UK: Tax Update, 09 July 2007

Last Updated: 12 July 2007

1. Changes at HM Treasury

The new arrivals:

  • Chancellor of the Exchequer: Rt Hon Alistair Darling MP

  • Chief Secretary to the Treasury: Rt Hon Andy Burnham MP

  • Financial Secretary to the Treasury: Rt Hon Jane Kennedy MP

  • Exchequer Secretary to the Treasury: Angela Eagle MP

  • Economic Secretary to the Treasury: Kitty Ussher MP

Link to view their profiles

2. Reminder Of Important Dates For Finishing The PAYE Tax Year 2006-07

19 July 2007: Last date for payment of 2006-07 Class 1A NICs to be cleared in HMRC bank account if posted.

20 July 2007: Last date for payment of any 2006-07 Class 1A NICs to be cleared in HMRC bank account if paid by an approved electronic payment method.

Interest will be charged on any payments received after these dates.

3. Other Forthcoming Important Date - 31 July 2007

Second interim tax payments for 2006/07 become due.

The opportunity should be taken to check whether any claim to reduce is relevant and, if a claim has already been made, whether the amount is still right.

If the 2005-06 Tax Return due back by 31 January 2007 has still not been sent in a second automatic penalty of £100 will be charged.

4. Fraud Attempt - Fake P86 Form

HMRC have issued the following warning:

"We have become aware of a letter claiming to be from HM Revenue & Customs (HMRC) which asks for personal information from taxpayers employed outside the UK.

The letter is accompanied by a bogus copy of Form P86 and asks for personal Bank Account details.

These documents have not been issued by HMRC. The letter, form and fax number that you are requested to return the completed form to, are all fake, and you should not complete any information on the fake form. An authentic P86 is available on the website, and does not contain a request for personal Bank Account details.

Employers are urged to advise their overseas employees to ignore these letters and to report the incident to the Police.

If you have any doubts about a message you have received claiming to come from the Department or asking you to pay money or disclose personal details, then please view our page on known spoofs and phishing attempts."


5. Deferred National Insurance Contributions: Notice To Pay

HMRC issued the following news release on 26 June:

Deferment Services have recently undertaken an exercise to calculate the deferred National Insurance contributions (NICs) due (where applicable) for customers who had deferment of payment of NICs in the 2005-2006 tax year.

Normally, a letter showing the breakdown of the calculation of deferred NICs due (CA2718A for Class 1 NICs or CA2705A for Class 2 and/or Class 4 NICs) is issued, followed a few days later by the actual bill for the deferred contributions. However, we are currently aware that in a number of cases the bill has been issued before the letter showing the calculation of deferred NICs due. We are urgently investigating the cause of this but can confirm that the calculations have now all been issued and should be with you shortly.

6. Expatriate Taxation: Practices Not Legislated For

CIOT have recently issued the attached research paper covering various aspects of expatriate taxation where there is no clear legislative or case law support (accounting fees, bonuses, domicile, economic employer test, foreign tax credits, garden leave and holiday pay, hypo tax, incidental duties, IR20, mobile workers, modified PAYE, neglect and penalties, ordinary residence, relocation expenses, CGT, SP5/84 and work days.)

7. Holiday Pay

HMRC recently issued the following statement:

‘In recent months HM Revenue & Customs has become aware that increasing numbers of employers outside the construction industry have been introducing holiday pay schemes. We are seeking information from other providers about their holiday pay schemes as part of our normal policy of continually monitoring and reviewing legislation, to ensure that it is meeting its intended objectives. For background, the exemption dates back to at least the early 1970s and was introduced so that a new employer would not be faced with a NICs liability on holiday pay earned with a previous employer.

HMRC continually monitor and review exemptions to ensure that the legislation is meeting its intended objectives and that original policy rationale intended by Parliament is still relevant.’

8. Refund of Voluntary Contributions

The Pensions Bill had its second reading in the House of Lords on 14 May 2007. When the Bill becomes law it will reduce the number of qualifying years needed to qualify for a full basic State Pension from 39 for women and 44 for men to 30 years for those reaching State Pension age on or after 6 April 2010. There is no change to the number of qualifying years needed for entitlement to Bereavement Benefits.

The Paymaster General jointly with the Department for Work and Pensions issued a News Release on 16 January 2007 concerning refunds of voluntary contributions. The News Release advised that contributors may be entitled to a refund if they have continued to make voluntary National Insurance contributions since 25 May 2006 but were unaware of the Government’s intention to reduce the number of qualifying years required for a full basic State Pension.

HMRC has now provided more details about the administrative arrangements for making refunds following the PMG’s announcement. They will make refunds to people who apply for a refund and satisfy the following conditions:

  • reach State Pension age on or after 6 April 2010,

  • paid voluntary contributions on or after 25 May 2006 (the date the Pension White Paper was published) but before the Pensions Bill gets Royal Assent (expected to happen in Summer 2007) and

  • were not aware of the changes when they paid. This means that at the time they paid they had not received information from HM Revenue & Customs about the changes.

Details and application forms:

9. Judgement In The Case Of Commissioners For HMRC V Thorn Baker And Others

In a judgement of the Court of Appeal on 27th June 2007 HMRC’s appeal from the decision of the High Court in the case of Commissioners for HMRC V Thorn Baker Limited and others) ("Thorn Baker") was dismissed.

This means that the High Court Decision given on 14 July 2006 that SSP is not payable to Agency workers whose contract with the agency is for a specified period of 3 months or less stands.

HMRC state that agencies should note that their workers can become entitled to Statutory Sick Pay if in a single contract:

  1. they work longer than the original period specified and the total period actually worked exceeds three months, OR
  2. the contract is extended for more than three months.

Agency workers whose contracts are for three months or less can also become entitled to SSP if two or more such contracts with the same agency are separated by eight weeks or less, (56 days) and

  1. the total length of the contracts is more than 13 weeks
  2. the total period actually worked becomes more than 13 weeks OR
  3. the contracts are extended so that together they can run for more than 13 weeks.

HMRC, DWP and DTI will be considering the implications of the judgement and further information will be published on their websites.

HMRC also point out that, in their opinion, the ruling applies to agency workers only. Other short-term contract workers are unaffected and remain entitled to SSP.

10. SDLT CD-Rom To Be Discontinued

Since online filing was introduced, demand for HMRC’s CD-Rom has significantly reduced and they will not be producing any more once current stocks have been exhausted.

11. Negligible Value List

HMRC’s Negligible Value list has been updated to include New Negligible Value Agreements in June 07.

Link: Negligible Value List

12. Online Agent Authorisation: PAYE Reference Starts With Zero

HMRC have fixed the problem that prevented employers with PAYE reference began with a zero from using their Online Agent Authorisation facility to authorise their agent. All employers can now use this service, according to HMRC.

13. Telling HMRC When You Become Self Employed

HMRC has published an improved version of Form CWF 1 to be used when a person becomes self employed.

In November 1999 Lord Grabiner was appointed by the Chancellor to conduct an investigation into the informal, or hidden, economy and to recommend how to move economic activity out of the hidden economy. Amongst his recommendations were that:

‘more assistance should be given to the newly self-employed at the outset to avoid trouble later on with the revenue departments (and perhaps other regulatory bodies) and that, to facilitate this, there should be an effective requirement to notify the Inland Revenue on or soon after the start of business.’

One of the outcomes of the Grabiner report was that the existing Form CWF 1 which was used to make a written application to pay Class 2 national insurance contributions was replaced by a simpler form. That form has now been improved.


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.

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