UK: Weekly Tax Briefing

Last Updated: 17 April 2000

Hot topics

Finance Bill - Inland Revenue powers to combat serious tax fraud

The Finance Bill was published on 7 April 2000. Many of the measures in it have been the subject of consultation. For example, the Bill proposes new Revenue powers to combat serious tax fraud, which are intended to substitute a production order for a search warrant where, in the course of investigating a serious tax fraud, the Revenue are seeking to obtain evidence held by an innocent third party. Following consultation there have been a number of changes to the plans set out in the original Technical Note.

  • Regulations will cover the resolution of disagreements on whether documents are privileged, the internal Inland Revenue procedures for approving applications for orders, and other procedures concerned with the hearing of applications and the production of documents.
  • The level of judicial authority needed to approve an order has been set at circuit judge or equivalent, instead of stipendiary magistrate.
  • The scope of documents that may be required has been limited to those that may be evidence of the suspected offence.
  • Documents subject to legal professional privilege are now exempt regardless of who holds them.
  • The time normally given for complying with an order will be 10 working days, instead of seven days.
  • Rights of recipients to appear at the hearing when the order is applied will now be the subject of a specific statutory provision (rather than governed by case law).

It would be a very serious matter to be on the receiving end of the new power. It would not be a matter to occupy an in-tray. In contrast with having one's premises searched and one's documents seized by the Revenue, the onus will now be squarely on the recipient to deliver the documents specified; the time scale for everything to happen is still very compressed; there are 'tipping off' provisions that might raise difficult issues; and non-compliance can result in contempt of court.

The Bill also proposes changes to the Revenue's existing search powers including (a) giving the Revenue the right to printouts of relevant documents stored on computer accessible from the premises being searched and (b) extension of the exemption for documents within legal professional privilege. For further information, please speak to your usual KPMG tax contact.

Employers - it's here again!

The income tax year end has come around again and with it all those payroll-related compliance tasks.

Avoid interest...

The final payment of PAYE/NIC for the 1999/2000 tax year is due by 19 April 2000. Any payments made after that date will attract interest.

... And penalties

Form P35 summarises the total deductions and payments in the year and Form P14 records the pay and deductions for individuals. These must be completed and submitted by 19 May if an automatic penalty of £100 per month per 50 employees is to be avoided.

And for your employees ...

All staff on the payroll at the end of the tax year must be provided with a form P60 by 31 May.

Benefits in kind

Employees must also be provided with a copy of forms P9D or P11D, where appropriate, to record taxable benefits in kind such as company cars. These forms are essential to employees in dealing with their own tax affairs as they have their own deadlines to meet for filing returns to the Revenue under self assessment. There is an initial penalty of £300 for each form P60 provided late, with £60 per form per day chargeable for continuing failures, and up to £3,000 for each incorrect return submitted. Visit the KPMG Tax Advisers website and click on the 'Our solutions' button for information about KPMG's P11D Solutions software to see how this may help you manage your risk.

PAYE Settlement Agreement

There may be items that create taxable benefits but you don't want these to appear on individual employees' P11D forms. Examples would include the staff Christmas party which cost over £75 per head, sales awards or prizes, etc. This can be resolved using a PAYE Settlement Agreement. The formal agreement between the employer and the Revenue has to be in place before 6 July, whereby the employer agrees to pay the tax due. For 1999/2000 the settlement will include a Class 1B NIC charge on the tax paid through the settlement and on any items in the settlement which would normally attract NIC after the end of the tax year. The employer then supplies details by an agreed deadline (commonly 31 August) and the tax and NIC due is paid by 19 October. For further information and assistance please speak to your usual KPMG tax contact.

100% FYAs

Last week's Weekly Tax Briefing referred to the Budget proposal to introduce 100% first-year allowances (FYAs) for small businesses investing in information and communications equipment. The Government has now clarified that 100% FYAs will be available to small enterprises - 'small' being defined using the same criteria as in the Companies Act - but not to medium-sized enterprises.

The next issue of Weekly Tax Briefing will appear on 28 April.

Press releases - w/e 7.4.00

3 April 2000 - Inland Revenue - Internet filing of Self Assessment tax returns - regulations

Regulations have been laid to support the first Internet-based service provided by the Inland Revenue, for the filing of Income Tax Self Assessment returns.

4 April 2000 - Inland Revenue -inheritance tax

The limit for the simplified IHT reporting rules has been raised from £200,000 to £210,000.

7 April 2000 - Inland Revenue/DSS - Finance Bill - pensions changes

New tax rules for stakeholder pensions and streamlined income drawdown arrangements have been published in the Finance Bill. The first batch of draft stakeholder tax regulations have been published for consultation.

7 April 2000 - HM Treasury - Publication of the Finance Bill

This press release, which was published in two parts, details the contents of the Finance Bill 2000.

7 April 2000 - Inland Revenue - Finance Bill

This press release lists some measures in the Finance Bill, some of which were announced before Budget Day.

Other Inland Revenue Finance Bill press releases issued on 7 April 2000 covered (a) 100% FYAs for investment by small businesses, (b) general insurers' reserves, (c) Inland Revenue powers to combat serious tax fraud, (d) companies drawing up their accounts in foreign currency, (e) tonnage tax and (f) provision of services through intermediaries.

For further information please contact your usual KPMG contact.

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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