UK: Weekly Tax Update - 11 January 2016

Last Updated: 13 January 2016
Article by Smith & Williamson

1. General news

1.1 Response to proposals to increase/introduce court and tribunal fees

The Ministry of Justice has published its response to the consultation on court and tribunal fees. This includes new fees for the First-tier Tribunal (FTT) and the Upper Tribunal (UT). The response generally accepts the proposals in the consultation for the tax tribunals, although for appeals against fixed penalties of £100 or less, the fee will be £20 (not the proposed £50). A date for the introduction of these new fees has not yet been set.

The proposed new fees for the FTT and UT are as set out below:

1.2 Direct recovery of debts by HMRC and the vulnerable

HMRC has published a paper giving non-exhaustive guidance on how it will apply its commitment to consider whether someone may be at a 'particular disadvantage' in dealing with their tax affairs, before making a decision whether to proceed with 'direct recovery of tax debts' as provided in Finance (No 2) Act 2015.

The particular indicators they will consider are:

  • a disability or long-term health condition;
  • a temporary illness, physical or mental health condition;
  • personal issues, such as bereavement or caring issues; and
  • lower levels of literacy, numeracy and/or education.

The note includes a case study example.

2. Private client

2.1 Foreign income and gains as loan collateral for a relevant debt – update

Following a meeting held with HMRC on 18 November 2015, the ICAEW has issued an update on the treatment of foreign income and gains (FIG) as collateral for a 'relevant debt' for remittance basis users. HMRC intends to issue further guidance by 31 January 2016 on what constitutes a new loan and how the grandfathering rules work. If it is not issued by that date, HMRC will accept the submission of provisional tax returns for 2014/15 in certain circumstances.

Broadly a relevant debt is a debt that relates wholly or partly to assets or services brought to, received, or used in the UK by a 'relevant person'. The HMRC view now is that there is a remittance where such collateral is secured on FIG. Prior to 4 August 2014 the HMRC view was that there was no remittance. Transitional rules required that there was re-financing or repayment of the debt prior to 6 April 2016 in order to avoid HMRC imposing a tax charge together with a written undertaking made by 31 December 2015 that this had occurred or would occur.

On 15 October 2015, however, HMRC announced that refinancing of debts secured on FIG was not required for arrangements put in place before 4 August 2014. Further guidance is now required to understand how the new interpretation will be applied in practice.

Extracts from the ICAEW note of the 18 November meeting include:

Issues around FIG as collateral may be relevant not just to new loans taken out and ongoing grandfathering but also to 2014/15 tax return preparation. The stakeholders raised this point and the proximity of the 31 January 2016 filing deadline. It is hoped that there will be an update from HMRC prior to 31 January 2016. Anything that comes through will be published on the Tax Faculty website and highlighted through the Tax Faculty Newswire. Where FIG as collateral is an issue for the 2014/15 tax return, use of the additional information box (white space disclosure) should be considered if:

  • no further HMRC guidance is issued by the filing deadline and there are concerns about the tax treatment adopted and whether it is in line with HMRC's stated view;
  • further HMRC guidance is issued but it does not cover the issue, so there are concerns about the tax treatment adopted and whether it is in line with HMRC's stated view; or
  • further HMRC guidance is issued but a different technical view is taken and the tax return is prepared on that basis.

HMRC will accept provisional 2014/15 tax returns where there is uncertainty about what to enter on the return in relation to these matters, with this acceptance being subject to the return containing full and complete disclosure of potentially affected arrangements.

3. Business tax

3.1 LLPs and PSC registers:

The Government will issue regulations early in 2016 to implement the requirements to disclose persons with significant control (PSCs) for LLPs in the same timeframe as for companies. Companies will need to keep a register of people with significant control ('PSC register') from April 2016, in preparation for the need to file this information (using a 'confirmation statement') at Companies House from 30 June 2016.

In respect of a company, a person with significant control is a person who:

  • directly or indirectly owns more than 25% of the shares in the company;
  • directly or indirectly holds more than 25% of the voting rights in the company;
  • directly or indirectly has the power to appoint or remove the majority of the board of directors of the company;
  • otherwise has the right to exercise or actually exercises significant influence or control over the company; and
  • has the right to exercise or actually exercises significant influence or control over a trust or firm that is not a legal entity, which in turn satisfies any of the first four conditions over the company.

We anticipate that LLP's will be required to create a similar register and supply information in the same timescale.

3.2 Amendments to corporation tax for regulatory securities

SI 2015/2056 sets out the tax treatment of new types of financial instrument issued by insurance companies to meet regulatory requirements. It applies for accounting periods starting on or after 1 January 2016. It also updates existing regulations to reflect the current terms used in the taxation of corporate debt and derivative contracts rules introduced in Finance (No.2) Act 2015.

Insurers' Tier 1 and Tier 2 compliant Solvency II instruments issued in the form of debt will be taxed as debt instruments. This does not include securities that are shares. It also amends the existing Taxation of Regulatory Capital Securities Regulations 2013 (S.I. 2013/3209) by extending the definition of the term 'regulatory capital security' to include certain Tier 1 and Tier 2 items within the Commission Delegated Regulation (EU) 2015/35.

Credits and debits on some conversions of the new types of regulatory capital are also excluded from the loan relationships rules in Part 5 of the CTA 2009. There are also updates to the Regulations making consequential amendments to reflect recent changes made to Part 5 CTA 2009 by the Finance (No.2) Act 2015.

A new regulation is inserted into the Regulatory Capital Securities Regulations 2013 to ensure that payments of a coupon in respect of regulatory securities will continue to be deductible in respect of amounts that are recognised in equity. regulations

3.3 HMRC examples on hybrid mismatch legislation

HMRC has published draft examples illustrating the effect of the draft anti-avoidance legislation published on 9 December 2015.

The twenty examples published are not exhaustive, but are designed to illustrate how the draft UK legislation is intended to apply to the range of hybrid mismatch arrangements considered by the OECD report on its BEPS Action 2. Further guidance on the application of the hybrids rules will be provided in 2016.

3.4 Corporation tax self-assessment the four year time limit and availability of losses

In the case of Bloomsbury Verlag GmbH (BV) the First-tier Tribunal (FTT) has held that the fact that corporation tax returns showing losses were submitted outside the normal four year time limit did not prevent those losses being taken into account in calculating the profits of subsequent corporation tax returns validly made. The Higgs decision ([2015] UKUT 92 (TCC)) was discussed and although BV case related to Corporation Tax and not Income tax, it was noted that a similar outcome to the Higgs decision was reached.

BV was a German incorporated wholly owned subsidiary of Bloomsbury Publishing Plc (Plc). Plc acquired BV on 14 March 2003 and it became UK resident by virtue of its being centrally managed and controlled in the UK thereafter. It remained UK resident at least until its sale by Plc to a German subsidiary of the Bonnier media group on 28 March 2012. BV had not appreciated that it had come within the charge to UK corporation tax on 14 March 2003 until 31 March 2010 when its advisers submitted a letter to HMRC. This provided estimates of profits and losses since 2003 and requested the exercise of HMRC discretionary powers to agree a late claim to carry back of trade losses to the previous 12 months.

On 20 September 2010 HMRC sent BV notices to file corporation tax returns for the years ended 31 December 2004 to 2009. BV had made losses in the short accounting period to 31 December 2003 (£1.2m), and the years ended 31 December 2004 (£1.5m) and 2006 (£0.1m). A profit of around £0.5m was made for the year ended 31 December 2005.

HMRC contended that the returns for the 2003, 2004 and 2005 periods were out of time and therefore invalid given the four year time limit in FA 1998 Sch18 para 46. As a consequence the losses were not allowable and HMRC intended to raise a discovery assessment for the 2005 year end arising from BV's carelessness in failing to notify chargeability.

The Tribunal examined case law and noted that what is now CTA 2010 s.45 requires profits to be computed after taking account of unrelieved brought forward losses and that since 1990 there has been no requirement to make a claim to carry forward a loss.

In deciding the case the Tribunal held that the voluntary return for the accounting period ended 31 December 2003 was not a valid tax return as HMRC had not issued a notice for BV to deliver a return. However, that did not prevent a later valid return including losses incurred in 2003. As the returns showing losses were self-assessments under FA 1998 Sch19 para 7, the time limits in FA 1998 Sch18 para 46 did not apply. As a result of these decisions it was not necessary for the Tribunal to examine the discovery assessment, though they doubted whether HMRC had the power to raise a discovery assessment in the way they did.

Draft Finance Bill 2016 clauses limit the time in which a 'self-assessment' for income tax can be made to four years from the end of the year of assessment to which it relates, subject to a notice or determination (in the event of no return) being issued by HMRC. Following the FTT decision in BV it remains to be seen whether similar legislation will be introduced for corporation tax self-assessment.

Anyone subject to income tax who has a similar issue should note that while the current draft legislation for income tax proposes that the changes are effective for tax years from 2012/13, and for tax years prior to this, there is a deadline of 5 April 2017 to submit any outstanding self-assessments.

To continue reading this update, please click here

Smith & Williamson LLP: Regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities. A member of Nexia International. The word partner is used to refer to a member of Smith & Williamson LLP The Financial Conduct Authority does not regulate all of the services or products discussed in this publication.

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.