UK: Weekly Tax Update - 30 November 2015

Last Updated: 1 December 2015
Article by Smith & Williamson

1.General news

1.1 Autumn Statement 2015

Smith & Williamson's summary of key measures, together with our initial commentary is on our website.

The Chancellor George Osborne set out his spending plans, forecasts for revenue and his vision for 2020.

1.2 Whether interest has a UK source

Ardmore Construction and Colin Perrin have joined together in taking their cases concerning whether interest payments have a UK source to the Upper Tribunal (UT), but have lost. The joint case reiterates some of the principles to be applied in assessing whether interest has a UK source for the purpose of deducting tax at the basic rate before paying it to the lender.

The case concerned the tax treatment of loan interest paid to creditors in Gibraltar for Ardmore, and Isle of Man for Mr Perrin. There were three grounds of appeal against the decisions of the First-tier Tribunal (FTT) that the interest had a UK source:

  • the source of the interest should properly be found by ascertaining the 'nationality' or the 'residence' of the relevant loan instrument, and that the FTT erred in determining residence using a multifactorial approach;
  • if a multifactorial approach is relevant, then the FTT erred by placing too much weight on the residence of the debtor;
  • it is the place where the credit is provided that is the source of residence.

The taxpayers lost on all grounds. The following points were included in the decision:

  • the residence of the lender and the place from which the money was lent (the place of credit) are not relevant;
  • jurisdiction and the proper law of the contract are factors of little or no weight having regard to the 'Greek Bank case' (Westminster Bank Executor and Trustee Co (Channel Islands) Ltd v National Bank of Greece SA [1971] AC 945; (1970) 46 TC 472), the single previous binding case on this;
  • the absence of security is a neutral factor - the fact that the agreements specified that there should be no UK security is immaterial;
  • the fact that in the case of Mr Perrin interest payments were made from the Isle of Man and paid to a bank in the Isle of Man was of no relevance. The place at which payments are received cannot be relevant to a question of source, and the place from which payments are made is of little or no significance, as the Greek Bank case illustrates, compared to the substantive or ultimate source of payment in respect of the obligations associated with the debt;
  • the FTT was correct to have given weight to the residence of the debtor, Mr Perrin, and to the source of funds for payment and enforcement and the residence of the debtor, Ardmore, a UK incorporated and tax-resident company.

2. Private client

2.1 Tax-Free Childcare: 10 things parents should know

HMRC has issued some guidance to parents about the new 'tax-free' childcare due to be launched early in 2017. To be eligible, parents in work need to earn over £100 a week and not more than £100,000 per year.

2.2 Scottish rate of income tax – letters to individuals

The National Audit office has published a report into HMRC's administration to date of the Scottish rate of income tax.

The report mentions that HMRC plans to communicate with Scottish taxpayers in December 2015 (delivery expected to start this week). Due to a delay by the Scottish Government in announcing the Scottish Government's budget, letters to individuals will not advise them on the actual SRIT they will pay in the 2016-17 tax year. However, the letters need to be issued shortly to give HMRC sufficient time to deal with queries from taxpayers, eg around their residence status, following receipt of the letters.

The report includes some positive comments on the work done to date to identify Scottish taxpayers and to put a SRIT system in place, although it highlights that HMRC will need to react quickly to the changing compliance environment within the UK from April 2016, when SRIT is introduced, especially if there are differential rates, which could according to the NAO encourage avoidance and evasion.

The following infographic from the report provides some useful key facts:

3. PAYE and employment

3.1 Payrolling of benefits in kind SI 2015/1927

A statutory instrument (SI 2015/1927) has been introduced to provide for the payrolling of benefits in kind. It has effect for the 2016/17 tax year onwards.

Amongst other things it provides for the:

  • removal of the requirement for employers to report expenses paid to employees (whether deductible or not) on form P11D at the end of the tax year;
  • introduction of a scheme to authorise employers to deduct tax from employees' pay in respect of certain benefits in kind that they provide to their employees through PAYE ('payrolling benefits');
  • removal of existing requirements for employers to report benefits provided to employees on form P9D at the end of the tax year in respect of certain excluded employments;
  • PAYE under payrolling does not count towards the 50% of pay that can be deducted by an employer; And
  • by 31 May following the end of the tax year employers operating payrolling must provide a statement to employees setting out benefits payrolled and their cash equivalent.

3.2 Consultation on exclusion of certain companies from the employment allowance

Following an announcement on 8 July 2015 the Government has issued a consultation on withdrawing the employment allowance from companies where the director is the sole employee.

The employment allowance currently reduces the majority of employers' annual NIC bills by up to £2,000. This is scheduled to increase to £3,000 from April 2016.

3.3 Advisory fuel rates

The advisory fuel rates applicable from 1 December 2015 for repaying employees for business mileage in company cars (or for employees to repay the cost of fuel used privately) without incurring tax and NIC charges and that can be used for calculating the fuel element for VAT input tax purposes, with the rates applicable immediately before 1 December 2015 shown in brackets, are:

It is possible to continue to use the previous rates for the period 1 December 2015 to 31 December 2015, after which the new rates apply mandatorily for the purpose of calculating any tax or NIC charges.

4. Business tax

4.1 De-regulatory changes affecting LLPs and qualifying partnerships

The Department of Business Innovation and Skills (BIS) has issued a consultation running from 20 November to 21 December 2015 on simplifying the administration of LLPs and qualifying partnerships (general and limited partnerships meeting the size criteria).

The proposals are to:

  • increase thresholds used to determine the size of LLPs, enabling around 195 medium-sized LLPs to be re-categorised as small and access the less burdensome small LLPs' regime. Similarly, around 86 large LLPs will be re-classified as medium-sized and will be able to access a reduced reporting regime;
  • limit the number of mandatory notes required of small LLPs;
  • provide LLPs with the opportunity to use alternative layouts when preparing their profit and loss account and balance sheet, provided that the information given is at least equivalent to the information otherwise required by the standard formats (this is likely to be particularly useful for LLPs who are subsidiaries in a group which uses international accounting standards for consolidation purposes;
  • allow small LLPs and qualifying partnerships to prepare an abridged balance sheet and profit and loss account if approved by all members of an LLP (a micro entity regime); and
  • permit the use of the 'equity method' in individual LLP statements (a consolidation basis of accounting).

Subject to the agreement of Parliament, it is the Government's intention that the new requirements for LLPs and Qualifying Partnerships will apply to financial years commencing on or after 1 January 2016. BIS anticipates that the regulations will be made by the summer of 2016.

The revised size limits from 1 January 2016 are proposed as:

4.2 Corporate tax or VAT?

The Royal Economic Society's annual lecture was given by 24 November 2015 Professor Rachel Griffith from Manchester University entitled 'Does Starbucks pay enough tax? – How and why we tax multi-national firms'. The conclusion of the lecture was that corporate tax should be paid based on where multi-nationals' products are sold rather than necessarily where their accounting profits are based.

Professor Griffith argued that, surprisingly, there is relatively little evidence that the UK or US lose substantial amounts of tax revenue due to firms' avoidance activities. In discussing why that might be the case, and some of the challenges that governments face in effectively taxing firm profits, she commented:

  • the fact that a company's assets often didn't have a physical presence - such as patents, trademarks and brands - made it difficult to calculate what a firm should pay and where;
  • we currently try to tax corporate profits at the location where value is created, under international agreements formed in the 1980s. Implementation of this system is increasingly difficult in the presence of intangible and internationally mobile assets;
  • multi-national companies should pay tax on their profits based on where their products are sold, not where they are made.

To continue reading this update, please click here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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.