times a year.
  • Clubs will be able to generate unlimited income from their members.
  • Clubs will be able to generate up to £100,000 turnover (receipts) from trading and other miscellaneous transactions with non-members.
  • The threshold on the exemption from corporation tax on trading income will be increased from £30,000 to £50,000. Clubs will pay no tax on trading income so long as the turnover from non-members is no more than £50,000.
  • The threshold on the exemption from corporation tax on income from property will be increased from £20,000 to £30,000. Clubs will pay no tax on income from property so long as the receipts from non-members are no more than £30,000.
  • All companies will be able to obtain tax relief on qualifying donations to a CASC under corporate gift aid.

Finance Bill 2014 will include provisions to extend corporate gift aid to donations of money made by companies to CASCs. The provisions will allow companies to claim tax relief on qualifying donations they make on or after 1 April 2014.

Draft regulations will be published for a short technical consultation in the new year before being laid in draft before Parliament.

www.gov.uk/government/uploads/system/uploads/attachment_data/file/260944/CASCs_Consultation_Response.pdf

4.2 Review of the EU parent subsidiary directive

The Confédération Fiscale Européenne (CFE) has issued the following note:

Today [25 November 2013], the European Commission has proposed a review of the Parent-Subsidiary-Directive, with a view to;

  • avoiding non-taxation of distributed profits. According to the current Directive, the parent company either has to refrain from taxing such profits or provide for a tax credit, regardless of whether the payment is tax-deductible in the country of the subsidiary (source country). Under the proposed rules, the member state of the parent company would only be allowed to grant exemption to the extent the payments are not deductible in the source country, limiting the policy options of the parent company´s residence country.
  • Introducing an anti-avoidance rule in the Directive, stating that the benefits of the Directive shall be withdrawn in the case of artificial arrangements.

The Commission hopes that the Directive could be implemented by 31 December 2014, but adoption will require unanimity in the EU Council.

4.3 Whether monies raised for the purpose of an EIS qualifying activity

Shortly after incorporation in June 2001, Harvey's Jersey Cream Ltd became a partner in the business of L & R Harvey and Partners. The other partners were Mr L Harvey and his three adult children: James, and David and Wendy. The share capital of the company was owned by those four partners. The partnership business was the manufacture and delivery of ice cream and dairy products, and included the running of the dairy herd which produced some of the milk for the ice cream and dairy products on land owned or occupied by the partnership.

On or around 26 November 2003:

  • each partner took drawings from the partnership;
  • each partner subscribed for shares in the company in amounts corresponding to those drawings;
  • the company paid the total amount raised by the share issue, some £1.25 million, to the partnership.

The process of withdrawal, subscription, and payment to the partnership was repeated on 27 July 2004. The amount involved on this occasion was in total some £750,000.

The company applied to HMRC under section 306(4) TA 88 (now ITA s204) for authority to issue EIS certificates in respect of the shares it had issued in these transactions. HMRC refused to give that authority.

The First-tier Tribunal concluded that the enterprise investment scheme conditions for use of the money from the fund raising (that they be employed wholly for the purpose of the qualifying trade) were not met, as the funds were already used in the qualifying trade, and instead were used to fund a change in partnership sharing ratios.

www.bailii.org/uk/cases/UKFTT/TC/2013/TC03045.html

4.4 SDRT

There has been an increasing trend recently for gross transactions in securities (stocks & shares) to be aggregated or netted off outside of CREST before settlement, which means that Euroclear UK & Ireland Limited EUI cannot assess the gross transactions as the legislation requires.

HMRC in consultation with key market participants and stakeholders has therefore asked EUI to develop and deliver a new enhanced SDRT assessment service.

The aim of the new enhanced SDRT assessment service is to help rebalance the established market practice of gross transactions being sent for reporting and assessment for SDRT at a centralised point. It is planned that the service will go live in June 2014.

www.hmrc.gov.uk/so/sdrt-assessment.htm

5 VAT

5.1 Partial exemption framework for NHS trusts

HMRC has issued a document setting out principles for VAT recovery calculations by National Health Trusts which if adopted may facilitate HMRC's agreement of the method.

www.hmrc.gov.uk/menus/frame-nhs.pdf

5.2 The use of First-tier Tribunal Rule 18 to add cases as related cases to an existing lead case

In a case concerning Group 288 Ltd and others the First-tier Tribunal (FTT) has concluded that five additional cases should be added as 'related cases' behind the lead case ZipVit which questions: "whether a taxable person, who has received supplies of services from Royal Mail which were at the material time treated by Royal Mail as exempt under the Value Added Tax Act 1994, but which were properly chargeable to VAT under the Sixth VAT Directive or Principal VAT Directive, is entitled to an input tax credit in respect of those supplies." It is understood this lead case will be heard in May 2014.

Rule 18 directions do more than merely stay one case behind another. They make the FTT decision in the lead case binding on the related cases in the FTT. To this extent the FTT decision in the lead case creates binding precedent when, as the FTT is not a court of record, its decisions normally do not have this effect. The advantage of a Rule 18 direction to those cases related to ZipVit is that if Zipvit is successful, they will not need to re-litigate the issue with HMRC. HMRC will be bound to apply the Zipvit decision in their favour. This is not the position with normal FTT decisions as they do not create precedent.

The application of Rule 18 is not, however, without its difficulties. Most of these difficulties stem from the fact that a designation of cases as lead cases and related cases does not survive on an appeal. The Upper Tribunal has no mirror to rule 18. In this Rule 18 in effect diverges from the process that would apply at the Upper Tribunal and later courts, where a group litigation order survives on appeal.

HMRC objected to the application of Rule 18 in the cases considered on the grounds that their facts were not identical to ZipVit, and there were 'out of time claim' issues to be considered which would make the application of Rule 18 inappropriate. Otherwise they accepted that the cases raised the same issues as in ZipVit. The FTT concluded that none of the objections had sufficient grounds for denying the application of Rule 18 in four of the cases, and its application in the remaining case would be dependent on the re- drafting of the grounds of appeal in that case and the consideration of any objections by HMRC's to those revised grounds of appeal.

www.bailii.org/uk/cases/UKFTT/TC/2013/TC03041.html

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.