UK: Tax Focus - January 2014

Last Updated: 3 February 2014
Article by Inez Anderson, Colin Aylott, Hannah Dobson and Matt Watts

Unapproved Share Schemes

By Inez Anderson

The Office of Tax Simplification (OTS) has been consulting on improvements to the taxation and reporting for both approved and non-approved share schemes.

The consultation for the former completed in 2012 and led to some welcome changes. The consultation for the latter completed last summer and the review of the comments made has just been published, together with the Government's proposals and draft legislation. In this, the Government has recognised the complexities of the current situation and has sought to address some of these.

Comments are invited on these new proposals by 4 February 2014.

We highlight three of the proposals that, subject to the further consultation, will be included in Finance Bill 2014.

  1. The introduction of a new rollover relief for certain share exchange arrangements for employment tax purposes (a relief is already available for capital gains tax) with effect for exchanges occurring on or after the date of Royal Assent of Finance Bill 2014. This is potentially a very valuable relief and should, for example, make it easier to exchange restricted shares and obtain a rollover without generating employment tax charges.
  2. An extension (with effect from the date of Royal Assent) to corporation tax relief for employee share acquisitions following the takeover of a company. Current rules do not allow such a relief where the shares are issued in a company under the control of another company that isn't listed. The proposed relief will allow a 90 day period to acquire shares following a takeover.
  3. A change (with effect for grants and awards made on or after 1 September 2014) in the basis of taxation of shares and options granted to internationally mobile employees to make it more consistent with the taxation of other forms of employment income. While this should simplify the whole area of taxing such employees, employers should be considering the tax implications of these imminent changes.

Currently there is no employment tax on charges under the restricted, or convertible securities, or options, or post acquisition benefits employment related securities legislation where the grant or award was made in a tax year when the recipient was not resident. The change will remove this exclusion and instead calculate tax on the date of the chargeable event and apportion any charges that arise on chargeable events to periods of UK and non-UK working for those to whom the remittance basis applies or who were non- resident for part of the period between award and chargeable event.

The change will have an impact on systems and procedures for accounting for employment tax in respect of awards to the affected individuals, and employers will need to consider the impact of the measures on the effectiveness of future awards.

Overall these proposals are welcome and should help simplify and improve the taxation of unapproved share schemes and therefore make them more attractive.

Apportioning The Price Paid For A Business As A Going Concern - Trade Related Property

By Colin Aylott

Where a business is sold that includes 'trade- related property', issues have often arisen on the allocation of proceeds amongst the assets acquired. This is important given the different tax and stamp duty treatment of different assets. In a number of these cases HMRC has, for example, refused to consider that a significant amount of value can be attributed to any goodwill that may exist. The corollary is that in HMRC's view the value should be allocated to the property itself.

A trade related property is defined as a property which has been designed for the business and its location is such that the property value reflects the trading potential of the business e.g. a public house, restaurant or cinema. Therefore, the property is intrinsically linked to the returns generated and arguably the business cannot be sold separately from the property.

HMRC has now issued a new practice note. In this, they accept that if a business is sold as a going concern, with trade-related property, the sale may include some element of goodwill. The question to be answered is what the value of the goodwill should be, as in HMRC's view, it is often difficult to directly attribute a sum to goodwill. HMRC prefer the deductive approach to calculating the value of goodwill rather than a just and reasonable apportionment. The deductive approach values all the other assets and deducts their value from the total to leave a balancing figure for goodwill value. This approach places great significance on the valuation method used for other assets when arriving at the balancing figure for goodwill.

According to Corporation Tax Act 2009 goodwill should have the same meaning as it does for accounting purposes. That is, the difference between cost of an acquired entity and its fair value of identifiable assets and liabilities. Therefore, a calculation of the value goodwill must begin with whether or not the accounts are prepared in accordance with generally accepted accounting practices (GAAP). When this is not the case purchased goodwill must be calculated as if the company has applied GAAP conventions.

The other assets in a business acquisition must also be valued, particularly the property itself. In the practice note, HMRC has indicated some ways of doing this and the assumptions to be adopted, comparing a 'profits' based and 'investment' based approach to valuation. The profits based approach assesses the trading potential of the property operated by a 'reasonably efficient operator' and is meant to exclude the impact of any profit in excess of that level.

The practice note also includes some examples showing how HMRC would approach calculating appropriate values in given circumstances.

The practice note gives HMRC's view of apportioning value in business transactions involving trade related property and is easier to understand than previous versions. However the note is written with an HMRC view and it may be useful to get another opinion before submitting figures based on the practice note for agreement.

VAT Alert: January 2015 Changes

By Hannah Dobson

Businesses should already be aware that supplies of telecommunication, broadcasting and e-services such as downloaded 'apps', music, gaming, e-books and similar services to private consumers located in other EU member states will become subject to VAT in the country of the customer from 1 January 2015.

To remove the need for relevant businesses to register in every EU member state where their customers reside, a voluntary simplification procedure known as the 'Mini One Stop Shop' (MOSS) will operate in each EU member state. The MOSS will allow relevant businesses to account for VAT via a single VAT return, in their own member state. This simplification is intended to remove the need for multiple EU VAT registrations that would inevitably result from the 1 January 2015 changes.

After much discussion and debate, the EU has finally issued guidance on how the MOSS will operate in each EU Member State. As we know, businesses are being advised to register for MOSS from October 2014, but the guidance is also useful in that it provides details on how the MOSS will operate for areas such as:

  • businesses that are 'established' and businesses that do not have an establishment (eg. premises from which they operate) within the EU
  • what happens where businesses are already registered in a number of EU member states. For example, as a result of 'distance sales' (typically mail order) of goods to private customers
  • information to be recorded on each MOSS Return
  • payment of VAT due for each EU member state, penalties, and other compliance issues
  • invoicing requirements.

If your business will be caught by the new rules, you will need to be aware of how the VAT regime will operate with effect from 1 January 2015, and make sure your systems are able to cope with the changes. You will also need to manage your pricing (to take account of different VAT rates across the EU) and invoicing (which will need to conform to rules set out in each EU country).

Upcoming Film Tax Relief Enhancements

By Matt Watts

In a further bid to support the UK's creative industries, the chancellor has announced further amendments to the UK film tax relief regime designed to give greater tax incentives on film production expenditure.

The Government first introduced UK film tax reliefs in 2007 and plans to enhance the regime in Finance Bill 2014. These latest measures follow the introduction of a tax credit system for high-end TV productions, animation and video games in April 2013. The key proposals in Finance Bill 2014 (which will become effective for films whose principal photography is not completed before a specified date, which will be on or after 1 April 2014) are:

  • to increase relief from 20% to 25% on the first £20m of qualifying production expenditure and 20% thereafter for small and large budget films
  • to 'modernise' the existing cultural test which currently ensures only British films which meet strict specific requirements will qualify for the relief. This test will be widened to include European culture films and increase the chance of visual effects, special effects and principal photography expenditure qualifying for the film tax relief
  • to entice overseas companies locating certain functions within the UK by reducing the minimum UK expenditure requirement as a percentage of the project as a whole from 25% to 10%.

The Government has also pledged to invest £5m into the National Film & Television School's Digital Village. The plan is to expand and upgrade its existing facility into a world- class training centre in an attempt to help sustain a supply of UK talent for the digital and creative industries.

These amendments to the existing regime are subject to state aid approval but are expected to be introduced in Finance Bill 2014. The Government has also stated that it intends to seek state aid clearance to increase the rate of relief to 25% for all qualifying expenditure when it renotifies film tax relief in 2015.

We have taken great care to ensure the accuracy of this newsletter. However, the newsletter is written in general terms and you are strongly recommended to seek specific advice before taking any action based on the information it contains. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. © Smith & Williamson Holdings Limited 2014. code NTD167 exp: 30/6/2014

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

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

In association with
Related Video
Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (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

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


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

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


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

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

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

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

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

Information Collection and Use

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

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

Mondaq News Alerts

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


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

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

Log Files

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


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

Surveys & Contests

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


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


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

Correcting/Updating Personal Information

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

Notification of Changes

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

How to contact Mondaq

You can contact us with comments or queries at

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