UK: Weekly Tax Update - 18 April 2016

Last Updated: 21 April 2016
Article by Smith & Williamson

1. General news

1.1 Additional 3% SDLT charge and granny flats

Financial Secretary to the Treasury, David Gauke, has clarified to the House of Commons that the Government will table an amendment to ensure that a 'granny annexe' of a main dwelling, or, we infer, the main dwelling itself, will not attract the additional 3% SDLT charge for second homes.

He commented on 11 April 2016 as follows:

"I have been made aware that the Bill as drafted might lead to some main houses with an annexe for older relatives attracting the higher rates of SDLT intended to apply to additional properties. I thank my right hon. Friend the Member for Brentwood and Ongar (Sir Eric Pickles) for bringing that to my attention. I am happy to reassure the House that that is not our intention and the Government will table an amendment in Committee to correct the error and ensure fair treatment for annexes."

Press reports indicate that to qualify for the relief an annexe must:

  • be within the same grounds as the main residence;
  • have the usual facilities of a home; and
  • have a value not exceeding 1/3 of the total transaction cost.

If the Finance Bill amendment is drafted in these terms, a house costing £0.5m could have an annexe for an elderly relative or disabled dependant valued at up to £250k and be excluded from the higher SDLT rate.

https://hansard.parliament.uk/commons/2016-04-11/debates/16041114000001/Finance(No2)Bill

1.2 Beneficial ownership information in Crown dependencies and overseas territories

On 11 April 2016, the Prime Minister announced that agreement had been reached with the majority of Crown dependencies and overseas territories to give UK law enforcement and tax agencies access to information on beneficial ownership of companies.

The Crown dependencies and overseas territories that function as financial centres had already agreed to exchange taxpayer financial account information automatically. They have now agreed to provide UK law enforcement and tax agencies with full access to information on the beneficial ownership of companies. Arrangements have been finalised with all but Anguilla and Guernsey, both of which are expected to follow in the coming days and months.

The extract from the Hansard record is as follows:

'For the first time, UK police and law enforcement agencies will be able to see exactly who really owns and controls every company incorporated in those territories: the Cayman Islands, British Virgin Islands, Bermuda, the Isle of Man, Jersey—the lot. That is the result of a sustained campaign, building on the progress that we made at the G8, and I welcome the commitment of the Governments of those territories to work with us and implement those arrangements.

'The House should note that that will place our overseas territories and Crown dependencies well ahead of many other similar jurisdictions, and also—crucially—ahead of many of our major international partners, including some states in the United States of America. Next month we will seek to go further still, using our anti-corruption summit to encourage consensus not just on exchanging information, but on publishing such information and putting it into the public domain, as we are doing in the UK.'

https://hansard.parliament.uk/commons/2016-04-11/debates/1604111000001/PanamaPapers

1.3 Corporate offence for failure to prevent the facilitation of tax evasion

On 11 April 2016, the Government announced it would bring forward plans to introduce a criminal offence for corporations who fail to stop their staff facilitating tax evasion. HMRC has now published a new consultation document setting out its proposals. Comments are due by 10 July.

The new condoc does not seek feedback on the policy, which was the subject of the previous consultation.

It seeks comments on the proposed legislation and guidance to implement the policy, which covers:

  • the nature of the offence;
  • those for whom corporations are liable – generally staff and contractors acting on behalf of a corporation;
  • definition of a corporation – companies and partnerships – and not just in the tax industry;
  • details of the tax evasion offence and failure to prevent this;
  • coverage - both UK and offshore tax evasion; and
  • authority to proceed with prosecution is not HMRC's as consent is required from the Director of Public Prosecutions or the Director of the Serious Fraud Office in England, Wales or Northern Ireland. In Scotland, it is the decision of the Crown Office and Procurator Fiscal Service.

HMRC is expected to provide assistance with industry guidance, which the Chancellor will have the power to approve.

www.gov.uk/government/consultations/tackling-tax-evasion-a-new-corporate-offence-of-failure-to-prevent-the-criminal-facilitation-of-tax-evasion www.gov.uk/government/news/pm-companies-to-be-liable-for-employees-who-facilitate-tax-cheating

On 16 July 2015, the Government had consulted on a new corporate criminal offence of failure to prevent the facilitation of evasion. A response document was published on 9 December 2015:

www.gov.uk/government/consultations/tackling-offshore-evasion

1.4 Phishing emails purporting to be from HMRC

HMRC has seen an increase in certain types of phishing emails. It has reiterated its request that taxpayers and their agents report all 'HMRC-related' phishing emails and bogus text messages to HMRC and refrain from opening attachments or clicking on links.

Even where the same or a similar phishing email or text message is received on multiple occasions, HMRC has asked for it to be forwarded to phishing@hmrc.gsi.gov.uk and then deleted.

HMRC recommends that recipients do not open any attachments or click on any links within the email or text message, as they may contain malicious software or links to a bogus website.

HMRC has posted examples of related phishing and bogus emails or text messages in their online guide. The last one relates to emails sent to offshore landlords and asks for significant personal information. This is particularly pernicious, as such taxpayers are amongst those least likely to be familiar with HMRC's style and to be able to spot a bogus email.

www.gov.uk/government/publications/phishing-and-bogus-emails-hm-revenue-and-customs-examples

2. Private client

2.1 Discovery

The First-tier Tribunal (FTT) has found that HMRC was not entitled to raise discovery assessments on Mr Bubb for 2009/10 and 2010/11. Although discovery assessments were issued at a time when it would have been possible to raise a standard enquiry, those assessments would have been validly made if HMRC could prove Mr Bubb had been careless in preparing his tax returns. Mr Bubb had experienced difficulty in entering tax return figures using HMRC's online system from France and the FTT considered HMRC was unable to prove he had acted carelessly in relation to the matters for which discovery assessments were raised.

For the relevant tax years in question, Mr Bubb was working as a consultant in France, while also being in receipt of a UK civil service pension. There had been some confusion in the establishment of his tax code by the PAYE provider he used, and he had been given an emergency PAYE code (which remained in place) instead of the BR tax code.

In relation to the 2009/10 and 2010/11 tax returns, Mr Bubb had also omitted to include his state pension, which had been paid into his wife's bank account. Although the omission of his state pension was considered careless, the assessments related to the fact that the information HMRC received in the online submission of Mr Bubb's tax returns for occupational pension income was incorrect.

Mr Bubb explained that he had experienced considerable difficulty operating the online filing system from France and had been unable to get through to the HMRC helpline using HMRC's international help line number. Mr Bubb had difficulty getting the online system to properly register the figures on his tax returns, and apparently had eight failed attempts to enter the figures. After considering subsequent evidence from HMRC on problems international filers had in filing tax returns at the time, the FTT considered Mr Bubb's explanations did not evidence carelessness.

www.financeandtaxtribunals.gov.uk/judgmentfiles/j8974/TC04992.pdf

2.2 CGT treatment of corporate bonds convertible into Euros, if the UK legal currency

In another twist to something of a long-running saga, the Upper Tribunal (UT) has held that corporate bonds that would otherwise qualify as qualifying corporate bonds (QCBs) are non- qualifying QCBs by virtue of the inclusion of the provisions to convert to Euros if Euros become UK lawful currency.

The UT overturned the earlier decision of the FTT. The question in the case was simply the interpretation of TCGA 1992 s.117(1)(b). This requires that to be a QCB the bond must be expressed in sterling and one 'in respect of which no provision is made for conversion into a currency other than sterling'. The court held that the contingent conversion to Euros, if sterling ceased to be the UK currency, was such a provision. The bonds therefore fell foul of this requirement and were not QCBs.

At one level, this is the plain meaning of the words of the statute, on the grounds that if the UK joined the Euro, the Euro would not thereby become sterling. At another level, the contrary argument was that such provisions had been put into corporate bonds, not to permit a conversion, with a view to ensuring the bond was a non-QCB, with a very different CGT treatment, but simply to deal with the contingency of the UK entering the Euro and, on a purposive construction, Parliament had not intended this kind of drafting to be caught.

The case is therefore interesting not so much for its tax outcome, but, rather, it is an early revisiting of the purposive construction doctrine set out in Barclays Mercantile Business Finance Limited v Mawson [2005] 1AC 684 and recently refined and confirmed by the Supreme Court in the case UBS AG v HMRC; DB Group Services (UK) Ltd v HMRC [2016] UKSC 13. Asplin J held that the purposive construction rule was just that: a rule of construction. It was not the task of the court to import a different meaning to the provision in question that could properly be attributed to it merely because of a perception that such a meaning would better suit the purpose identified.

In a passage that could well matter to litigants in the future, whether taxpayer or HMRC, if the decision is not overturned, Asplin J stated as follows:

"There is also, in our judgment, a distinction between the policy behind, or the reason for, the inclusion of a particular provision in the legislative scheme and the purpose of that provision. Parliament might wish to achieve a particular result as a general matter, and legislate for that reason or in pursuit of that policy. But if the statutory language adopted by Parliament displays a narrower, or more focused, purpose than the more general underlying policy or reason, it is no part of an exercise in purposive construction to give effect to a perceived wider outcome than can properly be borne by the statutory language."

HMRC v Trigg (a partner of Tonnant LLP) [2016] UKUT 165

www.bailii.org/uk/cases/UKUT/TCC/2016/165.html

2.3 Rates and allowances: capital gains tax 2016/17

HMRC has updated its website for the 2016/17 CGT rates. Changes from last year are due to be implemented in this year's Finance Bill. Readers will note the long list, copied below, of categories and appropriate rates that now have to be considered. We welcome the reduction in rates for certain categories, despite it adding to complexity of the tax system.

he website says: 'The following Capital Gains Tax rates apply (the tax rate you use depends on the total amount of your taxable income, so you need to work this out first)

  • 10% for [basic rate] individuals (not including residential property and carried interest)
  • 20% for [higher rate] individuals (not including residential property and carried interest)
  • 18% for [basic rate] individuals for residential property and carried interest
  • 28% for [higher rate] individuals for residential property and carried interest
  • 20% for trustees or for personal representatives of someone who has died (not including residential property)
  • 28% for trustees or for personal representatives of someone who has died for disposals of residential Property
  • 10% for gains qualifying for Entrepreneurs' Relief
  • 28% for Capital Gains Tax on Annual Tax on Enveloped Dwellings - the Annual Exempt Amount is not Applicable
  • 20% for companies (non-resident Capital Gains Tax on the disposal of a UK residential property)'

www.gov.uk/government/publications/rates-and-allowances-capital-gains-tax/capital-gains-tax-rates-and-annual-tax-free-allowances

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 Mondaq.com.

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

Authors
 
In association with
Related Topics
 
Related Articles
 
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions