UK: Weekly Tax Update - Februrary 9th, 2015

Last Updated: 12 February 2015
Article by Tina Riches

1.General news

1.1 Consultation: penalties and digital communication with HMRC

HMRC has issued a discussion document asking for feedback by 11 May 2015 concerning how tax penalties would work as the use of digital communication with taxpayers increases. The document is aimed at setting out objectives and identifying options. As HMRC increases the digitisation of its communication with taxpayers, the OTS has highlighted to HMRC that the way the penalty regime operates will need to be tailored to new digital processes, with as much as possible automated.

According to HMRC, penalties play a role in influencing behaviour, in emphasising that non-compliance does not pay, and fall into three broad categories:

  • those aimed at penalising a failure to meet a time-bound obligation (eg submitting returns on time);
  • those aimed at penalising a failure to meet a regulatory obligation (eg notifying taxable status);
  • behavioural-based penalties (eg for submitting inaccurate returns and documents).

The paper sets out the concern that increased digitisation could lead to large-scale automated issue of penalties, potentially reducing taxpayers' motivation to comply, particularly where the penalties are small and therefore resource-intensive for HMRC to follow up or deal with taxpayer reaction. There is also a concern that penalties may be disproportionate where based on a percentage of tax, if filing or payment is uncharacteristically late by a very small period. Mention is made of the VAT default surcharge system which permits a warning to be issued rather than a penalty in cases of initial failure to comply, while successive failures attract progressively higher penalties.

Possible reforms for the way penalties are administered include:

  • a progressive system similar to penalty points for motoring offences, so that initial financial penalties are avoided, but more substantial penalties then apply for more serious failures or for persistent non-compliance;
  • a personalised digital tax account showing in one place all the taxes due from a taxpayer may require a move away from applying penalties on a tax-by-tax basis and towards a penalty system that is based on the overall position of the customer. This might mean there are implications for the role of interest.

www.gov.uk/government/uploads/system/uploads/attachment_data/file/400211/150130_HMRC_Penalties_a_Discussion_Document_FINAL_FOR_PUBLICATION__2_.pdf

1.2 Scottish tax measures

SSI 2015/36 provides that where a payment is made to Revenue Scotland by credit card in respect of tax, interest or penalties, and internet authorisation is given to make that payment by credit card, a fee of 1.4% will be charged for using the credit card.

www.legislation.gov.uk/ssi/2015/36/pdfs/ssi_20150036_en.pdf

Draft Scottish statutory instruments have been published setting out the tax rates and tax bands for land and buildings transaction tax (LBTT) and the standard rate and lower rate of Scottish landfill tax (of £82.60 and £2.60 respectively). These are due to apply from April 2015, subject to the LBTT transitional provisions for certain transactions which began under SDLT.

www.legislation.gov.uk/sdsi/2015/9780111026359/contents

www.legislation.gov.uk/sdsi/2015/9780111026342/contents

1.3 PAC report recommends consultation on state regulation of tax advice Industry

The Public Accounts Committee (PAC) has published a short follow-up report on 'Tax avoidance: the role of large accountancy firms', on their work advising multinational companies on international structures. The PAC recommends that HMRC should 'do more to challenge the nature of the advice being given by accountancy firms to their clients, ensure that tax liabilities reflect the substance of where companies conduct their business, and introduce a new code of conduct for all tax advisers'. It also recommended that it should consult on how it should regulate the industry and enforce such a code, including through financial sanctions.

The report did not recognise the work already progressing between the professional bodies and HMRC to update the current guidance 'Professional Conduct in Relation to Tax', which sets out tax advisers' responsibilities in this area. In addition the report seems to ignore the rule of law, the introduction of diverted profits tax and does fully recognise the OECD developments in this area nor the role for legislators worldwide in keeping the international tax system up to date.

The professional bodies need to continue to work with HMRC and demonstrate that state regulation would not be beneficial for anyone, particularly for clients who need access to independent professionals. The detailed PAC recommendations are in the report at:

www.publications.parliament.uk/pa/cm201415/cmselect/cmpubacc/1057/1057.pdf

1.4 NAO report by Comptroller and Auditor General-HMRC Progress Report

The National Audit Office (NAO) has issued a report on HMRC: Increasing the effectiveness of tax collection: a stocktake of progress since 2010. The report says that HMRC has made good progress towards achieving its primary objectives of maximising revenue and making sustainable cost savings. It does however also say that HMRC has much more to do to improve its performance in dealing with taxpayers and has concerns about the replacement of the Aspire contract.

The report focuses on several key areas including tackling marketed tax avoidance; the administration of personal tax, particularly in the area of PAYE; and settling large tax disputes. However, although it has improved in some areas, HMRC has 'much more to do' to improve its standard of service and will, for example, miss its targets on answering 80% of telephone calls and 80% of post within 15 days.

Perhaps more concerning, in the area of technology, is that the NAO considers there is a risk that HMRC will not build up commercial and technical capability in time to replace its Aspire suppliers' contract. This is a major challenge.

The administration of tax reliefs, which can have a big impact on the public finances, is also mentioned as needing more structured and proactive management.

www.nao.org.uk/report/increasing-the-effectiveness-of-tax-collection-a-stocktake-of-progress-since-2010/

2.PAYE and employment

2.1 Consultation on intermediary record keeping requirements

Summary of responses: In response to an October 2014 consultation on the information required for reports made by employment intermediaries, HMRC has announced it will reduce the amount of information to be reported and clarified a number of aspects on how the regime will work.

In September 2014 HMRC issued advance notice of the reports that employment intermediaries would need to file on a quarterly basis covering each three month period from 6 April 2015, with the first reports due by 5 August 2015. Those reports will contain details of all workers and their payments where PAYE was not operated, but the requirements will now be updated to remove the need to report:

  • worker title;
  • hours worked;
  • passport number;
  • National Identity Card Number; and
  • where a NINO is provided, the need to report Date of Birth and gender.

The regulations have also been amended so that although HMRC will require details of employed workers (other than those of the intermediary with the filing obligation), they will only require the intermediary to tell them about payments for those self-employed workers and others they have engaged where PAYE has not been operated including those engaged through offshore intermediaries.

The time frame for making nil returns has been reduced from three years to one year. The response contains some further clarification points and can be accessed from the link below.

The updated version of the draft regulation published in original form in October 2014, was not available at the time of going to press.

www.gov.uk/government/uploads/system/uploads/attachment_data/file/399954/Record_keeping_and_reporting_requirements_for_intermediaries_-_Summary_of_responses.pdf

2.2 Consultation: Internationally Mobile Employees and Employment- related Securities

The government's consultation on Internationally Mobile Employees (IMEs) and Employment-related Securities (ERS) has concluded and a document summarising responses has been published. The consultation arose following the changes in Finance Act 2014 to ERS awards to IMEs that take effect from 6 April 2015. The changes were recommended by the Office of Tax Simplification (OTS). Their effect for income tax is broadly to apportion the awards on a time basis and the part that relates to UK duties will now be subject to income tax.

It is arguable both that this is probably fairer yet not necessarily simpler than what went before. The OTS also recognised that the treatment of the awards for NIC purposes should as far as possible be aligned. Although that must be right in theory, the problem that has emerged is that there may be circumstances where complete alignment of income tax and national insurance contributions could create double charges, UK and foreign, eg, an employee chargeable for income tax on ERS in the UK may still be within a foreign social security scheme and not liable for UK NICs.

The measure proposed in the original consultation is designed to ensure that any ERS income that is attributable to days when the individual was in a non-UK Social Security system will be disregarded and not subject to a UK NIC charge.

There will be further informal discussion with a view to publishing legislation to commence in the 2015/16 tax year (irrespective of the date of acquisition of the ERS). Guidance will also be published, which will include an explanation of how EU legislation and bi-lateral agreements can be relied upon in most cases to avoid a double charge to social security contributions, and when unilateral relief will be available.

www.gov.uk/government/consultations/internationally-mobile-employees-and-earnings-related-securities

3. Business tax

3.1 CJEU decision on infraction proceedings against UK re CTA 2010 s.119(4)

The CJEU has agreed with the UK that the point at which the 'no possibilities' test for the potential use of a non-UK but EEA resident subsidiary's losses incurred for periods beginning on or after 1 April 2006 (as introduced by Finance Act 2006), should be assessed immediately after the end of the accounting period.

The decision contrasts with the UK Supreme Court's 2013 decision ([2013] UKSC 30, ) in the case of losses incurred by the M&S group in periods up to December 2001, which concluded the no possibilities test should be determined at the date the claim is submitted.

http://curia.europa.eu/juris/document/document.jsf?text=tax&docid=162042&pageIndex=0&doclang=EN&mode=req&dir=&occ=first∂=1&cid=134601#ctx1

http://curia.europa.eu/jcms/upload/docs/application/pdf/2015-02/cp150013en.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 2015

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
Tina Riches
 
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.