UK: Weekly Tax Update - Monday 19th January 2015

Last Updated: 6 February 2015
Article by Tina Riches

1. General

1.1 Budget 2015 – have your say

The government is seeking views on what individuals and businesses would like to see in Budget 2015, which will take place on Wednesday 18 March 2015.

The government is encouraging original and innovative ideas, which will be considered by HM Treasury as part of the policy-making process. Ideally, proposals should set out the policy rationale, costs, benefits, impact (especially on economic stability and growth) and deliverability of proposals and be evidence based.

To allow for proper consideration in advance of the Budget, representations should be made Friday 13 February 2015, either by an online submission or by email.

1.2 Genuine HMRC contact and phishing emails

HMRC has issued another security reminder about identifying genuine HMRC contact and phishing emails. This alert provides up to date information on genuine contact, including by email and text, which taxpayers and tax credit claimants may receive from HMRC. It also sets out how to spot phishing emails and bogus websites.

2. Private client

2.1 Trusts and Estates newsletter

HMRC's latest Trusts and Estates newsletter includes articles on:

  • the move of web content to;
  • bereavement service and the removal of form R27;
  • Autumn Statement updates, including DOTAS – extension around IHT hallmark;
  • IHT toolkit refresh;
  • IHT online service plans.

3. PAYE and employment

3.1 Requirement to issue coding notices

Further to the item in last week's Update on coding notices, the statutory instrument has been issued to remove certain obligations on HMRC and employers with respect to communication on tax code changes and end of year return questions.

From 29 January 2015 SI 2015/2 permits HMRC to issue coding notices electronically. It also amends the PAYE regulations from 29 January 2015 so that HMRC does not need to notify the employee of their tax code where the employee's PAYE income is not chargeable to tax or where the employee has no liability to tax in respect of any PAYE income. It also removes the obligation for employers to complete the 'end of year questions' when submitting the final real time information (RTI) return for the year for returns filed on or after 6 March 2015.

4. Business tax

4.1 Scottish Government call for reform of UK oil & gas tax

The Scottish Government has put forward a paper calling for reform of the North Sea oil & gas tax regime, proposing three changes:

  • an investment allowance to provide support for fields that incur higher costs to develop;
  • a phased and timetabled reversal of the increase in the Supplementary Charge implemented by the UK Government in 2011; and
  • the introduction of an exploration tax credit to help increase levels of exploration and sustain future production.

4.2 Draft guidance - the new loan relationship corporate rescue exemption

Draft Finance Bill 2015 introduces new CTA 2009 ss 322(5B) and 323A of that will remove the obligation to bring into account a loan relationships credit arising on a release, modification or replacement of debt in certain circumstances where a company is unable to pay its debts.

If enacted, the new sections will apply to the release, modification or replacement of a debtor relationship of a company on or after 1 January 2015. HMRC has issued draft guidance for comment (along with the draft legislation) on how they envisage these provisions working in practice.

It is encouraging that this amendment is as a result of lobbying that HMRC has taken on board. It will be interesting to see how this could affect HMRC's interpretation of other provisions of s.322.

4.3 Implementation - Finance Bill 2015 loan relationship regime changes

We have anecdotal evidence that the Finance Bill 2015 measures announced in respect of the reform of the corporate debt and derivative contract regime will be implemented as follows:

To be enacted before the general election

  • The new corporate rescue exemption.

To be enacted after the general election

  • Clarifying the relationship between tax and accountancy, and moving to base taxable profits on amounts recognised as items of profit or loss (to have effect for periods from 1 January 2016);
  • New regime-wide anti-avoidance rules to counter arrangements with a main purpose of obtaining a tax advantage by way of the regime rules (this will have effect from 1 April 2015).

4.4 5p charge on single use plastic carrier bags in England

A draft statutory instrument has been issued in preparation for the minimum 5p single-use carrier bag charge to be made by the supplier in England from 5 October 2015. The charge will apply to those businesses with 250 or more full-time equivalent employees at the start of each reporting year.

Records must be kept of the number of bags supplied, the revenue raised (net of VAT) the costs of collection and the use to which the net proceeds have been put. The reporting year will run from 5 October 2015 to 6 April2016 and annually (April to April) thereafter.

The explanatory memorandum to the statutory instrument includes the following comment:

The Government does not have the legal power to take the proceeds of the charge (as happens in Northern Ireland) nor to determine where the proceeds of the charge go. There is an expectation that (as in Wales) retailers after deducting reasonable costs will donate the rest to good causes.

It is fascinating to note that bags to contain 'Live aquatic creatures' are excluded.

4.5 Amendment to Companies Act 2006

In the 2014 Autumn Statement the Government announced that in early 2015 it would bring forward amendments to Companies Act 2006 s. 641 to prohibit reductions in share capital by target companies in takeovers using schemes of arrangement, in order to protect the stamp tax base. A draft statutory instrument has now been published with the amendments.

The amendment prohibits a company from reducing its share capital as part of a scheme of arrangement where the purpose of the scheme is to acquire all the shares of the company, except where the acquisition amounts to a restructuring that inserts a new holding company into the group structure.

The amendment will not apply to a scheme that:

a) gives effect to, or is proposed in connection with, a takeover announcement made in relation to a company before the day on which the Regulations come into force; or

b) gives effect to, or is proposed in connection with, a pre-commencement offer to acquire:

i)all the shares in a company that is not subject to the rules; or

ii) all the shares of one or more classes, where there is more than one class of shares in a company, in each case other than shares that on the date that the terms of the offer were agreed were already held by the person making the offer or its associates.

4.6 New HMRC guidance

HMRC has published two new manuals:

  • Other non-statutory clearance guidance - covering all non-statutory clearances not separately listed.
  • Video games development company guidance – covering the corporation tax relief for video games development available from April 2014.


The US Internal Revenue Service (IRS) has announced the opening of the International Data Exchange Service (IDES) for enrolment. Financial institutions and host country tax authorities will use IDES to send their information reports on financial accounts held by U.S. persons to the IRS securely under the Foreign Account Tax Compliance Act (FATCA) or pursuant to the terms of an intergovernmental agreement (IGA), as applicable.

As a reminder, for UK financial institutions with FATCA reporting obligations, they will report their information to HMRC (requiring registration for a US global intermediary identification number (GIIN) and separate registration with HMRC). First reports are due to HMRC for the calendar year 2014 by 31 May 2015. We are currently awaiting UK regulations on the reporting process.

4.8 What is a contingent liability capable of adjusting a CGT disposal computation?

The Scottish Court of Session has overturned the Upper Tribunal's (UT) 2013 decision that a £12m payment, by a company director to settle an action for inaccurate statements in connection with a profit forecast provided on the acquisition by Anglian Water plc (AWG) of Morrison plc (Mplc), was not deductible for capital gains tax. The Court of Session considered the payment by the director (or a part to be determined later by the FTT) was to be allowed as a contingent liability thus reducing CGT on the disposal. This is a messy case in terms of some of the legal assumptions involved and may be difficult in later interpretation.

In September 2000 AWG purchased the shares of Mplc. Sir Fraser Morrison (SFM) made representations (regarding a profit forecast) in his capacity as director of Mplc and sold his own shareholding in Mplc, of between 12% and 13% of the company, for £33.4m. A £12m payment was made in 2006 to settle an action arising out of the representations allegedly made by SFM in connection with the AWG acquisition of Mplc.

The UT concluded in October 2013 that the payment did not arise from a contingent liability qualifying for deduction by claim under TCGA 1992 s.49, as it could not be directly related to the disposal of the shares. Neither did it allow any deduction for the costs (over £5m) for defending the action.

No appeal was made in respect of the tax treatment of the costs of defending the action, but there was an appeal on whether the £12m payment was a contingent liability deductible from the gain on disposal of SFM's shares.

An unsatisfactory issue in the case was the fact that HMRC had orally at the bar made a concession that the payment made by SFM in settlement of AWG's action constituted a 'contingent liability' within the meaning of TCGA 1992 s.49(1)(c), and that it was 'enforced' by AWG's action and its settlement. However, HMRC was unable to articulate what, in their contention, was the nature of the contingent liability and in what way it was enforced by the action and its settlement.

The Court of Session concluded that the terms of TCGA 1992 s.49(2) did not specify a direct link between the contingency and the disposal transaction, only that there be 'an adjustment as is required in consequence of the contingent liability being enforceable'. Even if there had been a requirement for a direct link, the Court of Sessions considered there was one, as SFM's shares were sold as a consequence of his statement (notwithstanding the sale involved all Mplc's shares).

However the Court of Session referred the matter back to the FTT to determine what proportion of the £12m settlement payment made by SFM was attributable to representations made by him and hence which came within TCGA 1992 s.49(1)(c).

5. VAT

5.1 GMAC windfall VAT receipts from bad debt relief on repossessed cars

Following the September 2014 decision of the CJEU, the Upper Tribunal (UT) has concluded its August 2012 decision in favour of GMAC's claim for VAT repayments arising from the interaction of VAT bad debt relief and the VAT treatment of disposals of cars repossessed under HP agreements.

The UT has confirmed its August 2012 decision in favour of GMAC, following the 3 September 2014 decision of the CJEU (Case C-589/12) that GMAC were entitled to a VAT windfall as a result of the interaction of the UK VAT bad debt relief and UK VAT treatment of the disposal of cars repossessed under the terms of a hire purchase agreement..

However, HMRC had alleged GMAC's claims were out of time in line with a case taken by BT, whereas the UT considered BT's claims were in time, yet the Court of Appeal overturned this ([2014] EWCA Civ 433) in April 2014. The UT considered further written submissions on the time limit issue for the GMAC case, but rather than reconsidering this point at the UT level, thought this would be most be efficiently dealt with by permitting HMRC until 2 February 2015 to submit permission to appeal the issue to the Court of Appeal.

5.2 HMRC guidance - supplying digital services to private consumers

HMRC has updated its guidance on VAT compliance requirements for businesses supplying digital services to private consumers, following the 1 January 2015 change in place of supply rules. There is a relaxation for micro businesses in respect of the time by which they need to update their data collection systems to evidence the location of their customer (with two pieces of information).

UK micro-businesses that are below the current UK VAT registration threshold, and who register for the VAT Mini One Stop Shop (MOSS) may, until 30 June 2015, base their 'customer location' VAT taxation and accounting decisions on information provided to them by their payment service provider. This means the business need not currently require further information to be supplied by the customer.

Payment service providers already collect and hold a minimum of 2 pieces of information about the member state where the customer usually resides. A transitional period, until 30 June 2015, will give micro-businesses additional time to adapt their websites to meet the new data collection requirements.

A micro business under the EU definition is an enterprise that employs fewer than 10 persons and whose annual turnover and/or annual balance sheet total does not exceed €2 million. consumers/vat-businesses-supplying-digital-services-to-private-consumers#support-for- moss-registered-micro-businesses-until-30-june-2015

6. Tax publications

NTBN308 - Private residence relief changes

Outline of the capital gains tax private residence relief changes and the introduction of the requirement to be tax resident, in the territory the property is located or meet the 90 day test.

NTBN307 - Changes to the VAT treatment of prompt payment discounts

Sets out the implications of the FA 2014 changes to the VAT treatment of prompt payment discounts.

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 2015

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.

Tina Riches
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.