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.

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.'

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.

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:

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 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.

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.

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

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)'

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.