23 Capital
Tax charities 12 Employment
gains tax
Rosina Pullman and Graham related securities
Sherburn explain the need
for tax charities has never
been greater
32
Aparna Nathan explains the
Robert Jennings and Rob Pearce
consider changes for internationally new capital gains tax regime
for non-residents
mobile employees
Excellence in Taxation
www.tax.org.uk
www.att.org.uk
February 2015
www.taxadvisermagazine.com
Out of
pocket
Rebecca Benneyworth
on the High Income
Child Benefit
Charge p28
PLUS HMRC communications – VAT planning – LDF – Loss relief – VAT returns – Daily penalties
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0115-017
CONTENTS
Journal of The Chartered Institute
of Taxation and The Association of
Taxation Technicians
Artillery House, 11-19 Artillery Row,
London, SW1P 1RT
tel: 020 7340 0550
The CIOT is a registered charity
– No. 1037771
The ATT is a registered charity
– No. 803480
EDITORIAL
Editor Chris Mattos
Deputy Editor Stefan Black
Publisher Chris Jones
ADVERTISING & MARKETING
Head of Sales
Nick Lee tel: 020 8662 2065
Head of Marketing
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PRODUCTION
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Offices LexisNexis,
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£96.00 for 12 issues
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For Tax Adviser magazine
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© 2015 Chartered Institute of
Taxation (CIOT).
Printed by Headley Brothers Ltd,
Ashford, Kent.
This product comes from
sustainable forest sources.
Reproduction, copying or extracting
by any means of the whole or part
of this publication must not be
undertaken without the written
permission of the publishers.
This publication is intended to be
a general guide and cannot be a
substitute for professional advice.
Neither the authors nor the publisher
accept any responsibility for loss
occasioned to any person acting or
refraining from acting as a result of
material contained in this publication.
ISSN NO: 1472-4502
3
4
6
8
9
11
Editor’s Welcome Chris Mattos A feast of penalties
President’s page Anne Fairpo Future of the tax profession
ATT Welcome Michael Steed More on the bereavement system
Briefings From Artillery House: ATT and CIOT
New route to Fellowship available
Spotlight on branches
Record attendance at Christmas carol service
20
23
General Features
12 Tax charities Why the tax charities?
Rosina Pullman and Graham Sherburn on the need for tax charities
14 HMRC communications It’s good to talk
Stephen Relf and Alison Ward explain two new initiatives being used
Large Corporate
16 Inside track Shifting interests
Bill Dodwell outlines the OECD’s draft interest restrictions document
17 VAT planning Where next for VAT?
John Voyez looks at the trends in VAT planning and compliance
20 Liechtenstein Disclosure Facility Not so last year
John Cassidy and Hayley Ives on why the LDF is still relevant
23 Employment related securities A move in the right direction?
Robert Jennings and Rob Pearce on internationally mobile employees
26
COVER STORY
SMEs & Individuals
26 In practice January madness
Chris Mattos shares his tax return season experiences
28 High income child benefit charge Out of pocket
Rebecca Benneyworth on the High Income Child Benefit Charge
30 Loss relief A Thorne in the side
Julie Butler considers the validity of income tax loss claims
32 Capital gains tax The new dwelling tax
Aparna Nathan explains the new regime for non-residents
36 VAT returns Avoiding a trip up
Neil Warren gives some practical tips about completing VAT returns
38 Daily penalties La peine quotidienne
Keith Gordon discusses the validity of daily penalty notices
Technical From Artillery House
42 Sports Clubs – unjust enrichment
43 Rating the Autumn Statement
44 Towards a TMA for Welsh taxes
45 Reform of the close company participator rules
46 The meaning of ‘dwelling’ – update
47 Prohibition of corporate members of LLPs
48 RTI is appealing
28
32
36
38
50 Branch events Dates for your diary
51 Book review
52 Recruitment Looking at the best industry jobs
www.taxadvisermagazine.com | February 2015
1
Spring Residential
Conference 2015
The conference offers a range of topical lectures presented by leading
tax speakers. Group working sessions will support the lectures and
there will be displays of tax books and software.
Queens’ College, Cambridge
Friday 27 – Sunday 29 March 2015
Book online at:
www.tax.org.uk/src2015
Tax investigations – ‘Getting the best outcome on a HMRC enquiry’
Private client and trust update
Top 10 risk areas for tax practices
Tax-efficient business structures for owner managers
Budget 2015 – the highlights
Corporation tax issues for owner-managed companies
BEPS – will the OECD’s work change the international corporate tax landscape?
Fiscal share valuation – all change or plus ca change
FRS 102 and its impact on tax computations
Sponsored by:
Latest developments: round-up pre-year end and election
Speakers to include:
Dawn Register BSc CTA TEP, BDO LLP, Chris Whitehouse MA BCL CTA (Fellow) TEP Barrister,
5 Stone Buildings, Paula Tallon FCA CTA (Fellow) ADIT, Gabelle LLP, Rebecca Benneyworth BSc FCA,
Tim Good BA (Oxon) ACA, Professional Training Partnership, Ros Martin PhD MA BSc (Hons),
Tax Consultant, Bill Dodwell CTA (Fellow) LLB LLM (Cantab) ACA, Deloitte LLP, Jenny Nelder BA
(Hons) FCA CTA (Fellow), Bruce Sutherland & Co, David Bowes FTII FRICS MAE MEWI SBV, Bruce
Sutherland & Co, Malcolm Greenbaum CTA ACA, Greenbaum Training & Consultancy Limited and
Peter Vaines FCA CTA Barrister, Squire Patton Boggs.
Conference fee £585 (booking before 28 February 2015) £665 thereafter
OPEN
to non
membe
rs
D IS C O U
NT
for thre
e or mo
re
membe
rs atten
ding
from th
e same
firm
Welcome from the editor
[email protected]
Editor, Tax Adviser
A feast of penalties
A
February
is a time for
a diet of selfassessment after
the indulgences
of January
fter the madness of tax return season,
I always find that February is when I
start to think about the year ahead. It’s
a time for a diet of self-assessment after the
indulgences of January. But for taxpayers who
didn’t submit their return on time they will soon
receive an automatic late-filing penalty.
Penalties generate a substantial amount of
income for HMRC. In 2014 it was reported that
they issued £71 million worth of late £100 filing
penalties, or as one press release in January
stated, 681.8 million Jaffa cakes!
Following on from the automatic penalties
we have the more convoluted statute relating
to daily penalties. On page 38 Keith Gordon
explains the Donaldson case, which concerns
HMRC’s appeal against a First-tier ruling that the
legislative requirements concerning the daily
penalties had not been met.
On page 28 Rebecca Benneyworth explains
how a revocation of the election not to receive
child benefit falls within the penalty regime. She
says that, although it is arguable that the penalty
legislation cannot apply to the return because it
was correct when ‘given’ to HMRC, the legislation
was written when subsequent events could not
affect the liability to tax for a particular year.
There are an increasing number of disclosure
facilities available to reduce a taxpayer’s exposure
to penalties for non-compliance. On page 20
John Cassidy and Hayley Ives highlight that there
are still common misconceptions about taxpayer
eligibility for the Liechtenstein Disclosure Facility.
Recently, I had to explain the penalty system to
a client who had made a real mess of submitting
his tax return online – you can read more about
that case in my In practice article on page 26. I
referred to it as the ‘new regime’ before I realised
that the provisions have been in place for more
than five years now – doesn’t time fly?
A truly new regime is the taxing of gains
realised by non-UK residents which will be
effective from April 2015. On page 32 Aparna
Nathan summarises the draft legislation and
explains that the additional capital gains
tax provisions apply only to disposals of UK
residential property interests and not to
interests in other property: in particular, it does
not apply to interests in personal property nor to
interests in commercial property.
Another set of measures that takes effect from
April 2015 is the new legislation to change the
UK taxation of share income for internationally
mobile employees. On page 23 Robert Jennings
and Rob Pearce explain that the new rules may
significantly change the UK income tax and NIC
treatment of employment related securities for
internationally mobile employees.
Chris Mattos
Editor, Tax Adviser
Details of the editorial advisory board can be found at www.taxadvisermagazine.com/editorialadvisoryboard
EDUCATION SUPPLEMENT
Don’t miss the CIOT & ATT November 2014 exam results
this month.
Those who have now met the examination requirements for membership
of the CIOT and ATT are listed, together with those who have achieved
distinctions and won prizes.
View online:
www.taxadvisermagazine.com/educationsupplement
www.taxadvisermagazine.com | February 2015
3
ATT Welcome
[email protected]
Anne Fairpo
Future of the tax profession
W
here are we going? I don’t think
anyone doubts that tax is going to
continue – not even science fiction
writers imagine a world without tax. Star Wars
begins with a tax dispute, for example. Have
a look at the opening lines of Episode I: The
Phantom Menace; the republic is in turmoil
because of a dispute about the taxation of
trade routes. Perhaps we should rename the
series BEPS: the Galactic Years? Even in Star
Trek, which tends to describe itself as set in a
post-want society and is decidedly sketchy with
details about how everything is funded, the
Ferengi (at least) have a tax system.
So, with tax as a given, what of the tax
profession itself. Perhaps, more accurately, the
professions within tax: advice and compliance,
at the least. Where do you see your line of
work in ten or 20 years?
We’ve talked readily for some time about
technology and the changes that it brings
for tax. A little while ago, I raised a note of
caution about overstating the benefits that
technology can bring into the tax system,
particularly from a collection perspective – but
that’s caution about the technology as it is at
the moment. It’s more than likely that what is
wished for now by government will be feasible
at some point, in a form and at a price that
is achievable. The same thing will be true for
technology for use in the tax profession. Walk
before you can run, certainly; but walk enough
and the running generally follows (some of you
have probably been trying out a couch-to-5k
plan for the new year. By the time you read
this, I should know whether I can run as well
as cycle – I’m more or less looking forward to
the Winter Run 10k in central London at the
beginning of February).
What effect will the increasing use of
technology and other changes have on the tax
profession? I don’t have any particular answers
but I’m interested to know what you think.
The legal system is potentially going
through similar changes, and tax is, arguably,
a specialist form of the legal profession. (Feel
free to disagree!) There is increasing pressure
on work as a result of clients’ unwillingness
to continue to pay at ‘normal’ law firm rates
for the more administrative, repetitive and
process-based tasks within the law. Clients are
not particularly interested in paying someone
to do something in three hours that could be
done, with judicious use of technology, in half
an hour.
In effect, the law seems to be moving
towards two types of work: specialist advisory
and process-oriented. The latter is being taken
4
in-house, or undertaken at a much lower cost
by businesses with the right technology. Not all
of those businesses are traditional law firms.
Law firms also face a challenge that
we’ve been dealing with for years, namely
liberalisation. Competition has increased
as alternative business structures enable
legal advice to be given by businesses other
than traditional law firms. Tax advice and
tax compliance have not been regulated in
the same way as legal advice, so that’s not
something we need to learn to cope with at
the same time as the two main drivers of
change in this economy: cost pressure and
technology changes.
A particularly interesting experiment here
is law firm that has partnered with a university
to develop technology such as artificial
intelligence, text processing and data mining
to use in legal services. The list looks rather
similar to some of the technology focus of
HMRC, particularly their Connect system.
None of this will take away the requirement
for specialist legal (and tax) advice – the myriad
ways in which people can get into difficulties
with legislation are likely to continue to
outnumber the ability of technology to resolve
those difficulties.
So what next? Where are we going? Letters
are invited (or, more likely, to my email address
below). I’d be interested to know what you
think the profession will look like, say, midcareer for the 58 candidates who passed the
Taxation of Major Corporates Advisory Paper
(part of our Joint Programme with the ICAEW)
– to whom, congratulations – and also to
those successful in the November sitting of
our exams.
Finally, congratulations also go to our new
Honorary Fellows, Professor Judith Freedman
of Oxford University, and Dame Fiona Woolf
and Nicholas Woolf.
Anne Fairpo
President, CIOT
[email protected]
What do you
think the tax
profession will look
like in ten years
time?
February 2015 | www.taxadvisermagazine.com
European Branch
Paris Breakfast Seminar
Save the date – Tuesday 10 March 2015
Book online at:
www.tax.org.uk/european
Mazars, Tour Exaltis, 61 Rue Henri Regnault,
92200 La Defense, PARIS
PROGRAMME – Is the UK really a Tax Haven ?
FREE
08:15 Registration & Coffee
08:30 Chairman’s introduction:
Stephane Gelin, CIOT European Branch
08:35 UK Plc – open for business? Tax Planning for inbound investors
David Sayers, International Tax Partner, Mazars
Q UA L IF
IES
FOR
C P E/C P
D
P O IN T S
Follow us on our website
www.tax.org.uk and Twitter
@CIOTEuropeTax for the latest
updates on topics and speakers
or join our Facebook group.
We also have a group on LinkedIn.
09:30 The UK as an environment for internationally mobile entrepreneurs
Stephen Coleclough, Consultant, Mishcon De Reya,
Secretary General, Confederation Fiscale Europeenne
10:15 Questions and discussion
10:30 Coffee
10:45 Depart
Thames Valley
Capital Taxes Update with John Barnett
Thursday 26th February 2015
Best Western, Reading Moat House, RG41 5DF
1:30 PM refreshments, session 2:00 PM to 5:30 PM
John Barnett, Burges Salmon
John has been partner in Burges Salmon since 2003. He specialises in
both international and corporate tax. A practising solicitor, he is also
qualified as a Chartered Tax Advisor and is a former winner of the CIOT’s
Institute Medal.
Nationally, John is a member of the CIOT council and until recently
chaired the CIOT’s Capital Gains Tax and Investment Income Committee.
He was a member of the GAAR interim panel.
In his roles with the Chartered Institute of Taxation, John has been
heavily involved in policy-level discussions about all the main capital tax
changes since 2006 including, in particular, CGT changes in 2008 and
2010; the domicile changes since 2008 and the statutory residence test.
www.taxadvisermagazine.com | February 2015
Book online at:
www.tax.org.uk/thamesvalley
£95
per
delegate
Q UA L IF
IES
FOR
C P E/C P
D
P O IN T S
To book online and pay securely by debit
or credit card or to pay by cheque please
visit the Thames Valley Branch website
www.tax.org.uk/thamesvalley
5
ATT Welcome
[email protected]
Michael Steed
More on the bereavement system
M
y recent comments on HMRC’s
‘improvements’ to the bereavement
system drew an interesting response
from one tax adviser who provided a good,
practical view from the streets, where theory
and practice don’t always tread the same path:
‘As a firm, we deal with a number of
deceased Estates each year, some relatively
simple and others that are more complex with
residuary assets being put in to Trust. Since
the removal of form R27 in October 2014, far
from simplifying the process, matters have now
become far more difficult to deal with.
Within the last couple of years, HMRC had
revamped the form R27. The form was split into
simple sections. You only had to complete the
sections relevant to your particular client and
all the information (and agent authority) was
included on one form.
From October 2014, with no warning, that
all changed.
Firstly, HMRC say they have a new telephone
number. Well in fact there are two. The
bereavement helpline number is 0300 200
3300, but this is not actually a dedicated
number, but a digitalised number where you
have to explain to a digital recording what it is
you are calling about. If you say “bereavement
helpline” it doesn’t recognise what you say. If
you can eventually get through to a real person,
they give very little help except to say that you
should write to the Self-Assessment office in
Liverpool. The second number is the Deceased
Estate Helpline, 0300 123 1072, which is
actually the Trust (and Estate) helpline, and they
can only help if a trust results from the Estate.
Secondly, HMRC say they have made it easier
for bereaved people to authorise someone else
to act. I have not as yet found out how this is
done. The form R27 used to have a separate
section, but the only option now seems to be
to send a 64-8. The problem here is that the
64-8 is only in respect of the deceased’s UTR,
so HMRC will only correspond with you for
the period up to date of death. If a Return is
required for the Administration period or for a
resulting Trust, a further one or two UTRs will
be issued, but the 64-8 details are not marked
against those UTRs automatically, so one, or
two, further 64-8s are required.
Finally, HMRC have supposedly replaced the
form R27 with tailored letters. I’ve dealt with
three deaths since October and have not yet
seen a tailored letter. When I’ve spoken
to HMRC Self-Assessment, they were not
aware of what these letters are or when they
will be issued.
6
After lots of phone calls, I have been advised
that if a client dies and there is untaxed income
or capital gains in the Administration period
(such that a formal Tax Return is required) and
a Trust also results then I must write three
separate letters (and complete three 64-8s)
as follows:
1. Write to HMRC Self-Assessment in
Liverpool providing details of income
to date of death and include a 64-8.
2. Write to HMRC Estates in Edinburgh
advising them that there will be
untaxed income and gains during the
Administration period and ask for
a Self-Assessment Tax Return and
include a 64-8.
3. Write to HMRC Nottingham Trusts
advising them that a Trust has resulted
from the death of an individual and
send a 41(G) and enclose a 64-8.
To me, this doesn’t seem much of a
simplification. While I understand that for
simple cases, where there may just be Income
Tax to reclaim for the period to date of death,
the new system might work, but for more
complicated cases, the form R27 was perfect.’
That response caught my attention and
also the attention of our technical officers
who are dealing with this member’s well-made
comments.
So, over to HMRC and let’s see what their
response is.
Michael Steed
Deputy President, ATT
[email protected]
While
I understand
that for simple
cases, where there
may just be Income
Tax to reclaim for
the period to date
of death, the new
system might work,
but for more
complicated cases,
the form R27 was
perfect
February 2015 | www.taxadvisermagazine.com
Sitting the CIOT or ATT examinations
in May 2015?
Fine tune your
examination skills for key
topics by getting advice
from expert tutors
The student training day follows
a question based approach, with
questions taken predominantly
from past exams. Knowledge is
not enough - to be successful in
professional exams you also need
to focus on application and exam
technique. The day will be question
based, covering mainstream aspects
of the syllabus and how to approach
questions. Good exam technique
can be the difference in passing or
failing a paper.
The tutor was very friendly
and engaging. A high level
of teaching.
CTA Programme
ATT Programme
Saturday 28 February, 9:30 - 16:30
Saturday 28 February, 9:30 - 16:30
LONDON
Taxation of Individuals
MANCHESTER
Taxation of Owner-Managed
Businesses
Saturday 7 March, 9:30 - 16:30
LONDON
Taxation of Owner-Managed
Businesses
LEEDS
Taxation of Individuals
Price £100 (complimentary lunch inc.)
Quality of teaching was
excellent. I felt that the day
was excellent value for money,
particularly for self-funded
students looking for an
alternative to full revision
courses!
LONDON
Paper 1: Personal Taxation
MANCHESTER
Paper 2: Business Taxation &
Accounting Principles
BRISTOL
Paper 1: Personal Taxation
Saturday 7 March, 9:30 - 16:30
LONDON
Paper 2: Business Taxation &
Accounting Principles
LEEDS
Paper 1: Personal Taxation
Price £90 (complimentary lunch inc.)
The course brought the
subjects to life and I feel well
prepared now. Excellent
value for money.
Book online at www.tax.org.uk/studenttrainingday and www.att.org.uk/studenttrainingday or
contact the Education Team on 020 7340 0550 or [email protected] for further information
BRIEFINGS
CIOT
New route to Fellowship available
FELLOWSHIP
The CIOT has launched
a partnership with the
University of Birmingham
enabling tax professionals
who enrol on the MSc by
Research (Taxation) course
to seek Fellowship of the
Institute. To do so they must
submit their completed
thesis for separate
assessment by the Institute
and the university.
The partnership will
further the promotion of
academic research into
taxation, while successful
students will benefit from
dual recognition of their
achievement by the Institute
and the university.
The University of
Birmingham, via the
Birmingham Business
School, is one of a number
of UK academic institutions
to offer postgraduate
degrees in taxation as the
academic dissemination and
analysis of policy becomes
increasingly prized by HM
Treasury and other parties.
The MSc by Research
(Taxation) is targeted at
experienced practitioners
wishing to integrate
academic analysis with their
practical knowledge. As a
research master’s degree,
the programme does not
include exams, but students
are required to research and
produce a thesis.
In demonstrating a
high degree of technical
competence in UK taxation,
successful students who
CIOT/ATT
Tax Rate Cards – Budget 2015
BUDGET
The Institute and Association
are offering their members
the opportunity to pre-order
Budget 2015 Tax Rate cards,
free of charge. If you would like
to order a batch to distribute
to clients or for use by staff in
your practice, log on to www.
tax.org.uk/taxratecards for
CIOT Members, or www.att.
org.uk/taxratecards for ATT
Members.
obtain Fellowship of the
CIOT via this route will
be able to market their
achievement in ascending
to the Institute’s senior
membership to employers
and clients. They can
also expect to receive all
the benefits conferred
by achievement of a
prestigious academic
qualification at a leading
UK university.
With each thesis
available for academic and
practitioner consumption,
successful students will be
uniquely placed to assist
in the development of
contemporary research on
UK taxation issues, and to
become thought leaders in
their chosen specialism.
The partnership between
the Institute and the
university, together with
the introduction of the new
route to Fellowship, reflects
CIOT President Anne Fairpo’s
support for the academic
study of tax by enabling
professionals to augment
their practical experience
with postgraduate work.
It is hoped that
collaboration with a leading
academic institution will
produce a steady stream of
high-quality applicants to
Fellowship of the CIOT, who
are equipped to contribute
to the discourse of taxation.
Anne said: ‘We are
delighted to be working
with the University of
Birmingham to encourage
the academic study of tax
among practitioners.
The new route to
Fellowship of the CIOT
promises to provide an
additional incentive for
tax professionals who may
be considering the merits
of combining their existing
experience of practice
with the new perspectives
afforded by academic
study.’
For more information
about this and other routes
to Fellowship of the CIOT,
see www.tax.org.uk/
fellowship
For specific information
about the MSc by Research
(Taxation) programme,
please email the programme
director Andrew Lymer
at [email protected],
or go to the University
of Birmingham website:
www.birmingham.ac.uk/
postgraduate/courses/
research/business/msctaxation-research.aspx
ATT
From high street to Downing Street
EVENT
Council member James McBrearty outside 11 Downing Street
8
ATT Council member James
McBrearty banged the drum for
small business at 11 Downing
Street in an event hosted by
Chancellor George Osborne
to mark the UK’s second Small
Business Saturday. The USinspired initiative focuses
national attention on the nation’s
5.2 million small businesses.
James, whose tax advice
practice specialises in advising
one-person businesses, said: ‘As a
small business owner helping other
small businesses, it is reassuring
to see the Chancellor give his full
backing to Small Business Saturday.
We are a small but mighty
community, acting as key drivers
of the economy, taking risks and
providing the opportunities for
long-term job creation.’
February 2015 | www.taxadvisermagazine.com
BRIEFINGS
CIOT/ATT
Spotlight on branches
BRANCHES CONFERENCE
This year’s branches
conference will be held at
Scarman House, University of
Warwick, from lunchtime
2 March to lunchtime the
next day.
The theme is ‘Press and
Publicity’ and will include
sessions on the following topics:
zz
How can you reward your
‘frequent flyers’?
zz
What new marketing tools
are on offer from CIOT/ATT
head office to help drive
up attendance to branch
events?
zz
Can you encourage those
who never attend branch
events to register?
The incoming CIOT and ATT
Presidents will be on hand
with head office staff to meet
branch committee members
and will discuss plans for 2015
and beyond.
An induction day for new
committee members will
be held on 12 May at
Artillery House.
Register to come along and
speak to other new committee
members and pick the brains of
those existing branch reps.
Please register your interest
for either the branches
conference or the induction
day, by emailing branches@
tax.org.uk
CIOT/ATT
Tax advisers
celebrate in
style!
BRANCHES
Above: ATT President Natalie Miller, Northern Ireland Branch
President Malachy McLernon and CIOT President Anne Fairpo.
Right: Northern Ireland Branch President Malachy McLernon
The Northern Ireland Branch
celebrated its annual dinner in
Belfast. Guests of honour were
Anne Fairpo, President of the
Chartered Institute of Taxation,
and Natalie Miller, President
of the Association of Taxation
Technicians. The after-dinner
entertainment was provided by
local comedian Jake O’Kane.
McLernon, the Northern
Ireland Branch Chairman,
delivered his keynote speech
asking the profession to be
vocal and creative in using tax
to increase the competitiveness
of Northern Ireland to
generate wealth, sustainable
employment and a future for
the next generation.
www.taxadvisermagazine.com | February 2015 9
BRIEFINGS
WCOTA
News from the Worshipful Company
of Tax Advisers
WCOTA
Alison Lovejoy pieces together
recent WCOTA events
Space prevents me reporting
all that has happened since
my last article but here is a
selection which I hope will
encourage readers to join the
WCOTA, or at least to attend
the functions that are open to
non-members.
History of Tax
One of these is the series
of History of Tax events. In
October, Peter Fawcett gave
a fascinating illustrated talk
on tax in classical Athens,
which Caroline Turnbull-Hall,
a barrister and senior tax
manager at PwC, attended and
reported about for me.
Classical Athens is famous
for its oratory, architecture,
democracy and philosophy; but
how was this financed?
Peter covered the taxes
themselves, tax administration
and tax policy. What Peter
revealed was a sophisticated
tax structure, with a number
of its elements familiar to us
today, including evidence of
an early tax treaty between
Athens and the Crimea.
To pay for public
expenditure, taxes were
levied in Athens on wealth,
imports and exports, silver, and
foreigners but there were also
local and religious taxes.
The evidence for Athenian
taxes is found in the literature
of, for example, Aristotle and
Thucydides. Most notable was
a stele detailing the Grain Tax
law of 374BC, which was found
covering the Great Drain in the
Agora. It sets out, in 61 lines,
the purpose of the tax, along
with administrative provisions.
Peter pointed out that,
although sophisticated, their
tax legislation suffered from
the age-old problem of vague
drafting. Nothing changes!
10
Our next History of Tax
meeting takes place on
12 February and will look
at ‘Creating a new fiscal
constitution in post-war Japan’.
If you would like to attend this
as a WCOTA non-member, email
Ann Bailey at [email protected].
uk
Tour of the BBC
A group of us stepped into the
world of broadcasting with a
tour of BBC Broadcasting House
in Portland Place, London.
While standing on what
was the ceiling of the studio
where the BBC news is
read, we looked over the
huge newsroom where
all the TV and radio news
from throughout the world
is produced. Our guides
explained who did what. We
saw the weatherman step out
to tell Britain what to expect,
caught a glimpse of the news
studio and then later watched
them discussing events with
the journalists below.
We learned about the
BBC’s history and were shown
numerous studios where
programmes were made,
including the One Show, Radio
2 concerts and popular radio
shows such as Just a Minute
and the News Quiz. Several
of us, including our Master
and Mistress, were given the
chance to read the news from
an autocue and report on the
weather. Then the rest of us had
a go at making our own radio
play complete with music and
sound effects. Our fun evening
rounded off with a meal at El
Vino in the Barbican.
His Master’s Voice
I asked our Master, Michael
Godbee, to take time out
from his busy schedule
to write a short report on
recent events. He told me
that particular memories
included the reception at
the Barber Surgeons’ Hall
WCOTA visit BBC Broadcasting House
for London’s air ambulance
with a demonstration of the
world-leading techniques their
medical team performs.
This event reminded him that
many of our vital services receive
no public money and depend on
charitable donations and feels
we should all remind politicians
seeking to ‘soak the rich’ that,
apart from failing to raise the
revenue expected, those who
have wealth are often those who
provide substantial funding for
these vital services.
Michael also picked out
the Lord Mayor’s Show in
November where he felt
particularly heartened to
march with the other modern
Companies, where the children
showed particular affection to
the firemen and farmers.
Compared with two years
ago when we last participated,
Michael found that the crowds
were larger, which he put down
to the 100-year anniversary of
the Great War.
Caroline, his wife, also
represented the WCOTA at a
number of events for Mistresses
and Consorts, especially hosting
luncheon at Innholders’ Hall.
Carol service and supper
The year finished off with the
annual tradition of members
joining other livery companies
for a Service of Nine Lessons
and Carols in our own guild
church, the Priory Church of
St Bartholomew the Great
in West Smithfield. Masters
present included our own and
those of the Fletchers’, Builders’
Merchants, Hackney Carriage
Drivers’ and Public Relations
Practitioners’ companies, read
the lessons. The highlight for me
was the mixture of traditional
and modern carols beautifully
performed by the resident choir.
I could have listened all night,
but the disappointment that
it was all over was mitigated
by a festive supper with the
other livery members in nearby
Haberdashers’ Hall.
One advantage of the WCOTA
being such a ‘young’ company
is that we do not have a hall of
our own so therefore have a
wonderful time experiencing the
beautiful surroundings of many
of the other more ancient halls
and their marvellous hospitality.
Alison Lovejoy
FURTHER INFORMATION
Anyone who would like to join the WCOTA should email our
Clerk, Paul Herbage at: [email protected] and/
or visit our website: www.taxadvisers.org
February 2015 | www.taxadvisermagazine.com
BRIEFINGS
CIOT
CIOT/ATT
Record attendance at
Christmas carol service
2015
Subscription
SUBSCRIPTIONS
FELLOWSHIP
More than 90 members and guests
attended the 13th joint carol service held
by CIOT and ATT on 10 December at St
Peter’s Church, Eaton Square, London.
The Reverend Mark Lowther conducted
the service in which CIOT President Anne
More than 90 members and guests attended
Fairpo, ATT President Natalie Miller and
some of the CIOT and ATT members and
staff, read seven lessons.
A small reception in the parish hall with
mulled wine and mince pies concluded the
evening.
Carol service readers – back row: Mike Truman, Jake
Bailey and Michael Ashdown; front row: Natalie
Miller, Anne Fairpo, Nikki Reale and Jude Maidment
Disciplinary reports
Findings and orders of the Disciplinary Tribunal
Mr Paul Shillaw ATT
An accountant has received a warning after
failing to return a client’s phone calls and
missing the deadline for her corporation
tax return.
At a hearing on 13 October 2014,
the Disciplinary Tribunal ruled that Paul
Shillaw, of Poole, Dorset, was in breach of
three provisions of the Professional Rules
and Practice Guidelines (PRPG).
The tribunal found that he had failed
to show courtesy and consideration
towards a client by deliberately refusing
to return her telephone calls and that
he had performed his professional work
inefficiently, negligently and incompletely
by failing to file his client’s corporation tax
returns on time.
Mr Shillaw also admitted that he
had delayed in responding fully to
correspondence from his client’s
successor adviser.
The tribunal ordered that Mr Shillaw
should receive a warning in respect of each
of the charges and pay costs of £5,338.
The full decision can be found at www.
tax-board.org.uk/pshillawfulldecision
Mr Akeel Mirza (CIOT student)
A student accountant who was jailed
after admitting falsifying tax returns and
pocketing the money himself has also had
his membership of the CIOT revoked.
The Disciplinary Tribunal determined
that Akeel Mirza of Coventry was in breach
of four provisions of the Professional Rules
and Practice Guidelines of the CIOT (PRPG).
A Disciplinary Tribunal hearing on 13
October 2014 found Mr Mirza to have
breached the fundamental principle of
integrity by committing offences involving
dishonesty, for which he had already been
convicted. He had also failed to inform the
CIOT of his being charged with financial
Your 2015 subscription was
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To use the automated
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TAXATION
DISCIPLINARY
BOARD
crimes and his subsequent conviction,
and also that the Institute of Chartered
Accountants of England and Wales, to
which he also belonged, had begun
disciplinary action against him.
In September 2013, Mr Mirza was
jailed for two years after pleading guilty at
Warwick Crown Court to five offences of
dishonestly making false representations
for gain and one count of conspiracy to
cheat the public revenue.
The offences involved submitting
falsified company tax returns and selfassessment returns so as to generate tax
refunds, which he retained for himself.
The tribunal determined that the only
appropriate sanction was expulsion
from student membership of the CIOT.
Mr Mirza was also ordered to pay costs
of £2,542.
The full decision in this case is at www.
tax-board.org.uk/amirzafulldecision
www.taxadvisermagazine.com | February 2015 11
TAX CHARITIES
Why the tax
charities?
Rosina Pullman and Graham Sherburn
explain why the need for charities TaxAid
and Tax Help for Older People has never
been greater
E
very month more than 1,000 people
with tax problems ring the helplines of
tax charities TaxAid and Tax Help for
Older People. The two charities have been
helping low-income taxpayers for the past 20
years. At no time has the need been higher.
Last February we started to track the
details of 300 cases over the year to discover
why they needed our help. What follows
are our findings, illustrated by some case
stories, that underlined not only the extent
of the problem, but also how stretched both
charities are.
Why is the need for tax assistance
increasing?
The working environment has become
harder. A larger proportion of the working
population is now in low-paid work – some
with multiple part-time employment, others
in new low-income self-employment. Older
people too face lower incomes at retirement
as annuity rates plunge and many are forced
to take or remain in part-time employment.
The result is more vulnerable people.
At the same time the tax regime has
become harder for them. Those least
able to cope now have more complex tax
affairs (through self-employment, multiple
employments or a mixture of both) made
worse by changed tax law and HMRC
practice. This includes late-filing penalties,
the greater focus by HMRC on compliance
activity and their tightening practices on
debt collection. The late-filing penalty regime
is harsh for all those on incomes below the
personal allowance; particularly so for those
with no original tax liability.
The late-filing penalty regime has
also caught out people who had a PAYE
12
underpayment which was subsequently
progressed into self-assessment. The
confusion that had been generated by poor
information on the original P800 has been
compounded by the misunderstanding that
being sent a tax return must imply that they
had been self-employed. The worst aspect is
that these problems often involve only tiny
amounts of tax but carry disproportionately
high penalties of up to £1,600.
Providing a safety net
Edward’s case was typical. Now retired, he
had a serious stroke which rendered him
incapable of completing his outstanding
tax returns, resulting in late-filing penalties.
Although he tried to appeal against
them himself he was unsuccessful. This
exacerbated the depression Edward had
been diagnosed with and caused further
risk to his health.
This case was unusual in that, despite
having been through the appeal stages, we
were able to make an exceptional appeal
against Edward’s late-filing penalties on the
grounds of his incapacity.
The more usual situation is that poorly
presented appeals by individual taxpayers –
or their unqualified advisers – use up their
opportunity to appeal, leaving them with
only the more tortuous route of taking the
case to the tribunals.
Even when the taxpayer is competent
and has some knowledge of how the system
should work, dealing with HMRC is not
always straightforward.
The number of low-income selfemployed is rising, resulting in a significant
proportion of our clients with earnings
below the personal allowance. There is
a positive correlation between this and
vulnerability. Many of the 300 clients we
tracked had long-running, complex cases
that the tax advice charities were able to
resolve and close.
Alex illustrates this. He has learning
disabilities and suffers from chronic
depression that worsened after a street
attack in which he was badly hurt. He
continued to be self-employed, albeit at a
lower level than previously, and is now on
income below the personal allowance. He
used various coping mechanisms to deal
with his depression. But he was unable to
deal with his self-assessment obligations,
resulting in multiple outstanding tax returns
and penalties. His tax affairs were not
straightforward because he had also bought
a van using a finance lease.
The tax charity liaised with HMRC to
ensure that distraint proceedings were
not taken. We assisted Alex to complete
his tax returns for the multiple years and
negotiated with HMRC’s debt team to
give Alex time to speak to his family about
raising money to settle his outstanding tax
liabilities.
Mental illness affects 20% of clients
Compounding the increase in low-income
employment and self-employment, the
extent of vulnerability has increased.
Nearly half of the clients in the month
in which we reviewed the cases presented
multiple vulnerabilities. For those of
working age, this included combinations of:
zz
homelessness;
zz
serious health problems (including lack
of capacity due to brain damage);
zz
disability, including mental illness;
February 2015 | www.taxadvisermagazine.com
TAX CHARITIES
PROFILE
Name Rosina Pullman
Position Director
Organisation TaxAid
Tel 020 7803 4952
Email [email protected]
Website www.taxaid.org.uk
Profile Rosina Pullman has headed TaxAid for the past 13 years,
during which time the charity has helped thousands of individuals, sole traders and small
businesses across the UK.
PROFILE
© IStockphoto/fzant
Name Graham Sherburn
Position Chief Executive
Organisation Tax Volunteers (Tax Help for Older People)
Email [email protected]
Website www.taxvol.org.uk
Profile Graham has been Chief Executive of Tax Volunteers since June
2011, which through its Tax Help service provides telephone and faceto-face advice on personal tax issues for older lower income people UK wide. He is also
a member of LITRG.
zz
abusive employment or domestic
situations;
zz
illiteracy;
zz
prisoners or ex-offenders; and
zz
alcoholism and drug addiction.
For the older population, greater
isolation, age-related health problems,
diminishing confidence and exclusion
by the move to ‘digital by default’
denies them the access to knowledge
that affects their ability to manage their
tax responsibilities.
Are we doing HMRC’s work?
Edward’s and Alex’s situations are not
uncommon. But increasingly, the charities
are seeing taxpayers who are too fearful to
contact HMRC – and who have problems
beyond the scope of resolution direct with
HMRC. Four clients in five who accessed
our help in the review month had not
contacted HMRC to resolve their problem,
and were deterred further by the higher
penalties for non-compliance. This also
begs the question ‘should callers to our
helplines have contacted HMRC instead?’.
Although HMRC have launched the
Needs Extra Support service for those
lacking capability to deal with their
obligations, the staff are not in a position
to act as adviser to low-income taxpayers
who cannot afford professional advice.
This, rightly, avoids HMRC advising on
disputes and challenges to assessments.
Neither can HMRC provide the support
needed in respect of calculations, or
engage in appeals or claims to special
relief. Analysis revealed that more than
nine clients in ten did need the expertise
that a professional tax adviser provides
– and most were given advice by the
charities in how to present the issue or
formulate the question to HMRC. People
who need our help struggle with forms and
can’t understand HMRC’s communications.
allowance, 0% savings band, tax-free
childcare payments.
zz
The tax implications of the forthcoming
changes in the pension rules.
Why are more free tax advice services
needed now?
TaxAid and Tax Help for Older People fill
those needs and help vulnerable people
on low incomes. But their resources are
too stretched to help anywhere near the
number who need support.
With the trend towards greater
casualisation of employment, selfemployment and the blurring of
boundaries between work and retirement,
more vulnerable people on low incomes
face an increasingly complex tax regime.
Nearly half of the clients in our review
had several causes of vulnerability. This
number is much higher than in previous
years, and has a significant impact on the
functioning of the tax charities.
For the future, other changes driven
by the increasing numbers in low-income
employment or self-employment and
the constantly changing tax regime and
environment will affect the low-income
taxpayer. These include:
zz
Digital by default, which will exclude
categories of vulnerable taxpayers who
will need help with calculations and
online filing.
zz
The transition to Universal Credit, which
will affect those on low incomes, in
and out of work, and marginal selfemployment.
zz
Employment intermediaries (rogue
employers and scams) will continue to
prey on vulnerable taxpayers, who will
need support to ensure compliance.
zz
Increasing focus by HMRC on
compliance activity and tightening
practices of debt collection.
zz
New complexity added to the tax
system affecting the lower paid, for
example transferable married couple’s
www.taxadvisermagazine.com | February 2015
What are we doing about this?
Bridge the Gap
To better cope with the pressures now put
upon them, both charities have launched
Bridge the Gap, a joint campaign with
the CIOT and ATT. This aims to allow the
charities help a further 6,000 vulnerable
people facing tax crisis, getting them back
on their feet and providing the education
they need to handle their own tax affairs in
the future.
The first stage is to make people in the
tax profession more aware of the problems
our clients face and the work the two
charities are doing to help them. In effect,
we provide the tax profession’s safety net.
We need your help now – simply to
raise awareness among your colleagues of
the tax advice charities and our Bridge the
Gap campaign.
This spring, in the second stage of the
campaign, the CIOT and ATT will provide
ways for their members to support the
campaign financially.
FURTHER INFORMATION
For further
information visit:
www.bridge-thegap.org
13
HMRC COMMUNICATIONS
It’s good to talk
Stephen Relf and Alison Ward explain two new communications
initiatives being used by HMRC
KEY POINTS
zz
What is the issue?
HMRC are looking to improve
communications with taxpayers and
agents through their Once and Done
and Phone First initiatives
zz
What does it mean for me?
It should be possible to do more over
the phone, reducing the need for
written correspondence
zz
What can I take away?
The opportunity to engage with HMRC
over the phone and to suggest ideas
where the Once and Done approach can
make a difference
I
© IStockphoto/monkeybusinessimages
t is easy to think that HMRC are only
interested in digital methods of
communication these days. With new
digital processes and systems coming
online all the time, and more on the way,
it won’t be long before we are all more
comfortable with web chat than we are
with talking to someone face to face. Yet
HMRC have recently begun to champion a
more traditional means of communication:
the phone call. At a recent visit to HMRC’s
Manchester offices we were given an
overview of two new HMRC initiatives: Once
and Done and Phone First, both of which
recognise that staff can provide a better
service when they pick up the phone and talk
to taxpayers and agents.
Once and Done
The aim of Once and Done is simple: to
enable and encourage HMRC’s call handlers
to resolve issues at the first point of contact
with the taxpayer or agent.
When a taxpayer phones HMRC with
a query, or to provide or to request
information, the default position will be
that the call handler is expected to resolve
the issue there and then. The advantages
are clear: for the taxpayer, there is palpably
better customer service with less time
to wait before important information is
provided or actioned; for HMRC, staff are
motivated and print and postage costs
are reduced.
Once and Done started in May 2013
and began trialling ideas in August 2013.
Since then, it has generated more than 600
ideas, of which more than 100 have been
implemented. With the Once and Done team
14
committed to rolling out at least 12 ideas
every eight weeks there is more to come.
Given that Once and Done is expected to
impact in excess of one million calls a year
based on the ideas rolled out to date, the
likelihood is that almost all of us will come
into contact with the initiative soon. For a
summary of some of the more high-profile
changes made under Once and Done so far,
see Table 1.
HMRC tell us that, so far, the feedback
has been good: on customer service, HMRC
report a satisfaction rate of 96% based
on 3,000 call-backs. Employee morale is
believed to have improved too as HMRC
staff are encouraged to challenge the
guidance that is currently in place. They
might have first-hand experience of the
problem that is causing the frustration,
and could make improvements by simply
changing the guidance. Currently, 96% of
the ideas generated by the Once and Done
team come from call handlers; and it was
obvious from our visit that staff have come
‘on board’ with this new initiative because
they can see that their input is valued and
will be acted on where it is possible to do
so. Even if their ideas don’t make the final
‘cut’, feedback is given along the way so that
they are not discouraged from continuing to
make suggestions.
Readers may be concerned that some of
the ideas will cause more harm than good,
perhaps because they are rolled out too
quickly, or if they require staff to deal with
queries beyond their technical capabilities.
In answer to these concerns, HMRC point
to the rigorous processes they have put in
February 2015 | www.taxadvisermagazine.com
HMRC COMMUNICATIONS
place. All ideas are initially risk-assessed
by a team of 28 stakeholders across HMRC
before they are even taken to the testing
stage. The ideas that are taken forward are
tested ‘to destruction’ in the Manchester
centre before HMRC are satisfied they can be
rolled out nationally. Helpcards are created
for call handlers to assist them in putting
the ideas into practice. All calls are logged
to determine whether the helpcards are
working and to identify where there may be
training requirements.
Phone First
As its name suggests, Phone First is all about
encouraging HMRC staff to pick up the phone
rather than put pen to paper. At present,
most HMRC staff who receive an incomplete
form from a taxpayer or agent, or who need
more information, will write to them for
clarification and in many cases will receive
a written response. This comes at a cost for
HMRC and the taxpayer and builds delays
into what can be relatively simple processes.
Under Phone First, the HMRC staff member
will be encouraged to collect the information
and complete the process in one phone call.
The challenge here will be in changing the
culture within HMRC. Whereas the HMRC
staff in Once and Done will be comfortable
with using the phone, their back office
colleagues, who are more familiar with
receiving and sending post, may not. And
who could blame them when HMRC policy so
far has been to favour post? The Phone First
team report that only 10% of internal HMRC
guidance where HMRC need to contact the
customer has picking up the phone as an
option. Worse, when a brave HMRC staff
member does pick up the phone they are
required to ask no fewer than five security
questions of the bemused taxpayer.
That said, this looks to be a battle worth
winning judging by the potential cost savings:
of the one million items of post received in
HMRC’s Manchester offices alone each year,
the Phone First team estimate that, where
a reply is needed, 80% of those contain
information that could have been given
or taken over the phone. In addition, the
Phone First team expects an improvement
in quality as mistakes can occur in written
correspondence. Moreover, it seems popular
with taxpayers: initial research by the Phone
First team suggests that 94% of taxpayers
prefer to be contacted by phone (with most
of the remainder having no preference at all).
But what of the risks? There are several
concerns here, from the risk of agents
being bypassed to issues of taxpayer
confidentiality. On the agents question,
we have been assured that the HMRC staff
member will check that the taxpayer is
represented before making the call and,
where that taxpayer has an agent who
initiated the correspondence, HMRC will call
them instead. On taxpayer confidentiality, a
PROFILE
Name Stephen Relf
Position Head of the Technical Team
Company Chartered Institute of Taxation
Tel 020 7340 0550
Email [email protected]
Profile Stephen leads the CIOT’s Technical Team, having joined from CCH
in 2014 where he was the senior tax writer. Stephen has worked in practice and in industry.
PROFILE
Name Alison Ward
Position Technical Officer
Company Association of Taxation Technicians
Tel 07762 947 910
Email [email protected]
Profile Alison is one of ATT’s two technical officers, dealing with all issues
relating to personal tax, trusts and estates. Before joining the ATT in March 2014, Alison
was a tax manager in the private client team of an accountancy practice in Stockport.
smaller number of security questions will be
asked. HMRC expect to roll this initiative out
nationally early this year.
Concluding comments
In the medium term, it may be that many
of the problems identified as part of these
two projects will be solved by HMRC’s new
digital services. However, HMRC are to be
commended for trying to find solutions
and adopting a more flexible and open
approach that may do much to relieve
some of the frustrations. We really hope
to see both initiatives go from strength to
strength and will keep readers updated.
Although the Once and Done team
has a long list of potential ideas to work
through, it’s interested in hearing from
agents and, at the suggestion of the
professional bodies, will look at issues
raised through Working Together. If
you have an idea you would like to put
forward contact the authors and we will
forward it to HMRC.
TABLE 1 – ONCE AND DONE CHANGES
Pay and tax details
Issue: The taxpayer needs pay and tax details (including PAYE reference number)
for his or her self-assessment tax return, for a tax credits renewal or for a mortgage
application.
Previously: The taxpayer or their appointed agent would request the details over
the phone and HMRC would advise that the details could only be provided in writing.
This delayed the completion of the return and any other documents. It was a cause
of frustration for the taxpayer, the agent and the HMRC call handler who wanted
to help, and had the information at hand, but was prevented from doing so by the
guidance in place.
Now: The HMRC call handler can provide the information over the phone, improving
the taxpayer’s or the agent’s experience of dealing with HMRC and getting the
information to the taxpayer/agent when they need it.
Note: This change is expected to impact 120,000 calls a year and, in live testing, it
generated more calls than any other idea. It took HMRC eight to ten weeks to take this
from the idea stage to full roll-out.
Self-assessment penalty objections
Issue: The taxpayer/agent calls to object about the imposition of a penalty for the late
submission of a self-assessment tax return. If it is clear that the objection is reasonable
the call handler will be able to cancel the penalty.
Previously: The taxpayer/agent was asked to appeal against the penalty in writing.
This lengthened the process, causing additional stress for the taxpayer.
Now: If the taxpayer/agent objects to the penalty, the call handler believes the
objection to be reasonable and the case falls within tightly drafted guidelines, the call
handler can remove the penalty while on the telephone. The use of revised guidelines
(including a decision tree) is intended to ensure consistency of approach by all call
handlers and the taxpayer retains the right of a formal appeal. The call handler can also
take the taxpayer out of self-assessment at the same time, whereas previously this had
to be referred to another team to action.
Note: The Once and Done team is looking to enhance this service and to extend it to
other penalties.
www.taxadvisermagazine.com | February 2015
15
INSIDE TRACK
Shifting interests
Bill Dodwell outlines the main points from the OECD’s draft interest restrictions
document aimed at tackling BEPS
T
he OECD’s action plan to counter
base erosion and profit shifting is in
full flow. BEPS may be split into three
core areas:
zz
changes to transfer pricing approaches;
zz
lowering the threshold for taxable
presence (permanent establishment); and
zz
limiting interest deductions.
On 18 December, the OECD released a
discussion draft covering finance costs. The
focus group from Working Party 11, which
drew up the draft, is co-chaired by Germany
and the UK.
The introduction notes that the OECD’s
aim is ‘…to identify best practices in the
design of rules to prevent base erosion and
profit shifting using interest and financial
payments…’. The first line of the document
states: ‘The use of interest (and in particular
related party interest) is perhaps one of the
most simple of the profit-shifting techniques
available in international tax planning.’ The
draft rejects the idea of relying on arm’slength pricing, which may shock those
who have heard the OECD defend this
fundamental concept.
The core concept covered in
the document is that the total of a
multinational’s net interest deductions
should not exceed its net third party
payments. This is not to prohibit
deductions for intercompany debt but is
intended to cap total deductions.
Having set this base parameter, the
discussion focuses on three possible
approaches:
zz
group allocation rules;
zz
coordinated national fixed ratio rules; and
zz
possible targeted rules.
In principle, a group allocation rule
requires adding up the group’s total thirdparty interest expense and then allocating it
among all the group members by reference
to an economic measure. The two obvious
measures put forward are group earnings
and group assets. The consultation does
acknowledge that there are practical
problems in identifying the key figures – not
least because interest is often a legal and tax
concept that differs from valuation-based
accounting under IFRS. The draft rejects
the idea of deemed deductions, apparently
16
due to withholding tax issues. Instead, the
allocation would cap the deductions that
may be claimed by a group company.
Business will thus be concerned that
the group allocation rule would be likely to
prevent groups deducting all their thirdparty interest costs. It is not easy to move
debt around a group. Many countries
have tax rules that prevent so-called
‘debt pushdown’ – where debt incurred
at a parent company level is moved into a
different country. In some cases, company
law and accounting could prevent it and the
discussion draft notes that exchange control
and withholding taxes can also be barriers.
Large groups with lots of relatively
small activities in many countries have
always shied away from the complexity of
trying to manage debt in every location.
Variability of profit could also deny relief
for finance costs.
Germany pioneered fixed ratio tests in
Europe and have been adopted by seven
countries here. The German measure
limits deductions to 30% of earnings
before interest, tax, depreciation and
amortisation (EBITDA). The OECD discusses
limiting national finance deductions to
a defined percentage of earnings or by
reference to assets or equity. It does note
that limiting interest in this way could
meet other policy goals, such as setting
the balance between debt and equity –
which go beyond the BEPS project. They
also make the point that some countries
with fixed ratios consider that the current
one is too high; there are indications that
Germany would like to reduce significantly
its 30% level.
The OECD references a PwC study of
global 100 non-financial companies in nine
countries, which indicates that about half
have a 10% ratio and 85% no more than 20%.
The OECD concludes that the BEPS goal
requires ratios below 30%. There’s also a
discussion of combining fixed ratios with
interest allocation – perhaps by setting
a low fixed ratio that would be simple to
apply. More highly-leveraged groups would
then be forced down the complexity of an
allocation system.
A range of targeted rules is covered, such
as limitations on connected party debt, the
imposition of a ‘subject-to-tax’ condition
and rules limiting the creation of debt on
group restructuring. None is put forward as
a particular solution.
After considering limitations, discussion
moves to excess interest, noting ‘the
countries involved in this work are also
concerned by the risk of economic double
taxation and agree that this should be
avoided where possible’. The main option
put forward is the carry-forward of excess
deductions for use in future years, with
consideration of the carry-forward of excess
capacity – a concept used by the US and
Germany, among others.
There’s discussion of specific industry
factors, where it is suggested that special
rules may be needed for:
zz
financial services;
zz
oil and gas exploration and production;
zz
real estate; and
zz
public infrastructure projects.
The overall flavour of the document
will concern business as it moves sharply
away from long-standing concepts of arm’s
length terms. It is important to respond
with detailed explanations of issues not
necessarily considered by the Working Party
and, ideally, other solutions that fit the
parameters set. There’s a real risk that full
deductions for third-party costs could no
longer be available in future.
PROFILE
Name Bill Dodwell
Position Leader of Deloitte’s Tax Policy Group
Company Deloitte LLP
Tel +44 20 7007 0848
Email [email protected]
Profile Bill Dodwell leads Deloitte’s Tax Policy group, which is
responsible for knowledge, training and representations to HM Treasury and HMRC.
He is Chair of the Technical Committee and the Tax Adviser sub-committee.
February 2015 | www.taxadvisermagazine.com
VAT PLANNING
Where next
for VAT?
John Voyez looks at the trends in
VAT planning and compliance
KEY POINTS
PROFILE
zz
What is the issue?
Name John Voyez
Position VAT partner
Company Smith & Williamson
Email [email protected]
Profile John’s main VAT advisory areas are on cross-border transactions
and property, including European and inbound from the US businesses.
He is a regular speaker at conferences and is a Council member of the Chartered Institute
of Taxation; being part of its VAT and indirect taxes sub-committee. He also represents
the CIOT in Brussels at meetings with the Confédération Fiscale Européenne as well as
chairing the Nexia indirect taxes committee.
The changing relationship between
HMRC and the VAT adviser is examined
as well as the future role of the
VAT adviser in an evolving business
environment
zz
What does it mean for me?
The article highlights the areas and
approach of the VAT practitioner in the
future, with a focus on planning to make
clients compliant
zz
What can I take away?
The business environment is changing,
and the way we as advisers have
operated in the past is changing too,
along with advances in technology. We
need to be open-minded to change and
the challenges this will pose
T
his article looks at trends in VAT
planning and compliance in the past,
in current times, and where those
trends may be heading in the future from
the perspective of the VAT profession’s
approach versus that of HMRC. Readers
will no doubt have their own ideas and
opinions which will have been shaped
by their personal experiences in the
profession; working in a Big 4 firm, an
‘A’ tier firm, a smaller firm, the legal
profession, in industry, or within HMRC.
Where we were
This is not intended to be a history lesson,
but it is worthwhile reflecting on the
VAT environment from which we have
emerged. If we return to the end of the
1980s and early 1990s, the interests of
the VAT profession and HM Customs &
Excise as they were then called (referred
to as HMRC throughout the rest of this
article) were almost diametrically opposed.
In those days, while the tax authorities
were focused on a rigid implementation
www.taxadvisermagazine.com | February 2015
of what the press regularly referred to as
a draconian penalty regime and almost
every article on VAT seemed to focus
on proportionality, the VAT profession
had by then matured, and was engaged
in what one might think of as the early
days of aggressive tax avoidance. For
those with long memories, these early
VAT arrangements took many forms with
varying degrees of sophistication, ranging
from VAT group entry and exit schemes
at one level to so-called ‘toothbrush’
schemes, making use of the ability to
generate small amounts of taxable supplies
to obtain high levels of overhead VAT
recovery not otherwise achievable.
17
VAT PLANNING
However, it was not long before the mist
disappeared from before HMRC’s eyes when
they realised what the profession had been
up to ‘behind their backs’, and the antiavoidance era was launched. Prepayment
schemes were countered by HMRC with the
introduction of anti-forestalling legislation,
and sale and leaseback structures, previously
accepted by the Revenue, suddenly became
the unacceptable face of VAT planning,
resulting in the complex anti-avoidance
legislation we have today for some property
transactions. By the mid-to-late 1990s the
focus of the profession on VAT planning
arrangements had, to an extent, shifted
down a gear, as HMRC’s focus moved away
from blind emphasis on compliance and
towards countering planning structures. One
might say that the direction of the profession
and HMRC had become more aligned by
this time.
But all was not well in the VAT garden,
and by the early ‘noughties’ the name of
Halifax began to be heard more frequently.
VAT advisers without any knowledge of
French suddenly found the phrase ‘abus
de droit’ tripping off the tongue. Readers
not absorbed in the world of VAT need
only recognise that Halifax put in place
a complex structure which ensured that
otherwise irrecoverable VAT incurred on the
development of a call centre by a financial
services business became recoverable. As a
reaction to Halifax and ongoing avoidance
planning, by 2004 HMRC introduced
legislation in relation to the disclosure of VAT
avoidance schemes. However, businesses
continued to play the VAT avoidance game,
and there were several notable EU case law
decisions just after the turn of the century.
Where we are today
Following Halifax plc and others v C&E
Commrs [2006] STC 919, case C-255/02,
the European Court of Justice decided a
number of landmark VAT cases in which
one might say that possibly the letter of
the law had been followed, but not the
spirit of the law. HMRC initially considered
the Halifax decision to be the answer to
all their problems in the fight to tackle
VAT avoidance.
In essence, two tests were recognised by
the courts: is there a tax advantage contrary
to the purpose of the Sixth Directive? And
is the essential aim of the arrangements to
obtain a tax advantage?
However, the impact of Halifax has been
eroded over the years by a procession of
cases in which the European Court was not
always inclined to invoke Halifax. Many of
these cases involved a cash flow advantage
for the taxpayer, but not necessarily an outand-out VAT saving.
Weald Leasing (C-103/09) involved a cash
flow advantage, RBS Deutschland (C-277/09)
an arbitrage on the place-of-supply rules
18
to avoid any taxation, Paul Newey (trading
as Ocean Finance) (C-653/11) led to a
substance-over-form debate as to where
services were ‘consumed’, and Pendragon
[2013] EWCA Civ 868 produced a VAT
recovery advantage. Although the message
coming out of the courts recently seemed
to be that obtaining a cash flow advantage
did not amount to egregious planning,
in the case of University of Huddersfield
Higher Education Corporation [2014] UKUT
438 (TCC), the court initially found in favour
of the appellant. But this decision has now
been reversed, with the arrangements now
considered unacceptable.
So, where are we today? While
undoubtedly VAT avoidance planning
continues, HMRC have been successful in
attacking perceived avoidance and there is
no longer the same appetite for aggressive
planning. The focus of the profession today
is more on ‘getting it right’ or, at least,
planning for our clients to be compliant. For
many of us that means good old basic VAT
advice, helping our clients who have little
desire to see their names splashed across
the business pages for unacceptable VAT
planning arrangements, and identifying
the best business-driven structures for
the activities they engage in. Dare one say,
helping HMRC’s ‘customers’ pay the right
amount of tax at the right time? Although
it is clear that HMRC’s resources are
constrained, it would be helpful sometimes
if they recognised this and were prepared
to work more with the professional adviser
on resolving client issues.
Today, the profession and HMRC are
more aligned in their focus on the balance
between VAT planning and compliance than
20 to 25 years ago, and certainly it has been
an interesting journey. Halifax has not been
the panacea HMRC thought it would be;
arrangements do not cease to be economic
activities simply because they may be part
of an avoidance arrangement; and the
threshold for finding abuse is different from
the immediate post-Halifax era.
It would be interesting to undertake
a view of the journey taken by some of
our European neighbours over the same
period. Experience indicates that today
many EU member states take a much
more rigid view on VAT compliance and
the imposition of penalties, which in some
countries are treated as a criminal offence
rather than a civil wrong.
in the future remains uncertain. Whether
we will see a cyclical return to a higher level
of planning activity being undertaken by
the profession, with HMRC reacting to such
trends, or whether the interests of both
will remain more aligned remains unclear.
However, there are some interesting issues
to consider that may point the way.
The future of tax collection
In December 2010 the EC issued a green
paper On the future of VAT – towards a
simpler, more robust and efficient VAT
system tailored to the single market, which
included many interesting comments
And it seems clear from the EC’s more
recent publication, The implementation
of the definitive VAT regime for intra-EU
trade, that we have finally settled on the
destination system of taxation but with
issues to be resolved over who should
collect and pay the VAT due. There are also
other views that the mini one-stop-shop
(MOSS) used for e-commerce supplies
might be introduced for all B2C supplies.
These changes might involve a major
rethink on how VAT should be administered.
Following on from the above, as
technology advances and we all submit
electronic VAT returns and settle our
accounts over the internet, the rationale
for making a single VAT payment (or
repayment) at the end of every accounting
period has little sense. There have already
been discussions on real-time accounting
for VAT, where the payment of the tax
on sales and the recovery of it on costs
happens automatically in the cloud.
This could result in obviating the need
for VAT returns and payments and
reduce the risk of fraud.
The tax gap
While not wishing to underplay
the importance of collecting the
right amount of tax, it is worthwhile
pointing out that indirect taxes make
up about 15% of the so called
‘tax gap’ (however that might
be measured). Of this, VAT
Where we are going
Having emerged from an era in which the
profession and HMRC could not be much
further apart in terms of their focus on
planning versus compliance, we are now
in a time where most VAT advisers see
their job for the client as being about
good housekeeping. Where the VAT
profession and HMRC may be headed
February 2015 | www.taxadvisermagazine.com
VAT PLANNING
avoidance arrangements are estimated to
make up just over 1% of the total indirect
tax gap. In other words, the amount of
VAT avoided relative to the total tax take
is a very small percentage of the total
compared with the resource HMRC have
dedicated to tackling this problem.
Fit and proper test
Businesses are already required to have
a senior accounting officer responsible
for the tax relationship with HMRC,
and there is a statutory requirement
in the charity sector to certify that
the organisation is not managed or
controlled by anyone who might misuse
or exploit reliefs. HMRC state that they
may decide a person is not ‘fit and
proper’ if that person has been involved
in the past in designing or promoting tax
avoidance schemes. Might we expect
HMRC to extend its fit-and-proper test
into other areas as part of its compliance
drive in the future? This also raises the
question of HMRC’s future regulation of
the tax profession.
VAT avoidance disclosure regime
This has gone from high numbers when
the disclosure rules were first introduced
to only a handful. It is not known whether
this reflects HMRC’s success in tackling
avoidance, or whether businesses are
unaware of the requirements. It should be
noted that, under VAT rules, the onus
is on the business to report use of a
scheme rather than the promoter,
as is the case for direct tax. HMRC
have therefore indicated that they
wish to strengthen and improve
the DOTAS and VAT avoidance
disclosure regimes (VADR) to bring
them more into line, and to ensure
they remain effective in detecting
tax avoidance and the users of the
schemes. There is also a proposal
to bring VAT into line with the new
accelerated payments regime for
direct tax.
BEPS
Many tax advisers would have you
believe that BEPS is all about direct tax.
It’s not. A quick look at the action points
reveals that many of them have as much
to do with indirect taxation as direct.
The digital economy (action point 1)
is the most glaring example and causes
issues for both tax worlds around the
concept of establishment in the digital
environment where a digital presence or
establishment may be somewhere on a
digital cloud. Who has the taxing rights in
this case? It seems that the indirect tax
world has stolen a march on the direct tax
world with the new approach to taxation
of B2C supplies from 1 January, and direct
tax practitioners are recognising that they
may have something to learn from their
indirect tax colleagues.
Other action points with an indirect
tax angle include ‘Neutralising hybrid
mismatch’ (action point 2), which looks
at avoiding double or no taxation – see
RBS Deutschland; ‘Countering harmful
tax practices by taking transparency
and substance into account’ (action
point 5) – see Paul Newey; ‘Disclosure
of aggressive tax planning’ (action point
12) – see new proposals for VADR; ‘Make
dispute resolution more effective (action
point 14) – see the EU trial on crossborder VAT clearances for transactions.
Office of Tax Simplification
Among all this, let’s not forget UK plc.
The UK is ranked 14th of 185 in the
World Bank Survey for competitiveness.
The OTS paper, Competitiveness
review, highlighted the need to make
compliance easier for businesses. This
includes simpler VAT returns and easier
identification of the correct VAT liability
of supplies; identifying rights to recover
VAT; dealing with tax changes; easier to
interpret legislation; easier to undertake
cross border trade and so on.
Confédération Fiscale Européenne
The CFE recently published a paper
on European tax adviser priorities in
EU policy and identified goals for
the next five years. These included
requirements on the need for clear
and certain tax law; the need for
transparency and fairness related to
disclosure obligations; a recognition of
taxpayer rights; respect for the role of
the tax adviser; resolution of double
or no taxation issues; facilitation of
VAT compliance and harmonisation
of legislation; and a need to foster
competitiveness in the market place.
Planning to be compliant
If we bring together all of the
above, the role of the VAT adviser
www.taxadvisermagazine.com | February 2015
appears to be to ensure their clients are
compliant, and making them aware of
how changes may affect their business.
It means advising clients on a range of
issues including:
zz
VAT recovery on professional fees
associated with corporate transactions
in the light of the BAA decision, and
how the transactions should be
structured to ensure recovery. See
also the recent amendments to HMRC
internal guidance.
zz
Management charges following the
African Consolidated Resources v HMRC
[2014] UKFTT 580 (TC) and Norsemen
Gold v HMRC [2014] UKFTT 573 (TC)
cases, and the mood music on this
front coming out of HMRC policy. Such
charges should be ‘real’ and
have substance.
zz
To whom services are provided
following the Airtours Holidays
Transport Ltd v HMRC [2014] EWCA
Civ 1033 decision and the ability to
deduct VAT.
zz
The future for intra VAT group charges
in the light of the decision in Skandia
America Corp v Skatteverket case
C-7/13. If intra group charges are to
become taxable, is there an upside for
supplies to non-UK branches?
zz
Calculating recoveries within costsharing groups to ensure an exact
reimbursement of expenses incurred
following the West of Scotland Colleges
Partnership v HMRC [2014] UKFTT 622
(TC) decision.
zz
Special partial exemption methods
following decisions in cases such as
Fazenda Publica v Banco Mais SA case
C-183/13 and Lok’nStore Group plc v
HMRC [2014] UKUT 288.
zz
Establishment issues and taxing rights
following the Welmory sp. z o.o v
Dyrektor Izby Skarbowej w Gdańsku
C-605/12 case.
zz
The ability to recover VAT on
investment management changes
related to employee pension funds. See
HMRC’s recent briefs.
There is certainly plenty to keep the
VAT adviser busy.
In summary, Napoleon Bonaparte said
‘not one cent should be raised unless it is
in accord with the law’, while the modern
day riposte from HMRC might be to say
it is about making our ‘customers’ pay
the right amount of tax at the right time.
Lord Keynes said: ‘The avoidance of tax is
the only intellectual pursuit that carries
any reward.’ I wonder what Napoleon
and Lord Keynes would make of where
we were, where we have been, and
where we might be going.
The views expressed in this article are
very much the personal views of the author.
19
LIECHTENSTEIN DISCLOSURE FACILITY
Not so last year
KEY POINTS
zz
What is the issue?
There are still common misconceptions
about taxpayer eligibility for the LDF,
not helped by the restrictions on
access to ‘full favourable terms’ since
August 2014
zz
What does it mean for me?
All advisers encounter instances where
clients need to make a disclosure
of underpaid tax to HMRC. Advisers
need to recognise cases in which the
LDF may be appropriate and when to
refer them to investigations specialists
to avoid potential claims under their
professional indemnity insurance
zz
What can I take away?
A better awareness of cases that may
benefit from the LDF
T
he Liechtenstein Disclosure Facility
(LDF) has operated for five years
and is due to expire on 5 April
2016. Nevertheless, the principality’s
government and HMRC have continued
to vary the arrangements, with the
fourth joint declaration signed on 14
August 2014.
The newest memorandum of
understanding updates several aspects of
the LDF, including:
zz
introduction of a single charge rate
(SCR) for the 2011/12 and 2012/13 tax
years; and
zz
a definition of restrictions on eligibility
for the full favourable terms of the LDF
for certain participants.
Professional advisers need to keep
up to date with the changing disclosure
facilities to ensure opportunities are
not missed.
Although there are several ways to
make voluntary disclosures to HMRC,
the LDF continues to offer extremely
beneficial terms, despite the new
restrictions on eligibility, and remains one
of the most direct routes of disclosing
to HMRC.
20
John Cassidy and
Hayley Ives explain
why the Liechtenstein
Disclosure Facility is
still relevant
The LDF is commonly overlooked,
perhaps because taxpayers and advisers
hold the misguided view that it was designed
only for wealthy individuals with offshore tax
issues. However, there are many scenarios in
which participation in the LDF is not obvious,
but could prove beneficial. These include:
zz
taxpayers with undeclared income/gains
relating to UK business activities/
assets; and
zz
trusts, whether onshore or offshore.
Recap of the LDF benefits
The message that the LDF offers extremely
beneficial terms is undisputed among tax
investigation practitioners.
Taxpayers can still acquire ‘relevant
property’ in Liechtenstein until 5 April
2016 and, if they held an offshore asset
of any nature anywhere in the world on
1 September 2009, they qualify for all
beneficial terms of the agreement (unless
the new restrictions apply), including:
zz
a shortened assessment timeframe,
starting from 1999/2000;
zz
a fixed penalty of 10% up to and including
2008/09; and
zz
the potential to elect for the composite
rate option (CRO) and SCR.
It should be remembered that, even
where there are restrictions on the full
favourable terms, participants in the
LDF will still achieve immunity from
prosecution and the use of HMRC’s
bespoke service. This gives access to a
named person at HMRC and matters can
be discussed on a no-names basis.
Perhaps because of the need to hold
an offshore asset at 1 September 2009,
there is a common misconception that
the LDF was intended to be used only by
wealthy Swiss bank account holders to
regularise the tax affairs of those overseas
assets. This is untrue. There is no need to
have held an offshore asset at all in order
to access the LDF. As long as taxpayers
have not been notified that they are being
investigated criminally or under Code of
Practice 9 (COP 9), they are eligible to
register for the facility when they have
acquired relevant Liechtenstein property.
Restrictions on eligibility for full
favourable terms
The additional circumstances announced
in August 2014, in which a participant in
the LDF will not be entitled to access all its
terms, are:
February 2015 | www.taxadvisermagazine.com
LIECHTENSTEIN DISCLOSURE FACILITY
PROFILE
Name John Cassidy
Position Partner
Company Crowe Clark Whitehill
Tel +44 (0)20 7842 7356
Email [email protected]
Profile John has spent more than 20 years working in tax and was
previously a partner at PKF. He is a high profile figure in tax investigations, with wideranging experience in the field covering offshore evasion, fraud investigations, the
Liechtenstein Disclosure Facility, disputes with HMRC, professional negligence claims
and expert witness work. A regular writer and lecturer, he wrote chapters on tax
investigations in the Zurich Tax Handbook and ICAEW’s TAXLine Tax Planning.
PROFILE
© IStockphoto/duncan1890
Name Hayley Ives
Position Manager, Tax Investigations Group
Company Crowe Clark Whitehill
Email [email protected]
Profile Hayley works on numerous types of investigation, from
self-assessment enquiries to more serious Code of Practice 8
and 9 projects. She is particularly experienced in assisting clients making voluntary
disclosures to HMRC which often means using the Liechtenstein Disclosure Facility after
assessing the most appropriate route for the client.
1. The relevant person enters the LDF to
settle liabilities HMRC is already aware
of (note, if a disclosure is made about
known and unknown liabilities, the
restriction on favourable terms applies
to the known information only).
2. The issue being disclosed has already
been subject to an intervention that
started more than three months
before the date of application (for
example, a section 9A enquiry or
where a determination or assessment
has been issued).
3. There is no substantial connection
between the liabilities being disclosed
and the offshore asset held by the
relevant person as at 1 September 2009
(meaning less than 20% of the liabilities
disclosed relate to that offshore asset).
Professional advisers need to take care
when interpreting the above restrictions
and take expert advice. More importantly,
they should not overlook the fact that
the restrictions do not prevent access to
the LDF altogether; they merely limit the
favourable terms available.
It is always best for a taxpayer to
voluntarily declare any insufficiency to
HMRC, whether brought about innocently,
carelessly or deliberately. Not only does
this type of proactive action show good
faith with HMRC, it also has a massive
impact on the overall penalty position.
The LDF remains an excellent disclosure
mechanism given the structured process,
the single point of contact at HMRC
and the fact that it is a disclosure made
to the Revenue, rather than a lengthy
investigation by the department that has
no pre-ordained end date. The effect
is that matters are generally dealt with
more quickly and the taxpayer suffers less
stress than when engaged in a continuous
debate with HMRC.
In cases where any of the above
restrictions apply, the taxpayer will not be
eligible for the shorter limitation period,
the fixed penalty or the CRO/SCR under
the LDF. Everything else remains available.
Scenario 1 – tax problems closer
to home
It is foolish to believe that HMRC are
interested only in offshore evasion.
Much investment has been made in
the new ‘Connect’ analytical software,
allowing HMRC to build a detailed
picture of a taxpayer’s wealth and
financial affairs to help them identify
and investigate fraudulent behaviour
and general tax irregularities. HMRC are
also assigning more resources to increase
the pace and number of tax evasion
cases being brought before the criminal
and civil courts, leading to employment
of extra investigators and risk and
intelligence staff.
Taxpayers with issues resulting
from UK assets and business activities
www.taxadvisermagazine.com | February 2015
should always come forward and make
a voluntary disclosure before HMRC
catch up with them. Advisers need to be
pragmatic when making recommendations
on how the taxpayer should make a
disclosure. For example, if a taxpayer
realises he made a one-off chargeable
gain exceeding the annual exemption in
a previous year which was mistakenly left
off his return (and the time limit to amend
the return has passed), this is unlikely to
warrant the use of the LDF unless fraud
is involved and there is a strong risk of
prosecution. Obviously the shortfall
should be disclosed quickly to HMRC and
arrangements made to pay the additional
tax, interest and any penalty.
In the following scenario, an individual
has been a self-employed electrician for
16 years. He subcontracts for various firms
on different phases of projects.
Tax is deducted from his gross pay
under the construction industry scheme
(CIS) and these amounts are declared on
his annual tax returns. In addition, the
electrician does a lot of private work in
the evenings and at weekends, sometimes
receiving cash, sometimes cheques, which
supplement his subcontracting earnings
considerably. The taxpayer declares most
of the cheque payments on his selfemployed pages because he knows there
is a paper trail, but not the cash.
The electrician has recently bought
a brand new car and brags on Facebook
about how much money he is earning.
He learns about HMRC’s Connect
system, which draws together all kinds of
data (including bank account information,
activity on websites such as Autotrader,
eBay, Gumtree and social media sites) that
21
LIECHTENSTEIN DISCLOSURE FACILITY
are likely to raise suspicion about his tax
figures when compared with his lifestyle.
He is also paranoid that his neighbour
is about to report him using HMRC’s tax
evasion helpline.
He has heard about the LDF, but has
been told that he is ineligible because
he has never held an offshore asset and
his tax problem relates solely to his UK
business activities.
Clearly, the taxpayer has been
deliberately under-declaring his profits
from self-employment. If HMRC discover
this before the taxpayer comes forward,
they may either prosecute him or launch
an investigation under COP 9. Either way
this is not good news. COP 9 enquiries can
go on for a long time, and the taxpayer
will be subject to a stressful investigation
involving frequent data requests and
questioning by HMRC.
This is the sort of case that is perfect
for the LDF. Of course, all of the beneficial
terms of the facility will not be available
because the taxpayer did not own an
overseas asset at the relevant date.
The shortened time limit will not apply
because the understatement results from
deliberate behaviour, although in this case
he only has 16 years of underpaid tax to
declare. The fixed penalty and use of CRO/
SCR will not be available.
However, assuming the taxpayer now
uses the LDF to make a full disclosure, he
will be immune from prosecution, will
have access to the ‘bespoke’ service and
will not be investigated by HMRC after
registering with them.
Taxpayers are given up to ten months
to draft and submit their disclosures with
no risk of any interrogation by HMRC
during that period. Appealingly, the risk
of a lengthy open-ended investigation is
diminished. Once the disclosure has been
reviewed, HMRC are not obliged to accept
it if there are areas that require further
explanation, and so questions may arise.
Experience has shown that members of
HMRC’s LDF team are approachable and
pragmatic, which usually leads to swift
settlement of past tax liabilities, even if
further queries arise.
The taxpayer in this example will
have peace of mind that he will not face
prosecution and will be given breathing
room to quantify and disclose the
shortfalls. He is likely to save money
on professional fees because there
will be less interaction between his
adviser and HMRC than if there was a
COP 9 investigation. The penalty will be
lower because he made an unprompted
disclosure and gave maximum assistance
in quantifying how much tax was
outstanding. Once the offer is finally
accepted, leading to a binding contract
settlement, he can feel confident that
22
HMRC will not come after him in respect of
these past liabilities.
Even if HMRC have already started an
enquiry, the LDF can still be accessed. For
example, if the electrician had already
been approached by HMRC and had
admitted wrongdoing, he can switch out
of the enquiry and into the LDF as long
as COP 9 or criminal proceedings are not
under way.
It should also be noted that there is
no need for the taxpayer to have been
fraudulent and at risk of COP 9. As noted
above, anyone with tax problems to
resolve with HMRC can use the LDF.
Scenario 2 – trusts
Trustees have a number of legal
obligations to fulfil which depend of the
type of trust they administer, as well as
any clauses set out by the settlor in the
trust deed.
From a tax perspective, trustees
are responsible for accounting for
the income and gains of the trust and
declaring this to HMRC on a timely
basis. Trustees are also responsible for
reporting inheritance tax (IHT) events to
HMRC and paying the correct amount on
time. Typically, IHT results from ten-year
charges and ‘exit’ charges on distribution
of trust capital to beneficiaries.
Trustees elected to deal with small
family trusts or otherwise are not
commonly ‘professional’ trustees. The tax
implications can easily be overlooked.
Many IHT issues go unnoticed because
there is no prompt from HMRC, leaving
it to the trustee to recognise when there
is a tax event. Even if the trustee does
register an IHT liability, there can be
doubt about whether distributions made
to beneficiaries should be treated as
capital or income distributions, which can
result in underpaid tax. It is inevitable
there will also be offshore trusts with
exposures to UK tax which historically
have not been appreciated.
Whatever the reason, experience
shows that there are likely to be trustees
with outstanding tax issues to rectify, even
if they do not realise it. The LDF may prove
a beneficial tool, whether or not the trust
held an offshore asset at 1 September
2009. If it did, even better, because the
trustee may be able to elect to use the
CRO for all years 1999/2000 to 2008/09,
subject to the restrictions since August
2014. This would mean paying tax on all
income and gains at a flat rate of 40% with
any IHT resulting from undeclared tenyear and exit charges falling away.
The LDF can also be used to fully
disclose the background and details of
the trust so that any non-financial or
unclear issues can be aired and agreed
with HMRC.
This covers, for example, the true
nature of the trust (is it genuinely
discretionary?) or other matters such as
whether it is an excluded property trust.
It is not uncommon for ten-year
charges to have been missed or for trust
assets to have been historically thought
of as excluded property when they might
not be, perhaps due to doubt over the
domicile status of the settlor. In such
scenarios, the LDF can lead to the correct
position being agreed with HMRC – if
this leads to agreement that no ten-year
charges are due all well and good; if not,
the CRO/SCR can remove the ten-year
charge liabilities anyway.
Summary
It is clear that the LDF can be used in
many circumstances, not just for offshore
evasion, so tax advisers should not discard
it. We have encountered various scenarios
as well as those included above. These
might include non-domiciled taxpayers
who have made a mistake about their
remittance basis, a complex area in itself,
and elderly taxpayers who, having already
suffered UK taxes, did not realise that
the interest arising on an offshore bank
account should be declared here.
For clients faced with making
disclosures to HMRC, advisers should
always question whether the LDF is
suitable. Not every case will benefit from
this, but considering the possibility will
stave off any professional negligence
claims for not bringing it to the client’s
attention. Anyone apparently advising on
tax investigation matters who does not
recognise and advise on the potential to
use the LDF in the right circumstances may
find themselves subject to a claim later.
Earlier this year, Crowe Clark Whitehill’s
Tax Investigations Group published
its fourth annual survey of general
practitioner accountants. It concluded that
there are many issues parties on both sides
should address, including that accountants
are potentially missing opportunities to
square their clients’ tax affairs with HMRC
through beneficial disclosure facilities. The
findings suggest that every accountant has
clients who would benefit from making a
properly managed disclosure under one
of the available HMRC facilities, but a lack
of understanding of these facilities means
that is not happening.
The same issue has been addressed in
the 2014 survey.
The earlier survey also found that a
quarter of accountants had not made
their clients aware of the LDF and stated
that nothing would persuade them to
change this approach. Perhaps this will
change if they realise that it can benefit
all sorts of clients, not just those with vast
offshore assets.
February 2015 | www.taxadvisermagazine.com
EMPLOYMENT RELATED SECURITIES
A move in the
right direction?
Robert Jennings and Rob Pearce consider the forthcoming changes to the UK
taxation of share awards for internationally mobile employees
KEY POINTS
zz
What is the issue?
T
he taxation of employment
related securities (ERS) has always
been complicated and when an
internationally mobile employee (IME) is in
receipt of ERS income, these complications
are multiplied, which creates significant
compliance challenges for employers.
Currently, the income tax treatment of
ERS for an IME depends upon a number of
factors, including:
zz
the type of ERS instrument – for example,
whether it is a share option, conditional
share award (restricted stock unit (RSU)
or performance share plan (PSP)), or a
Internationally
mobile
employees
© IStockphoto/ma_rish
FA 2014 introduced new legislation
to change the UK taxation of share
income for internationally mobile
employees; these rules take effect from
6 April 2015. HMRC also published
a consultation to change the NIC
treatment. Draft legislation has been
published and is intended to also take
effect from April 2015
zz
What does it mean for me?
The new tax rules may significantly
change the UK income tax and NIC
treatment of employment related
securities for mobile employees. These
rules apply to all chargeable events
occurring after April 2015, irrespective
of the date of grant. All internationally
mobile employees with share income
– and their employers – will need to
consider the impact of the changes
zz
What can I take away?
The UK income tax rules will become
less complex and there is a short
window in which individuals can take
action to mitigate the tax consequences
arising from the changes. The NIC rules
will look to align NIC with income tax as
far as possible. However, the draft rules
do not necessarily achieve this so, as
drafted, there is likely to be significant
complexity for employers, with NIC
costs for employers likely to increase
as a whole
forfeitable or restricted share;
Additional complexity arises when
considering the NIC treatment of the
awards, as this will often differ from the
income tax position.
tax changes enacted are in line with the
recommendations made by the Office of Tax
Simplification (OTS).
FA 2014 seeks to simplify the income tax
treatment of all ERS held by IMEs, where
there is a UK chargeable event (such as a
vesting or exercise) occurring on or after
6 April 2015. This will apply regardless
of when the award was granted. While
these changes will be welcomed by most
employers, a number of issues need to be
considered before April 2015.
Income tax
NIC
zz
whether the award is settled in cash or
shares;
zz
whether the IME is inbound to or
outbound from the UK; and
zz
the country to which an outbound IME
has moved.
FA 2014 contained a number of significant
amendments to the UK legislation
governing ERS. The majority of the income
www.taxadvisermagazine.com | February2015
In July 2014 the government opened a
consultation on proposed changes to the
NIC rules for ERS income of IMEs. The broad
23
EMPLOYMENT RELATED SECURITIES
EXAMPLE 1
A non-UK resident IME was granted a share option while outside the UK and the grant was
not made in contemplation of UK duties. The IME subsequently moves to the UK during the
earnings period (typically the grant-to-vest period) and becomes UK tax resident, spending
all of his or her time working in the UK. The IME then exercises the option in the UK while
UK resident.
Under the current rules, no UK income tax would arise at exercise (although a tax liability
may arise in the country where the IME was at grant). However, where the exercise occurs
after 6 April 2015, UK income tax will arise at exercise based on, broadly, the days in which
the IME was working or resident in the UK over the earnings period.
objective of the consultation was to ‘align’
the NIC treatment with that of income
tax. However, as drafted, the proposed
legislation does not achieve its objective in
the way that employers may have hoped
and it raises a number of challenges and
questions for employers.
Income tax rules
From 6 April 2015, income tax on ERS will
generally be payable by reference to an
individual’s UK residence and workdays
during the period in which the award
is earned, regardless of the type of ERS
instrument used. This has a significant
impact for employees who, for example,
were granted share options or restricted
shares while not resident in the UK.
Under the current rules, these awards
will not be subject to income tax in the
UK, provided they were not granted
in contemplation of UK duties. Where
the tax point for these awards occurs
on or after 6 April 2015, however, the
tax treatment will be different from
what would currently be the case, as
illustrated in Example 1.
Example 1 illustrates how an
employee might have an increased UK
tax liability under the new rules.
EXAMPLE 2
A UK resident IME was granted a share option while working in the UK. The IME
subsequently moves to the United Arab Emirates (UAE) during the earnings period. The IME
then exercises the option in the UAE after ceasing to be UK tax resident.
Under the current rules, UK income tax would arise at exercise on the full gain as the IME
was UK resident at grant of the option. However, under the new rules, UK income tax will
arise at exercise but only on the proportion of the gain that was earned in the UK.
EXAMPLE 3
Currently, inbound IMEs who were granted share options before arrival in the UK (and
where the grant was not made in respect of UK duties) do not incur a NIC liability as
there is no charge to income tax.
Under the proposed new rules, a NIC charge would arise for inbound employees for
any part of the grant-to-vest period when the individual is UK insured.
EXAMPLE 4
1. A UK outbound IME is assigned to Singapore
A share option is granted while the individual is UK resident and vests on the third
anniversary of the date of grant. The IME is assigned to Singapore one year after the
grant of the option. The IME then exercises the option immediately on vesting.
UK income tax would be due on the apportioned gain based, broadly, on UK
residence (that is, one-third of the gain). NIC would also be due on the apportioned
gain based, however, on the period for which the IME was UK insured. In the current
case, he or she is UK insured for year one (when in the UK) and year two (due to the 52week rule). As such, NIC will be due on two-thirds of the gain.
(Under the current rules, there would be no NIC as the employee is outside the
scope of NIC at the tax point. This is therefore a significant change.)
2. A US outbound IME is assigned to the UK but remains under US social security by a
Certificate of Coverage for two years before being localised to the UK
A share option is granted at the end of year one of the UK assignment and exercised
immediately on vesting on the third anniversary of the date of grant.
UK income tax would be due on the full gain at exercise. However, NIC would be due
only on the proportion of the gain at exercise that related to the period for which the
IME was UK insured, being two-thirds of the gain, as the individual was insured for only
two of the three years (in the first year they were covered by a Certificate of Coverage
and therefore not UK insured).
24
However, other employees might
benefit from this change in legislation; in
particular, individuals who were granted
an option while UK resident and who
have moved, or will move, during the
earnings period to a country with which
the UK does not hold a double tax treaty,
as illustrated in Example 2.
The new legislation being introduced
could therefore affect a number IMEs
who have ‘touched’ the UK during the
vesting period of an award. While the
impact on employees who have been
awarded conditional awards or restricted
stock units may be less significant,
early action should be taken to assess
the impact of the proposed changes. In
particular:
zz
Employers should ensure they
understand how the new rules will
impact their UK withholding and
reporting requirements.
zz
Employers should also consider
what advice or guidance they provide
their employees. For example, IMEs
with vested share options may benefit
from exercising either before or after
6 April 2015.
NIC rules
While the changes to the income tax
treatment have been legislated as part of
FA 2014, the changes to the NIC treatment
have yet to be finalised. The consultation on
the changes to the NIC treatment closed in
October 2014 and a response from HMRC is
due shortly.
However, HMRC intends the changes
to the NIC treatment to take effect from
the same time as the changes to the
tax treatment and to apply to any ERS
chargeable events occurring on or after
6 April 2015.
February 2015 | www.taxadvisermagazine.com
EMPLOYMENT RELATED SECURITIES
PROFILE
Name Robert Jennings
Position Senior Manager
Company Deloitte
Email [email protected]
Profile Rob works in the Compensation and Benefits practice at
Deloitte, advising companies about their global share plans. Rob has
a particular specialism in the UK taxation of incentives for domestic and internationally
mobile employees.
PROFILE
Name Rob Pearce
Position Senior Manager
Company Deloitte
Email [email protected]
Profile Rob works in the Social Security Consulting practice at Deloitte.
Rob has detailed experience of working on international mobile
employment issues over many years. He was previously a technical specialist at HMRC.
As with income tax, the current NIC rules
relating to ERS income for IMEs are complex.
The NIC position can depend on a number of
factors, such as:
zz
whether an income tax charge arises;
zz
whether the IME moves to an ‘agreement’
country, an EEA country or Switzerland, or
a ‘non-agreement’ country;
zz
whether the IME holds a Certificate of
Coverage or A1 to remain in a specific
social security regime; and
zz
whether the IME moves location as an
assignee or permanent transfer.
Most readers will recognise that the NIC
position does not always follow the income
tax position. In particular, NIC is generally
due on ERS income on an all-or-nothing
basis – ie NIC is not generally apportioned.
Under the proposed new rules, however,
liability to NIC on ERS will be based on the
amount of time during the earnings period
for which the IME is UK insured. Similar to the
new income tax rules, this is regardless of the
IME’s residence position at grant or vesting/
exercise of the ERS. Therefore, the proposed
new rules may result in both UK inbound and
outbound IMEs, who would not currently be
liable to NIC on their ERS, becoming liable to
NIC on a proportional basis, as illustrated in
Example 3.
Example 3 appears to show that the NIC
rules are being aligned to the income tax
rules. This was the broad intention of the
proposal; however, the key difference is
the basis on which the apportionment will
be made.
Under the tax rules, any apportionment
will be based, broadly, on UK residence/
workdays; however, under the proposed
NIC rules, any apportionment will be based
on periods for which the employee is UK
insured. While UK insurability and tax
residence could be the same, this will not
always be the case. For example:
zz
where the IME has moved from the UK to
a ‘non-agreement’ country as a secondee,
the IME remains subject to social security
in the UK for an additional 52 weeks (the
‘52-week rule’); and
zz
where the IME is subject to a Certificate
of Coverage/A1 arrangement, they remain
within their home social security system
regardless of a change in tax residency.
income. Where an IME moves between the
UK and an EC or social security agreement
country there cannot be a double charge.
It is unclear how the competent authorities
will deal with these provisions so there
may need to be frantic negotiations to
determine how double charges will be
avoided. Where an IME moves to a ‘nonagreement’ country, such double charges
may be unavoidable.
See both scenarios set out in Example 4
for further details.
If the proposed rules are to be
implemented as they are, NIC and
income tax liabilities on the ERS would
be calculated based on two different
apportioned amounts and RTI reporting
may require differing adjustments in
the NIC and income tax fields. Although
NIC costs will be reduced under some
scenarios, we expect NIC costs for UK
employers generally to increase.
In addition, the proposed changes
increase the risk of a double charge to
social security arising on the same ERS
The income tax changes are significant
and are likely to affect many employees
currently holding share awards. While
the changes can be seen as a positive
step towards simplifying the income tax
treatment of ERS, the current proposals
for NIC do not appear to provide the same
simplicity. It will be interesting to see
HMRC’s response to the NIC consultation,
and whether any amendments are made
to the draft legislation and the guidance
they subsequently provide. Employers
may then need to act quickly to ensure
that they can comply with any new rules
from 6 April 2015.
Conclusion
ACTION POINTS
1. Watch for further announcements regarding the NIC changes.
2. Consider how the income tax and proposed NIC changes will impact your share plans.
3. Identify employees who will be impacted, and if appropriate, communicate with
them about the proposed changes (being careful not to provide ‘investment
advice’).
4. Analyse where the company’s costs may increase, either due to:
(a)awards held by a tax equalised employee becoming taxable in the UK; and/or
(b)new/increased NIC charges.
If necessary ensure that appropriate provisions are made for the increased costs.
5. Consider the impact of the changes on future assignment costs and whether a
change in assignment policy is needed.
6. Ensure payroll teams are notified and can manage their withholding and reporting
obligations.
www.taxadvisermagazine.com | February2015
25
IN PRACTICE
January madness
Chris Mattos shares his tax return season experiences
A
nd here I am again wondering if
it’s all a dream! Having hung up
my personal tax ‘boots’ to become
editor of Tax Adviser and promising my wife
that ‘Januarys’ were a thing of the past,
I find myself in January 2015 in full-scale
tax return operations mode. Perhaps deep
down you can never get the self-assessment
fever out of your system.
But how did this all happen? It seems
that my start-up marketing message that
we ‘take the frustration out of tax’ has
really resonated with people. It’s safe to say
that most of my clients HATE tax – some of
them have quite severe phobias. I’m not
sure how I’ve managed it, but I do seem to
have attracted clients who have managed
to get themselves into a complete mess.
One client came with £1,300 of late filing
2013 penalties. The sad thing was that
there were only two entries required to get
things straight; a £7,200 salary and £8,400
of dividends.
When Keith Gordon’s article arrived in
my inbox (see page 38), I did hope I might
find something that could help; but in my
case, I cannot see how their inaction can
be excused. It is a case where a bit of bad
luck and illness leaves you thinking that if
they’d had some help earlier we wouldn’t
be speaking to debt collection agencies
now. It’s the sort of case that helps me to
appreciate the work of the tax charities and
it is always with much interest when I read
one of their articles about the work they do,
such as this month on page 12.
Then came mum and dad whose son
works in the City – it‘s still a big thing
for some ‘Stroudies’! Mum does a bit of
bookkeeping for a local letting agency and
started to worry for her son when she saw
a request from HMRC for details of the
landlords they acted for. A familiar story
soon followed – boy meets girl, boy moves
in with girl, boy keeps old house, boy rents
out house and boy doesn’t tell HMRC
about the rental income. Okay, perhaps
it’s not Hollywood blockbuster material
(and the similar girl-meets-boy sequel
was not much of an improvement), but if
my experiences of HMRC’s Let Property
Campaign are anything to go on, he
should walk away with the minimal of
penalties due to the losses he had made
in earlier years.
26
Before I had a chance to reflect on the
fairness of the different penalty outcomes
from the non-compliance of my two clients,
I read Rebecca Benneyworth’s article
on page 28, shrugged my shoulders and
thought that’s just the way it is sometimes.
I am often told by clients of their sense
of relief after they have discussed their
tax affairs and left their little bundle of
papers with us to sort out for them. For
me, it’s one of the satisfying aspects of
January to witness those moments when
you see a client starting to understand
their tax affairs.
This year I’ve been referred to as a
magician and, more bizarrely, the ‘Oz of
Tax’; but personally I don’t think that what
I’m saying is that complicated. Evident is the
lack of understanding that many taxpayers
have about their affairs. They can struggle
to grasp concepts that the tax profession
might regard as basic. One area that
seems to come as a revelation is taxation
on employment income, particularly that
PAYE doesn’t always collect all the tax due
and that it can affect the rate of tax due on
other income.
6% of all tax returns
filed on time were
sent in on deadline day –
well over half a million
Recently, a potential client visited me
with an HMRC enquiry into his previous
two returns which he had submitted online.
He had been baffled when, on completing
the entries using HMRC’s software, he was
presented with a tax liability.
‘That’s because it’s the first year you had
that [gas-guzzling] company car,’ I said, ‘and
your PAYE code didn’t include this.’
‘Oh!’ said the client.
The confused client had remedied his
return by not entering his benefits and
sending a letter to HMRC explaining that the
expenses were ‘wholly and exclusively for
business’ – words that a friend had advised
were required.
The following year he made an even
bigger mess. By now he had established
that he should be entering his employment
related expenses on his tax return.
However, he continued not to include
his benefits. The result was that he had
managed to submit a return declaring, to his
delight, a refund which he banked.
‘I haven’t got £20k,’ said the client once
I had calculated what was due; then, on
reflection: ‘Can I pay it in 2016 when I get
my bonus?’ We will have to see what we
can agree.
First, the HMRC officer is considering
penalties and has sent a long list of
questions: ‘Why did you make these makes?
Didn’t you read the guidance? Didn’t you
take advice?’ and so on. Unfortunately, the
client received his letter first and got all in
a fluster protesting his innocence. I phoned
the HMRC officer asking where my letter
was – it was in the post.
‘So what does your letter say,’ I asked.
‘Errr, you will see.’ I declined to converse
further on the subject – a job for February.
I do worry about the tone of some
HMRC communications and the effect
they have in the hands of unrepresented
taxpayers. I have just helped a client reach
a conclusion with his eBay trading affairs.
When I first met him, he complained about
HMRC’s relentless approach that had
caused him nothing but stress in the past
18 months of trying to resolve it himself.
The first letter I read started:
‘In your letter you said that your eBay
activity had been purely to dispose of a
very large personal collection of scale
model plastic kits, acquired over the years.
I have to say this is contrary to information
about your eBay activity in HM Revenue &
Customs possessions.’
There was a very small element of
trading, but the large majority did relate to
the client’s hobby and after two letters from
us all is now resolved with a total of £164
tax over three years being due (no penalties
were raised). Was it all worth it?
There is still a huge difference between a
taxpayer trying to discuss their affairs with
HMRC compared with us as agents.
As a professional, it takes me just a
few minutes to establish the employment
income that HMRC has for one of my clients.
(I have found this to be a very good way
to obtain such information where clients
have been unable to find their own details.)
But in my own personal experience as an
unrepresented taxpayer, I must grumble
February 2015 | www.taxadvisermagazine.com
IN PRACTICE
PROFILE
Name Chris Mattos
Position Editor
Organisation Tax Adviser magazine
Tel 07785 935906
Email [email protected]
Profile Chris is responsible for the article content in Tax Adviser
and works closely with CIOT technical to ensure that full coverage is given to issues of
importance. Chris set up his practice in March 2014 and assists a wide range of clients
with their tax and financial affairs. Chris’s practical approach to tax and finance has
evolved from several finance director roles over the last five years. Chris is the past chair
of the Severn Valley Branch and Deputy Chair of the Environmental Taxes Group.
© IStockphoto/Alija
that it has taken me ten times longer. I’ve
heard what delight that receiving a tax
refund from HMRC brings, but when I saw
an expected tax refund staring back at
me – I looked at it and just groaned! It took
me 39 minutes – more groans – to talk to
someone to explain that I should still be in
self-assessment. If there was an upside to
this little episode, it was that, as I sit here
writing this, with 11 days of January left and
12 tax returns to submit, unusually, I’m not
on the list.
In the January issue of Tax Adviser I
mentioned my cunning plan for tax returns
in January. I can now report that it has
been a success. I adopted the production
approach that we use to put together
the magazine. Every month there is an
important series of timelines when it is
essential to have one part of the process
completed before another. For us, it’s all
about getting the articles in as soon as we
can. So, I took time out between Christmas
and new year to plan and, by 5 January,
when the phone hardly stopped ringing, we
were prepared and ready. I then spent the
first month contacting clients and chasing
some almost daily. Weeks two and three
have all been about production. And, as we
stand, there is only one client for whom we
haven’t got the information and I do wonder
whether we will at all.
I have heard many different methods
that have been used to encourage clients
over the years, but the facts remain that,
with the deadline so widely publicised and a
‘do it at the last minute’ culture, it is difficult
to persuade clients otherwise. The statistics
for 2014 give a clear picture of this, with 6%
of all tax returns filed on time being sent
in on the deadline day – well over half a
million. Or to present in terms of what value
this can translate to for HMRC in terms of
late filing penalties, apparently it equates to
681.8 million Jaffa cakes.
One partner I used to work with always
took off the last week of January to go
skiing. Each year as 31 January approaches,
I am always reminded of this and how those
distant dreams of snow move from fantasy
to a much-needed reality.
www.taxadvisermagazine.com | February 2015
27
HIGH INCOME CHILD BENEFIT CHARGE
Out of pocket
Rebecca Benneyworth explains a practical issue of the High
Income Child Benefit Charge
KEY POINTS
A drop in income
zz
What is the issue?
Where a taxpayer’s annual income falls
below £60,000 but is above £50,000
there is some entitlement to child
benefit. A revocation of the election
not to receive the benefit is necessary,
backdated to the start of the relevant
tax year
zz
What does it mean for me?
Because this is a binary choice, the
child benefit will be paid in full for
the relevant period. The taxpayer is
then in the position of owing a partial
HICBC, and needs to deal with the tax
consequences promptly
zz
What can I take away?
It is arguable that the penalty legislation
cannot apply to the return because it was
correct when ‘given’ to HMRC. However,
this legislation was written when
subsequent events could not affect the
liability to tax for a particular year. Since
the introduction of the HICBC this has
become a thing of the past
T
he tax charge imposed to withdraw
child benefit from families on what is
regarded as a ‘high income’ has been
with us for more than two years, and most
advisers will be used to the resultant extra
work when preparing tax returns for clients.
The need to check the living
arrangements of your client in the tax year
concerned, then establish whether they or
their partner received child benefit, and
which partner’s income is the higher is a
challenge to deliver practically in a way
that does not give rise to unbillable time.
However, as we go forward with the charge,
there is another aspect that may cause
problems for both you and your clients.
When someone has elected not to receive
child benefit because their or their partner’s
income is expected to exceed £60,000 a year
on an ongoing basis, the difficulties of dealing
with the facts set out above are minimal.
As long as the income continues to exceed
£60,000 the child benefit would be fully
clawed back by the charge, and therefore no
action is required. Once an election has been
made, it is effective on a continuing basis, so
there is only a simple requirement to review
the income of your client year by year to
establish that the election should continue
in force.
28
It is assumed here that your client is the partner with the
higher income, and there is no possibility that the other
person’s income will ever exceed £50,000.
Having completed the tax return, you have established
that your client’s adjusted net income for High Income
Child Benefit Charge (HICBC) purposes is £46,000. The
adjusted net income is defined by ITA 2007 s 58 (as
prescribed by ITEPA 2003 s 681H). This is the net income
for the year, less the gross amount of gift aid payments
made or treated as made in the year, less the gross
sum of pension contributions paid that have
been given relief at source.
As your client’s income is below £50,000,
there is an entitlement to the full amount
of child benefit for the year concerned.
Payments of the benefit can be
restarted at any point by completing
an online form – more information
and a link to the form is at www.
tinyurl.com/qcegl67. However,
this only provides for child
benefit to be re-started at the
earliest from the Monday
after the application is made,
so you or the client will
need to contact the child
benefit office to reinstate
the payments for a prior
period; a telephone
contact number is
provided on the
GOV.UK website for
this purpose.
The right to
start payments
from an earlier
date (in effect
backdating the
revocation) is
given by the
Social Security
Administration Act
1992 (SSAA 1992)
s 13A(7) and (9), and there is
equivalent legislation in Northern
Ireland. This provides that a request
can be made to reinstate payments
for an earlier tax year if:
zz
the taxpayer originally elected not to
receive payment and did not receive
payment for one or more weeks in a
tax year;
zz
had an election not been made,
neither the person now revoking the
February 2015 | www.taxadvisermagazine.com
HIGH INCOME CHILD BENEFIT CHARGE
© IStockphoto/RazoomGames
election nor any other person would have
been liable to the HICBC in respect of the
payments of child benefit or, if they were,
the charge would have been less than
the child benefit payable for the relevant
weeks; and
zz
notice is given within two years of the end
relevant tax year.
However, the problem with this legislation
now becomes clear – the election not to
receive child benefit and its revocation is
simply a binary choice: either child benefit
is paid in full or it is not. So in the particular
case we are thinking about, the client’s
income, having fallen to £46,000, does
not produce an HICBC when the election
is revoked – you can safely notify the child
benefit office and reinstate the entitlement
for the relevant year.
Checking whether this needs to be done
yearly, picked up when the tax return is
reviewed. Noting this point for action when
returns are being completed in January still
leaves plenty of time to make the necessary
revocation before the time limit expires, but
perhaps after the January rush has subsided.
Re-instating a partial claim
It is when your client’s income exceeds
£50,000 but not £60,000 that things get
tricky – as illustrated in Example 1.
There is some entitlement to
child benefit, so a revocation of the
election not to receive child benefit
is necessary, backdated to the start
of the relevant tax year. Because
this is a binary choice, the benefit
will then be paid in full for that
period. Your client is then in
the position of owing a partial
HICBC, and needs to deal with
the tax consequences.
Although your client’s tax
return was correct when it
was submitted – it showed
no HICBC for the relevant
year – once a backdated
payment of child benefit
has been made, the return
will contain an inaccuracy,
in that only part of the
child benefit is due, with
the balance to be clawed
back by the HICBC. Note
that the HICBC is not due until
the payment of child benefit for the
relevant year has been made by HMRC –
this may be some time after the revocation
notice was given.
What of penalties?
The return was correct when submitted,
and only became incorrect when the
payment of backdated child benefit
was made, so at this point the taxpayer
is potentially affected by penalties for
PROFILE
Name Rebecca Benneyworth
Position Freelance lecturer and author
Email [email protected]
Profile Rebecca Benneyworth MBE BSc FCA is a freelance lecturer and
author, working with many of the major tax and accountancy training
organisations and professional bodies. She is well known for her
enthusiastic approach to tax and her down-to-earth lecturing style. She was voted Best
Tax Lecturer at the 2007 Taxation Awards. She contributes regularly to a wide range of
tax publications and is Chair of the committee of the Tax Faculty.
inaccurate returns under FA 2007 Sch
24 para 3(2) (Sch 24). This covers an
inaccuracy in a document that was neither
careless nor deliberate when it was given
to HMRC, but is treated as careless if the
taxpayer discovered the inaccuracy later
and did not take reasonable steps to
inform the Revenue. HMRC’s Compliance
Handbook does not prescribe a time limit
before a penalty is appropriate under this
legislation, but clearly a prompt reaction
will be needed if the client is not to incur
a penalty.
It is arguable that the penalty cannot
apply because the return was correct when
‘given’ to HMRC. But the legislation was
written when subsequent events could not
affect the liability to tax for a particular
year – since the introduction of the HICBC
this is a thing of the past.
I consider it reasonable to assume that
HMRC would seek to impose a penalty under
Sch 24, so prompt attention to amending
the return is a must – assuming that it is still
in time to do so. If not, a standalone notice
should be given to HMRC of the inaccuracy.
Interest?
The really interesting aspect of this (if
readers will forgive the pun) is interest.
I have no doubt that any penalty for late
payment of tax, if raised by an over-eager
computer perhaps, would be covered by
reasonable excuse. Indeed, one might
argue that the tax is not due until the
backdated payment of child benefit has
been made.
It would also be fair to assume that
interest could not be due on the ‘late’
payment because the tax was not due until
the child benefit payments were made.
However, my personal experience in
dealing with incorrect interest charges
arising from simple misallocation of
payments does not give me any confidence
that time spent arguing about this with
HMRC will be productive. Unfortunately,
this type of issue seems to fall foul of the
mentality that if the computer says interest
is due it must be.
Implement in haste, repent at leisure?
These provisions were widely criticised
when they were drawn up – and many in
the profession suggested other ways of
achieving the same policy ends but without
shoe-horning something of this nature into
the tax system.
I have no doubt that civil servants’
advice to ministers was that this was the
simplest way to implement the reforms
(and indeed raise the considerable extra
revenue that this measure achieves). And
for most taxpayers affected I am sure
that it is worry free. But for me, it is the
drip, drip undermining a complex but
essentially stable income tax system. It
represents a change that ‘doesn’t really
work’ in several ways: the steady erosion
of certainty and the dependence of one
person’s tax liability on another person’s
income or circumstances, for example.
This way lies more trouble than the
government has probably realised.
EXAMPLE 1 – PETER
Peter is self-employed and has net adjusted income of £57,500 for the tax year 2013/14.
He is a single parent with four children under 16 living with him and had a child
benefit entitlement in 2013/14 of £3,146. Peter’s income has previously been
considerably more than £60,000, so in November 2012 he elected not to receive child
benefit after 7 January 2013. The election remains in force.
As part of your tax return review process, you identify that Peter should revoke
his election not to receive child benefit for 2013/14. Notification is given to HMRC on
18 February 2015.
Peter receives a payment of £3,146 on 26 May 2015.
As of May 2015, Peter is now liable to HICBC of 57.5% x £3,146 = £1,808.95 in
respect of 2013/14, plus an additional payment on account in respect of 2014/15 of
£904.48, a total of £2,713.43.
Amending Peter’s 2014 self-assessment return on 29 May 2015, his tax adviser notes
that his online account shows the liability of £2,713.43, plus a penalty for late payment of
the amount due for 2013/14 of £90.45 and interest of £22.30 to 31 May 2015.
www.taxadvisermagazine.com | February 2015
29
LOSS RELIEF
A Thorne
in the side
Julie Butler considers the validity
of income tax loss claims
KEY POINTS
zz
What is the issue?
HMRC are paying close attention to
tax loss claims, particularly if the trade
appears uncommercial and possibly a
hobby
zz
What does it mean for me?
Beware of processing tax loss
claims without all the checks and
controls in place, including a review
of the commercial viability, a loss
memorandum, and a business plan. And
warn the client
zz
What can I take away?
Tax losses are under attack by HMRC.
There is now a greater benefit to be
gained by keeping a history of the
losses claimed than previously. When a
client starts a business, there is a need
to put warnings in place for a possible
attack on the validity of any tax losses.
As pre-5 April work, the responsibility
is to review historic and ongoing tax
loss claims to see whether there are an
underlying concerns which should be
flagged up
F
or many reasons, including the fact
that HMRC are under escalating
pressure from central government
to increase revenues collected, the
department is scrutinising more tax loss
claims. Agricultural tax losses, particularly
from the horse breeding sector, seem to
be under increasing threat from HMRC
enquiries, resulting in some claims being
disallowed. Indeed, hot on the heels of
Richard Murray v HMRC [2014] UKFTT 338
(TC), an income tax loss claim tribunal case
in which such action was taken, the recent
Thorne hearing indicates the mounting
pressure the industry as a whole is under
to prove commerciality in order to obtain
a tax relief.
30
Equestrian breeder and farmer – the
facts
In Thorne v HMRC [2014] UKFTT 730 (TC),
Ms Thorne included a self-employment
income page in her 2008/09 tax return for
her trade as an ‘equestrian breeder and
farmer’, showing a loss of £79,424.
She made a claim for loss relief under
ITA 2007 s 64(1) and (2) to set off these
losses against other income for 2008/09.
For the three years to 2007/08, Ms
Thorne’s trade was included in her tax
returns under the description ‘equestrian
breeder’. However, from 2007/08 the trade
was re-titled and described as ‘equestrian
breeder and farmer’, with the farming
element relating to a new asparagus
growing operation.
HMRC initially refused the claim by Ms
Thorne for sideways loss relief on the basis
that the trade was not commercial under
ITA 2007 s 66 and was considered to have
little chance of receiving significant future
cash inflows. HMRC also argued that the
equestrian and asparagus trades should be
assessed together because they were not
legally separate businesses and had been
included in one self-employment return
with an amalgamated claim to sideways
relief. Ms Thorne decided to appeal against
this decision at the First-tier Tribunal (FTT).
‘Just an amateur’
HMRC did not dispute the existence
of Ms Thorne’s trade, but argued that
during 2008/09 the enterprise had
not been carried out on a commercial
basis with a view to the realisation of
profits. Reference was made to the case
of Wannell v Rothwell [1996] STC 450.
HMRC submitted that, with regard to
the equestrian side of the trade, Thorne
was not seriously interested in profit but
was ‘just an amateur’, participating in
what could be considered a hobby. Such
an operation was therefore beyond the
scope of the UK taxation system and the
tax losses not allowable.
HMRC reported that the equestrian
trade had produced losses in the five
years to 2009. In addition, given that it
would take three years from planting the
asparagus in that year to obtain the first
crop, it was difficult to envisage how Ms
February 2015 | www.taxadvisermagazine.com
LOSS RELIEF
PROFILE
Name Julie Butler FCA
Position Managing Partner
Company Butler & Co Chartered Accountants
Tel 01962 735544
Email [email protected]
Profile Julie Butler is a farm and equine tax specialist. Her articles
are published in the national accountancy and tax press and she is the author of Tax
Planning for Farm and Land Diversification, Equine Tax Planning and Stanley: Taxation of
Farmers and Landowners.
to ensure a profit was made to satisfy
HMRC that a commercial venture was
being undertaken. It is key to ensure that
the subjective and objective tests can be
passed by the taxpayer.
© Gettyimages/Olena Chernenko
Start-up costs and not legally separate
trades
Thorne ever had an expectation of profit in
the 2008/09 trading period.
Action plan
The facts of this case help remind tax
advisers to carefully distinguish between
separate trades, and present evidence
to show exactly how they can be
differentiated. The generic need for lossmaking businesses to produce business
plans to demonstrate commerciality
and support the claim of future profits
is highlighted by this case. If such plans
showed potential profitability problems
there should be evidence of what steps
could be and have been taken to militate
against them and a strategy devised
to ensure that future trading could be
more profitable.
The need for a ‘loss memorandum’
showing how many years a business had
made a loss would also have been a useful
planning tool. This enables the adviser
to highlight the fact that the limit of five
years of allowable losses (or 11 for horse
breeding) were close to being breached,
and that the client should take action
Ms Thorne argued that her business had
met the reasonable expectation of profit
test. She argued that most of the losses
had related to the high start-up costs
of the asparagus trade and HMRC had
incorrectly focused on the equestrian
losses. As a result Ms Thorne said that the
sideways loss relief should be split into two
categories.
The FTT decided that, because both
trades were not legally separate and
the loss claim was amalgamated in the
tax return to cover them both, the claim
should indeed be considered in relation to
one composite trade.
The composite loss claim
On consideration of the composite trade,
the FTT found that the business was
not run on a commercial basis because,
although the asparagus farming did meet
the definition of a business earnestly
undertaken with the aim of generating
profits, the equestrian side met the
definition of a hobby rather than a
commercial operation. Ms Thorne argued
that she did have a view to the realisation
of profits for the asparagus business; she
thought it would be profitable.
However, when considering the two
businesses together, the FTT found it
was difficult to see how Ms Thorne could
have had this view because there were
increased losses in the equestrian business
compared with previous periods, and it
would take years to obtain the first crop of
asparagus and thus receive cash inflows.
Disallowed losses
The claim for tax losses against other
income was not allowed. The HMRC
position was therefore upheld by the FTT
and the taxpayer’s sideways loss claim
was denied. It should be noted that there
have been many enquiry cases in which a
profitable business has been amalgamated
with a loss-making equine business.
www.taxadvisermagazine.com | February 2015
HMRC have been keen each time to
separate the entities in order to disallow
the equine losses from the individual’s tax
return. The case of Thorne, however, does
demonstrate the professional challenges
being faced within the agricultural and
equine industry. Professional advisers must
be prepared to support loss claims with
hard evidence and business plans to ensure
the tax authorities will accept the claim.
Managing client expectations can be
very difficult.
Hansard to support the claims
Many have mentioned the importance
of Hansard, the official parliamentary
record, which can be used to help
interpret tax legislation. It can be
useful to remind HMRC that, when
the legislation was introduced into
parliament, the Chancellor of the
Exchequer said:
‘We are after the extreme cases in
which expenditure very greatly exceeds
income or any possible income which
can ever be made in which, however long
the period, no degree of profitability can
ever be reached.’
This can be found in paragraph
BIM85705 of HMRC’s Business Income
manual. There are not many decided
cases on ‘uncommercial’ trades.
However, evidence to support the
view to the realisation of profits is still
important in every loss claim supported.
Practical tips
The practical tips have to be for all
advisers to consider all tax loss claims
with regard to commerciality if this is
not already being undertaken. Warnings
must be made to clients and practical
evidence of the ‘view to the realisation
of profits’.
The most fundamental method to
demonstrate that the business will make
a profit must be the preparation of
business plans showing future profit.
With so little evidence being
prepared, HMRC definitely have this
area of tax relief in their sights. It is
likely that all sizeable losses will be
questioned by HMRC and the adviser has
to be prepared with evidence and well
prepared arguments.
31
CAPITAL GAINS TAX
The new
dwelling
tax
Aparna Nathan explains
the new capital gains tax
regime for non-residents
KEY POINTS
zz
What is the issue?
A new regime for taxing gains realised
by non-UK residents with effect from
April 2015
zz
What does it mean for me?
The new regime only applies upon
disposals of UK residential property
interests and not to interests in other
property; in particular, it does not apply
to interests in personal property or
commercial property
zz
What can I take away?
There are many other interesting quirks
and anomalies with the Principal Private
Residence Relief (PPRR) provisions, as
well as with the other provisions of the
draft legislation
T
he tax regime for non-residents
holding UK property (both real
and personal) has historically been
relatively benign in that they were not
subject to capital gains tax (CGT) on the
gains realised upon the disposals of such
property. In the 2013 Autumn Statement
the government announced its intention
to introduce a new regime for taxing
gains realised by non-UK residents with
effect from April 2015.
A consultation document,
Implementing a capital gains tax charge
on non-residents, was published on 28
March 2014. The consultation period
closed on 20 June 2014. There was
32
widespread engagement with the
consultation process by practitioners and
professional bodies, among others.
Those participating in the consultation
pressed for the abolition of annual tax on
enveloped dwellings (ATED)-related CGT,
given that the new regime would obviate
the need for this regime.
The government published its
Summary of Responses on 27 November
2014. Draft legislation intended for
inclusion in the Finance Bill 2015 was
published on 10 December 2014. The
government has continued to consult
on the terms of the draft legislation
and, although the broad ambit of the
proposed new CGT regime is fixed,
the consultation should remove any
significant infelicities in the drafting of
the applicable draft legislation.
To the great disappointment of the
professional bodies who were involved
with the consultation, the new regime
is in addition to, rather than in place of,
ATED-related CGT.
Two main reasons were given for
retaining ATED-related CGT. First, this
tax and the new regime seek to achieve
different policy objectives, respectively the
disincentivisation of enveloped structures
and the levelling of the CGT regime
applicable to owners of UK residential
February 2015 | www.taxadvisermagazine.com
CAPITAL GAINS TAX
PROFILE
Name Aparna Nathan
Position Barrister
Company Devereux Chambers
Email [email protected]
Profile Aparna specialises in all aspects of tax law: her special focus
is on private client tax issues. She was listed in Chambers & Partners
UK Bar 100 Juniors at the Bar and is recognised by the principal
directories as a leader in the tax field. She is chair of the CIOT Capital Gains Tax and
Investment Income sub-committee.
New regime overview
The Finance Bill 2015 introduces a new
TCGA 1992 s 7AA, which provides that:
(a)a person;
(b)who does not meet the residence
condition;
(c)is chargeable to capital gain tax;
(d)in respect of a chargeable relevant gain
accruing to that person in a tax year; and
(e)on the disposal of UK residential
property interest.
From TCGA 1992 s 7AA, it is clear that:
zz
The new regime only applies upon
© IStockphoto/esp_imaging
disposals of UK residential property
interests and not to interests in other
property: in particular it does not apply
to interests in personal property or
commercial property.
zz
The new regime applies to individuals,
trustees, personal representatives
and certain companies (discussed
further below). The transparency of
partnerships (and indeed, LLPs carrying
on a trade or business) for tax purposes
means that non-resident partners of
such partnerships are also within the
scope of the new regime.
zz
The new regime applies to those who do
not meet the residence condition. This
is set out at new TCGA 1992 s 7AA(7):
property interests. Second, ATED-related
CGT applies a 28% rate, whereas the new
regime will apply the existing CGT/CT
on chargeable gains rates. In relation to
individuals, they concern the 18% and 28%
rates and, for companies, the 20% rate.
The professional bodies are far from
convinced that these are valid reasons
for retaining ATED-related CGT, given
the complexity and compliance costs it is
building into the new regime. This article
refers to the proposed CGT charge on nonresidents as the ‘new regime’ and considers
significant (but not all) aspects of the new
regime as set out in the draft legislation
(published on 10 December 2014).
‘(a) in the case of an individual, that the
individual is resident in the United
Kingdom for the tax year,
(a) in the case of personal
representatives of a deceased
person, that the single and
continuing person mentioned in
section 62(3) is resident in the
United Kingdom,
(b) in the case of the trustees of a
settlement, that the single person
mentioned in section 69(1) is
resident in the United Kingdom
during any part of the tax year, and
(c) in any other case, that the person
is resident in the United Kingdom
when the gain accrues.’
Recourse must therefore be had to
the statutory residence test in order
to determine whether the person in
question is ‘resident in the UK’ for (or,
as applicable, during any part of) the tax
www.taxadvisermagazine.com | February 2015
year in which the disposal takes place.
The new regime applies to:
zz
‘the chargeable relevant gain accruing … on a disposal’; and
zz
‘UK residential property interests’.
Companies affected by the new
regime
It is intended that not all companies will fall
within the scope of the new regime.
New TCGA 1992 s 7AA(6) provides that
the new regime does not apply, upon a claim
being made, to a company that is:
(a)a diversely held company at the time of
the disposal;
(b)a unit trust scheme that meets the widely
marketed fund condition in relation to the
disposal; or
(c)an open-ended investment company
that meets the widely marketed fund
condition in relation to the disposal.
A ‘diversely held company’ is one that is
not a ‘closely held company’. A closely held
company is defined in TCGA 1992 Sch C1
Pt 1. This definition is closely modelled on
the close company definition provisions in
CTA 2010. Broadly, a company is a closely
held company if it is under the control of
five or fewer participators. Interestingly,
there is no mirroring reference to control
by participators who are directors of
the company. It is not clear whether this
omission is deliberate and what, if any,
significance attaches to this omission.
‘Control’ bears a materially similar
meaning to the CTA 2010 provisions: a
person (P) is treated as having control of a
company (C) if P:
(a)exercises;
(b)is able to exercise; or
(c)is entitled to acquire direct or indirect
control over C’s affairs and, in particular,
P is treated as having control of C if P
possesses or is entitled to acquire:
(i) the greater part of the share
capital or issued share capital of C;
(ii) the greater part of the voting
power of C;
(iii) the greater part of the income
available for distribution; and
(iv) the greater part of the assets
available for distribution on a
winding up (TCGA 1992 Sch C1
para 12).
33
CAPITAL GAINS TAX
However, a company is not a closely
held company where, inter alia, one
of the five or fewer participators is a
diversely held company or a qualifying
institutional investor. A ‘qualifying
institutional investor’ is a defined
term and includes a widely marketed
unit trust scheme, an open-ended
investment company and a trustee of a
pension scheme.
TCGA 1992 Sch C1 para 6 deals
with divided companies (eg protected
cell companies).
TCGA 1992 Sch C1 para 7 sets
out an anti-avoidance provision to
counteract ‘arrangements entered
into where the main purpose or one of
the main purposes of any party of the
arrangements is to avoid capital gains
tax being charged under TCGA 1992 s
7AA(4)’, (capital gains tax charge on nonresident companies).
UK residential property interest
This is defined in TCGA 1992 s 7AA(9)
Sch B1. This provides that an interest
disposed of by the non-resident
disponor is a ‘UK residential property
interest’ if either the first or second
condition is satisfied (TCGA 1992 Sch B1
para 1(1)).
The first condition is satisfied if the
land has at any time in the relevant
ownership period consisted of (or
included) a dwelling, or the interest
subsists for the benefit of land that has
at any time in the relevant ownership
period consisted of (or included) a
dwelling (TCGA 1992 Sch B1 para 1(2)).
The second condition is met if the
interest in UK land subsists under a
contract for an off-plan purchase, where
that means a contract for the acquisition
of land consisting of, or including, a
building or part of a building that is to
be constructed or adapted for use as a
dwelling (TCGA 1992 Sch B1 para 1(3)).
The ‘relevant period of ownership’ is
the period beginning with the later of
the day on which the disponor acquired
the interest or 6 April 2015; and ending
with the day before the day on which
the disposal occurs. Where various
interests in the UK residential property
disposed of have been acquired by the
disponor at different times, for the
purposes of determining the start date
of the relevant period of ownership the
interest is treated as acquired on the
date of the earliest acquisition (TCGA
1992 Sch B1 para 1(4), (5)).
‘Dwelling’ is defined in TCGA 1992
Sch B1. A building counts as a dwelling
when it is used (or is suitable for use)
as a dwelling or is in the process of
being constructed or adapted for
such use. There is some concern that
34
townhouses currently used as offices
may nevertheless be regarded as
‘suitable for use as a dwelling’ (so
falling within the scope of the new
regime). It is arguable that the use of
the present tense ‘is suitable’ means
that townhouses currently configured
and used as offices do not satisfy the
statutory requirement: they require
some (arguably not much) work to make
them suitable for use as dwellings, but
the fact that premises ‘may be suitable’
for use as dwellings falls outside the
statutory test of ‘is suitable’ for use as
a dwelling. Further, such properties are
generally subject to planning restrictions
that prevent residential use. It seems
tolerably clear that such properties
cannot be said to satisfy the ‘is suitable
for use’ requirement.
It is intended that communal
accommodation is excluded from the
definition of ‘dwelling’. TCGA 1992 Sch
B1 para 3(3) gives details of properties
that do not count as dwellings, eg
residential accommodation for school
pupils, residential care homes, hospitals.
A catch-all provision in TCGA 1992
Sch B1 para 3(4) seeks to exclude
as ‘dwellings’ a building that is an
institution used (or suitable for use)
as the sole or main residence of its
residents. There is a slight infelicity with
the drafting because a building cannot
be an institution though it can be used
as an institution. Consequently, provided
this drafting error is rectified, it seems
clear that premises that are used (or
suitable for use) as communal residential
homes do not count as ‘dwellings’ for
the purposes of the new regime.
Chargeable relevant gain
The new regime taxes chargeable
relevant gains. New TCGA 1992 s 7AB
provides that the charge is on the total
amount of the relevant gains after
deducting allowable relevant losses.
New Sch 4ZZB makes provision
for the computation of chargeable
relevant gains (or losses) and other
gains or losses arising on chargeable
non-resident disposals of UK residential
property interests.
The default method of computation
for assets held at 5 April 2015 is set out
at TCGA 1992 Sch 4ZZB paras 6 and 7. In
effect, only gains accruing after 5 April
2015 up to the date of disposal, during
which time the disposed of property has
been used as a dwelling, are chargeable
relevant gains.
It is possible to elect for a different
method of computation based on
straight line apportionment for assets
held on 5 April 2015 (TCGA 1992 Sch
4ZZB paras 2–8). The chargeable
relevant gain is the proportion of
the gain accruing after 5 April 2015,
reflecting the period of use of the asset
after that date when the asset has been
used as a dwelling.
New TCGA 1992 Sch 4ZZB paras
10–19 set out the computational rules
necessitated by the retention of ATEDrelated CGT.
Interaction with other antiavoidance provisions
The new regime is intended to take
precedence over existing anti-avoidance
provisions.
Accordingly, the following
amendments are made by the new
regime:
1. TCGA 1992 s 8 – FB 2015 Sch [A] para
5 provides that s 8 does not apply to
ATED-related CGT nor to gains falling
within the scope of the new regime.
2. TCGA 1992 s 10A – FB 2015 Sch [A]
para 6 makes a minor amendment
to TCGA 1992 s 10A(5). However,
it is understood that the intention
(as stated by the explanatory notes
accompanying the draft legislation) is
to introduce a new TCGA 1992 s 10A
(1A), which disapplies TCGA 1992 s
10A in relation to gains that fall within
the scope of the new regime.
3. TCGA 1992 s 13 – FB 2015 Sch [A] para
7 disapplies TCGA 1992 s 13 from
applying to gains that fall within the
scope of the new regime.
4. TCGA 1992 s 86 – FB 2015 Sch [A]
para 10 introduces a new TCGA 1992 s
86(4ZA), which disapplies TCGA 1992
s 86 from attributing gains of nonresident trusts to settlors, provided
that the trustees of such trusts are
chargeable in respect of such gains
under the new regime.
5. TCGA 1992 s 87 – FB 2015 Sch [A]
para 11 introduces a new TCGA 1992
s 87(5A), which disapplies TCGA
1992 s 87 from attributing gains of
non-resident trusts to beneficiaries,
provided that the trustees of such
trusts are chargeable under the new
regime in respect of such gains.
Note: No draft clauses have yet
been published on the interaction of
the new regime with TCGA 1992 Schs
4B and 4C (trustee borrowing rules). It
is understood that these clauses are a
work in progress.
Principal private residence relief
(PPRR)
The aim of these provisions is to leave
the present rules broadly unchanged (for
example, the ability to elect a home as
a principal private residence) except for
any adjustments necessary to prevent
February 2015 | www.taxadvisermagazine.com
CAPITAL GAINS TAX
PPRR being sought by non-residents who
do not occupy the UK property as their
main residence.
A new concept of ‘a non-qualifying tax
year’ is introduced by new TCGA 1992
s 222A: a dwelling house (or part) is not
treated as occupied as a residence by an
individual (P) at any time in P’s period
of ownership that falls within a nonqualifying tax year (or a non-qualifying
partial tax year) (TCGA 1992 s 222A(1)).
A ‘non-qualifying tax year’ is a tax
year that falls entirely within P’s period
of ownership of the dwelling house (or
part) where:
(a)P was not resident for that tax year
in the territory in which the dwelling
house is situated; and
(b)P failed to meet the day count test in
respect of the dwelling house.
The day count test is set out in new
TCGA 1992 s 222B. A ‘partial tax year’
is one where only a part of the tax year
falls within P’s period of ownership of the
dwelling house (TCGA 1992 s 222A(4)).
The day count test in new TCGA 1992
s 222B is met if in a full tax year, P spends
at least 90 days in the dwelling house or
in one or more other qualifying units.
A day is spent in a qualifying unit if P
is present there at the end of a day (new
TCGA 1992 s 222B(7)). A ‘qualifying unit’
in relation to P is a dwelling house (or
part thereof) in which P has an interest
and it is situated in the same territory as
the dwelling house (or part) in respect of
which a PPRR claim is made: new TCGA
1992 s 222B(8)).
There is some concern about the
requirement for P to be present in a
qualifying unit at the end of day: this
might be difficult, for example, for shift
workers and party animals. It is clear that
the day count test takes into account P’s
presence in qualifying units other than
the one in respect of which P wishes
to make a PPRR claim: for example, if P
has a London flat (the dwelling house
in respect of which the PPRR claim is
made) and a country house, P’s presence
at the end of the day at either of those
properties is taken into account in
determining whether P meets the day
count test in relation to the London flat.
It appears that the focus of the test is
to ensure that one of the UK properties
is actually used by P. If that is the case, a
test focusing on presence for more than
a de minimis period in any UK dwelling
house or qualifying unit should suffice.
Clearly, the drafting of such a test will
need to balance simplicity with clarity.
An interesting feature of the day
count test is that the presence of the
spouse of the individual in a dwelling
house in effect counts as presence by
the individual in that dwelling house
(new TCGA 1992 s 222B(6)). For example,
assume a non-resident husband and UK
resident wife who together own a UK
property that is their principal private
residence. The non-resident husband is
present in the UK property (under the
day count test) for 25 days in the tax
year and his wife is resident in the UK
property for most of the tax year. The
husband will meet the day count test for
that year because his wife’s presence
in the UK property will count as his
presence in the UK property.
Conclusion
There are many other interesting quirks
and anomalies with the PPRR provisions,
as well as with the other provisions of
the draft legislation. A full discussion is
outside the scope of this article. Such
quirks and anomalies are being discussed
with HMRC so many, if not all, of them
could be addressed in the next iteration
of the draft legislation.
Additionally, the draft legislation
contains no provisions dealing with
collection mechanisms, holdover reliefs,
entrepreneur reliefs, wasting assets
and options. It is anticipated that these
aspects will be dealt with in the next
iteration of the draft legislation.
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www.taxadvisermagazine.com | February 2015
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35
VAT RETURNS
KEY POINTS
zz
What is the issue?
An accurate VAT return means there
is less chance of a query from HMRC
on the figures declared each period.
For example, a figure excluded from
Box 6 in relation to a ‘reverse charge’
transaction might create an imbalance
with the Box 1 output tax figure
zz
What does it mean for me?
If a VAT return is properly completed
and checked, there is less risk of a
business making errors and potentially
incurring a penalty
zz
What can I take away?
Many errors and queries in relation
to VAT returns relate to overseas
transactions. It is important to
recognise that the procedures are very
different for goods and services
Avoiding a
trip up
I
always enjoy telling the tale about
a client who was completing his
VAT return online and didn’t realise
that HMRC’s very helpful computer
automatically completes Box 3 (total
output tax, that is Box 1 plus Box 2) and
Box 5 (output tax minus input tax, giving
the VAT payable or repayable) without
any pressing of buttons or entering of
numbers. So the result for the poor client
was that he entered his total output
tax figure online into the input tax box,
leaving a zero VAT payment in Box 5 that
is, output tax equals input tax.
HMRC queried the return that he
had submitted and he had in effect
overclaimed input tax by £6,000, which
was the difference between his output
tax and input tax.
It sounds a basic error but, if people
are not comfortable with computer
screens and are just entering words
or figures on a mechanical basis, you
can see how it can trip someone up in
the same way as a football defender
past his sell by date trips up a speedy
young winger.
The happy ending to this story is that
HMRC did not apply a careless error
Neil Warren gives some practical tips about
completing VAT returns, with those concerning
overseas transactions in particular
penalty, recognising that the penalty
regime requires them to takes into
account the knowledge and experience
of the individual taxpayer (this client was
a builder). But if an accountant or tax
adviser made the same mistake on his or
her VAT return, and HMRC picked it up,
then I feel a penalty would be justified.
Here, I am going to consider some
practical situations in relation to
completing VAT returns, particularly
focusing on dealing with tricky
international transactions.
EXAMPLE 1 – REVERSE CHARGE FOR MIKE
Mike is an accountant in Manchester and registered for VAT. He uses the services of
a bookkeeping firm based in India and received services of £10,000 in the VAT period
ended 31 December 2014. What entries will he make on his VAT return for these
services?
Under the ‘reverse charge’ procedures, Mike must treat the services received as
both his income and expenditure. He will make the following entries on his VAT return:
Box 1 (output tax): £10,000 x 20% = £2,000 – the value of services multiplied by the
rate of VAT that applies to that service in the UK, usually 20%.
Box 4 (input tax): same figure as Box 1 (£2,000). This assumes that the expense in
question relates to ‘taxable’ activities and there are no partial exemption/non-business
issues. This is the case for Mike.
Box 5 (VAT payable): nil effect if Box 1 is the same as Box 4.
Box 6 (outputs)/Box 7 (inputs): the net figure of £10,000 is included in both of these
boxes so Mike is treating the services received as both his income and expenditure.
36
Buying services from abroad
The ‘reverse charge’ calculation often
causes confusion and applies when a UK
business buys services from abroad. The
basic principle is that the customer deals
with the VAT rather than the supplier,
avoiding the need for lots of overseas
businesses having to register for UK VAT.
As a starting point, always be clear that
the reverse charge applies to services
bought from EU and non-EU suppliers and
not just from those based in the EU. See
Example 1.
I am often asked about the logic of a
business paying money to an overseas
supplier but then recording this payment
as income in Box 6 of its VAT return.
However, if you think about a domestic
purchase of goods or services between
two VAT-registered entities, the supplier
will declare output tax in Box 1 and the net
value of the sale in Box 6. The customer
will claim input tax in Box 4 and record the
inputs figure in Box 7. Here, we have the
same boxes completed as with a ‘reverse
charge’ calculation.
Selling services abroad
If Mike does some work for a German
business customer (or Australian business
February 2015 | www.taxadvisermagazine.com
VAT RETURNS
PROFILE
Name Neil Warren
Position Independent VAT consultant and speaker
Company Warren Accounting Services Ltd
Profile Neil Warren is an independent VAT speaker, author and
consultant, and was the Taxation Awards Tax Writer of the Year
in 2008. Neil worked at HMRC for 13 years until 1997.
© IStockphoto/alphaspirit
Buying goods from abroad
customer as the rules for selling B2B
(business to business) services here are the
same for EU and non-EU customers), which
boxes of the VAT return will be completed?
The answer is ‘only Box 6’ (outputs). This
answer can sometimes cause confusion –
there is a view that, if a service is outside
the scope of VAT because the place of
supply is outside the UK, no entry is made
on the VAT return. This statement is correct
in only one situation if the business uses the
flat rate scheme. For examples of income
sources that are included or excluded from
Box 6, look at HMRC Notice 700/12, para
3.7. The point about including the overseas
services is shown at bullet point 8, ‘Supplies
which are outside the scope of UK VAT as
described in Notice 741A place of supply
of services’.
Warning: ignore Box 8 and Box 9 for
services
Here is my tip to save you unnecessary
hassle: don’t forget that boxes 8 and 9
apply only if you either buy or sell ‘goods’
from a VAT-registered business in another
EU country. The boxes do not relate to
services. So if your client only buys or sells
services abroad, then the figures in boxes 8
and 9 will be zero.
The rules on buying goods from abroad
are very different according to whether we
are buying from a supplier based in an EU
or non-EU country. If the latter, VAT is paid
at the point that the goods enter the UK,
assuming they are standard-rated creating
a source of input tax for the importer when
he acquires the C79 VAT certificate issued by
HMRC. But no VAT is charged by the supplier,
or HMRC, in relation to an EU purchase from
outside the UK, with the buyer accounting
for ‘acquisition tax’ in Box 2 of his VAT return.
See Example 2 and Example 3.
What are the key issues in relation to
Mike’s computer purchases?
The VAT payable on goods bought from an
EU supplier is included in Box 2 of the return
compared with Box 1 for services.
There is no Box 6 (outputs) entry for
goods bought from an EU supplier. This is
because the buyer in the UK does not need
to treat the payment for goods as his own
income as he does for services.
We have used Box 9 in the case of goods
bought from an EU supplier but, as explained
above, we never use Box 8 or 9 for services.
Selling goods abroad
To complete the loop, let us assume that
Mike is now selling two computers abroad,
one to a VAT-registered customer in France
and one to a business in the US. Both sales
are zero-rated but, in the case of the EU
sale, the proceeds will be recorded in Box
6 (outputs) and Box 8 (sales of goods to
VAT-registered businesses in EU countries
outside UK) but only in Box 6 for the sale
to the US. This is another important point:
don’t think that just because an entry has
been made in Box 8 for a sale that it is not
included in Box 6 as well – it is. In effect,
Box 6 reflects worldwide sales made by
a business.
Conclusion
As a final question, what basic checks
should always made be made to ensure
our VAT returns are accurate? It is always
important to ensure that the VAT payable
(or repayable) figure in Box 5 reconciles
to the VAT creditor or debtor balance in
the nominal ledger as at the same date.
Although you would expect this to be
automatic, it is not necessarily the case.
Think of the fun and games you have
if someone forgets to ‘reconcile’ the
VAT return system on Sage after it has
been completed.
And how many computer systems
exclude VAT journals from the VAT
report? I even know one system that
includes the previous quarter’s VAT
payment in the input tax figure for the
following period; what an excellent idea
that sounds!
EXAMPLE 2 – MIKE BUYS A COMPUTER FROM ITALY
Mike has bought a new computer for his practice from a supplier in Italy for £2,000.
The sale has been correctly zero-rated by the Italian supplier because he is selling
goods to a VAT-registered business outside Italy.
Mike will make the following entries on his next VAT return:
Box 2 (acquisition tax): £2,000 x 20% = £400. This is the value of the goods multiplied
by the UK rate of VAT applicable to them. Note: no tax would be due if the goods in
question were zero-rated in the UK.
Box 4 (input tax): same figure as Box 2, assuming no input tax restrictions apply for
exempt, non-business or private use.
Box 7 (inputs): net value of goods – £2,000.
Box 9 (acquisition of goods from other EU states): same figure as Box 7 – £2,000.
EXAMPLE 3 – MIKE BUYS A COMPUTER FROM JAPAN
Mike has bought a new computer from a supplier in Japan for £2,000. The computer is
subject to customs duty of £200 when it arrives in the UK, so VAT payable at the point
of entry is £440 (£2,200 x 20%).
Mike will make the following entries on his next VAT return:
Box 4 (input tax): he will reclaim VAT of £440, supported by a C79 certificate as
evidence.
Box 7 (inputs): net value of goods £2,200. This includes the customs duty paid at the
point of import.
www.taxadvisermagazine.com | February 2015
37
DAILY PENALTIES
La peine quotidienne
Keith Gordon discusses the validity
of £10 daily penalty notices for
late tax returns
KEY POINTS
zz
What is the issue?
The Donaldson case concerns HMRC’s
appeal against a First-tier ruling that the
legislative requirements for the daily
penalties had not been met
zz
What does it mean for me?
Whereas the statute provides that
liability for the £100 and £300 penalties
arises automatically once a tax return is
late, the statute is more convoluted for
the £10 daily penalties
zz
What can I take away?
The Upper Tribunal decided in favour of
HMRC. This gives rise to the oddity that
an individual might be notified of the
risk of daily penalties when it is already
too late to do anything to avoid them
I
n my article ‘The rise and fall of Christine
Perrin’ in the August 2014 issue of Tax
Adviser – which concerned the case of
Perrin v HMRC [2014] UKFTT 488 (TC) – I
discussed the harmonised penalty rules for
late returns and late payments of tax as set
out in FA 2009 Schs 55 and 56. There was one
aspect of Mrs Perrin’s appeal that the Firsttier did not consider – the daily £10 penalties
for late returns because their validity was
the subject of another case which the Upper
Tribunal has now heard, namely HMRC v
Donaldson [2014] UKUT 0536 (TCC).
38
The facts of the case
The case concerned Mr Donaldson’s 2011
tax return. A valid notice under TMA 1970
s 8 had been issued to Mr Donaldson in
April 2011. That meant that the return was
due to be submitted by 31 October 2011 (if
submitted on paper), or by 31 January 2012
(if submitted online).
Mr Donaldson did not submit his return
in any form by the latter day. Under Sch 55,
para 3, he incurred a penalty of £100,
which was imposed by notice issued on
15 February 2012.
Mr Donaldson appealed against the
penalty notice on the ground of having a
reasonable excuse; he said that the delay was
his agent’s fault. HMRC told Mr Donaldson by
letter on 18 April 2012 that they were unable
to process the appeal unless he submitted
his return and advised him of the risk of daily
penalties. Presumably in response to this
letter, Mr Donaldson filed his tax return by
post on 1 May 2012.
Since it was a paper return sent more
than six months late, Mr Donaldson was
issued with a further penalty notice of £300
under Sch 55, para 5. At the same time,
HMRC issued Mr Donaldson with a penalty
notice imposing the maximum 90 days’
worth of £10 daily penalties under para 4,
for tax returns that are more than three
months late.
Mr Donaldson appealed against these
further penalties also on the ground of
having a reasonable excuse. This excuse
was rejected both by HMRC and the Firsttier Tribunal.
However, the First-tier considered that
the legislative requirements on the daily
penalties had not been met. It therefore
allowed Mr Donaldson’s appeal so far
as it concerned the £900 relating to the
daily penalties. HMRC appealed to the
Upper Tribunal against this part of the
First-tier’s decision.
The relevant legislation
Whereas the statute provides that liability
for the £100 and £300 penalties arises
automatically once a tax return is late (or,
in the case of £300 penalties, more than six
months late), the statute is more convoluted
about the £10 daily penalties. Para 4(1) reads
as follows:
4(1) P is liable to a penalty under this
paragraph if (and only if) –
(a)P’s failure continues after the end of the period of three months beginning with the penalty date,
(b)HMRC decide that such a penalty should be payable, and
(c)HMRC give notice to P specifying the date from which the penalty
is payable.
February 2015 | www.taxadvisermagazine.com
DAILY PENALTIES
PROFILE
© IStockphoto/Claudiad
Name Keith Gordon
Position Barrister, Chartered Accountant and Tax Adviser
Company Atlas Tax Chambers
Tel 020 7670 1500
Email [email protected]
Profile Keith M Gordon MA(Oxon), FCA CTA (Fellow) is a barrister,
chartered accountant and tax adviser and was the winner in the Chartered Tax Adviser
of the Year category at the 2009 Taxation awards. He was also awarded Tax Writer of
the Year at the 2013 Taxation awards. He provides litigation support and advises on tax
and related matters to accountants, tax advisers and lawyers.
In Mr Donaldson’s case, there was no
dispute that the condition in para 4(1)(a)
was met. The First-tier Tribunal held, by the
presiding judge’s casting vote, that para
4(1)(b) was met. However, the First-tier
held that the condition in para 4(1)(c) was
not met. The basis of this conclusion was
the First-tier’s belief that the documents
sent to Mr Donaldson did not constitute
adequate notice.
Mr Donaldson took no active part in the
appeal, so the Upper Tribunal’s attention
was focused on the subject matter of
HMRC’s appeal (para 4(1)(c)), although
the interpretation of para 4(1)(b) was also
considered by the Upper Tribunal.
The Upper Tribunal’s conclusion
The appeal came before the president of
the Tax and Chancery Chamber of the Upper
Tribunal, Mr Justice Warren, who sat with the
president of the Tax Chamber of the First-tier
Tribunal, Judge Colin Bishopp.
HMRC’s arguments focused on two
notifications sent to Mr Donaldson,
neither of which the First-tier Tribunal
had considered sufficient to satisfy the
requirements of para 4(1)(c).
The first of these documents was the
reminder to file a tax return, sent to Mr
Donaldson in late December 2011 or early
January 2012. Although Mr Donaldson’s
return was not necessarily late at that stage –
he might still have filed online – the reminder
notified the taxpayer that ‘daily penalties can
be charged from 1 February for paper tax
returns or 1 May for online tax returns’.
The second document was the £100
penalty notice issued automatically in
February 2012. That was issued because
a £100 penalty had been incurred by that
stage, irrespective of how the return might
eventually be filed. The notice contained
advice on what to do next, including a
request to submit the return ‘now to avoid
further penalties’. It explained that daily £10
penalties ‘will’ be charged’, and that ‘daily
penalties can be charged … starting from
1 February for paper returns or 1 May for
online returns’.
Whereas the First-tier Tribunal had
concluded that these documents were
informal warnings as opposed to the notice
required by the statute, the Upper Tribunal
considered that they were sufficient to
comply with para 4(1)(c). The First-tier
had noted the mismatch in the wording
between the statements that a daily £10
penalty ‘will be charged’, on the one hand,
and the sentences that followed which used
the more permissive ‘may’. However, the
Upper Tribunal considered that the overall
meaning was clear: penalties would indeed
be charged and that two different start
dates were possible.
Thus, HMRC’s appeal was allowed.
Commentary
Ever since I was engaged in the Tax Law
Rewrite Project, I have had a particular
interest in the drafting of clear tax legislation.
One positive aspect of the project has
been the use of shorter sentences or at
least ones with more sub-paragraphing
and consequently a better, easier-to-follow
layout. However, there seems to me a trend
in recent years of having legislation that is
superficially ‘rewrite-style’, but is in fact just
as unclear as the legislation that the rewrite
was supposed to replace.
Whenever I raise this issue, I am given
the same answer: legislation is drafted in
a hurry, often with unclear political aims,
and therefore the quality of the output is
less than ideal. I suspect that that is indeed
part of the problem, but in my view it is not
www.taxadvisermagazine.com | February 2015
the only cause. There are some drafting
techniques that should have been eradicated
by the rewrite, but which have stubbornly
remained in place.
However, returning to the stated reasons
for unclear legislation, is it really excusable
that the taxpaying public and their advisers
have to deal with poor legislation because
the politicians do not give the drafters
adequate guidance on what they want or
enough time for the drafting process to be
properly undertaken? If a tax adviser were to
tell a tribunal that they had made errors on
a client’s tax return because of the volume
of work, the tribunal would turn around and
say that the adviser should take on more
staff to ensure that the job is done properly.
However, the rules that apply to taxpayers
seem not to apply to government.
FA 2009 is an example of the problem. It is
458 pages long, including 61 schedules, plus
the additional sheet issued in 2010 correcting
the typos. Sch 55 contains the rules for
penalising taxpayers who are late with their
returns. We are not exactly talking about
the most esoteric part of the tax system,
so one would have expected the legislation
to be relatively straightforward. However,
as Donaldson demonstrates, four judges
have reached three different views on the
meaning of para 4(1). And I do not think that
HMRC have got it right yet.
The Upper Tribunal’s decision means
that the point on which Mr Donaldson won
– determined by whether the condition in
para 4(1)(c) was met – has now been decided
in favour of HMRC. On balance, I think that
the tribunal was correct on that point, but it
does give rise to the oddity that an individual
might be notified of the risk of daily penalties
when it is already too late to do anything to
avoid them.
The Upper Tribunal also considered in
passing the meaning of para 4(1)(b). Since
Mr Donaldson took no active role in the
proceedings, the tribunal was not asked to
comment on the point where the First-tier
Tribunal had been divided. The dissenting
view in the First-tier was that, for HMRC to
‘decide’ that daily penalties should be issued,
this had to be effected by an individual
officer on a case-to-case basis. However, the
Upper Tribunal considered that the condition
in that sub-paragraph was met by virtue
39
DAILY PENALTIES
of a policy decision taken by HMRC before
the legislation came into force. For what it’s
worth, I am happy to accept that the wording
of condition 4(1)(b) is satisfied by such a
policy decision.
Nevertheless, the more natural meaning
of para 4(1) is that a sequence of events is
taking place: first, the return is more than
three months late; second, a decision is taken
that daily penalties should be payable; and
third, a notice is given to the taxpayer to
advise the taxpayer what is going on. Further,
there were several issues on which the Upper
Tribunal did not state an opinion and, had
these points been considered, it is possible
that it might have accepted what I describe
as the more natural reading of the legislation.
Therefore, although the purpose
of HMRC’s appeal was partly to seek
clarification of the meaning of para 4, it is
my view that it would still be worth another
taxpayer continuing to challenge the
imposition of daily penalties.
The first issue that could be contested
lies in para 4(1)(c) itself. That provision
specifies that ‘HMRC must give notice’ to
the taxpayer of the start date of the daily
penalties. It seems to have been accepted by
the Upper Tribunal that this can be satisfied
by the issuing of notices via an automated
process effected by computer. This is closely
related to the dissenting view in the First-tier
in relation to para 4(1)(b). However, it is my
view that the point is even more pertinent to
para 4(1)(c).
As I have said, the Upper Tribunal has
proceeded on the assumption that a notice
from HMRC is indeed the product of, what
the statute requires being, ‘HMRC give
notice’. But how does the law interpret
‘HMRC’? Para 27(3) defines ‘HMRC’ as ‘Her
Majesty’s Revenue and Customs’, which
seemingly does not take us much further.
However, it is enough. In CRCA 2005 s
4(1), we find that ‘the Commissioners and
the officers of Revenue and Customs may
together be referred to as Her Majesty’s
Revenue and Customs’. Therefore,
consistent in fact with the Upper Tribunal’s
interpretation of para 4(1)(b), HMRC cannot
be some mere computer, but requires an
individual, either a board member or an
officer of the board. If that is correct it would
appear that automated notices are not
sufficient to comply with para 4(1)(c).
Second, the same point could be made
in respect of para 18 of Sch 55. That
requires the assessment and notification
of a penalty to be by HMRC, which means
an individual, not a computer. (There is a
similar argument that could be deployed
in relation to automated penalties issued
under the previous legislation in the
TMA 1970, which I have written about in
Taxation – see ‘Hamstrung durch Technik’,
6 February 2014, p8 and ‘Technikal
progress’, 20 November 2014, p8.)
Third, there is a point raised tentatively
by the Upper Tribunal itself. I have not seen
a penalty notice issued under para 18 and
therefore cannot comment on whether
this argument would succeed in practice.
Nor did the Upper Tribunal, although it did
see a specimen notice. The Upper Tribunal
commented that the specimen did not
appear to comply with the requirement in
para 18(1)(c) which provides that the penalty
notice must state ‘the period in respect
of which the penalty is assessed’. As the
meaning of para 18 was not a matter that
was before the Upper Tribunal, it did not
pursue the point. However, that does not
rule out the matter being considered afresh
in another case.
FURTHER INFORMATION
Read Keith’s article on the Perrin case
at: www.tinyurl.com/ploj742
Members’
Support Service
• The Members’ Support Service aims to help those with
work-related personal problems
• An independent, sympathetic fellow practitioner
will listen in the strictest confidence and give
support
• The service is available to any member of the
CIOT and ATT
• There is no charge for this service
To be put in touch with a member
of the Support Service please
telephone 0845 744 6611 and quote
‘Members’ Support Service’
40
February 2015 | www.taxadvisermagazine.com
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To take advantage of this content visit
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TECHNICAL
Sports Clubs – unjust enrichment
VAT
Disabled people and their carers
– an update on the tax rules
EMPLOYMENT, INCOME TAX
Key points
zz
We wrote to HMRC on 14 October
zz
They responded on 6 November
zz
They agree in part with what the CIOT submitted
Background
We wrote to HMRC about their approach to refunds to sports clubs
as outlined in Revenue and Customs Brief 25/14. This was in response
to a specific request by a member that we look into the issue.
Our submission
Our submission focused on a principle of EU law known as the
unjust enrichment concept. This permits members to deny a
refund to a person who has paid taxes or other levies contrary to
EU law if by doing so they would be unjustly enriched – ie where
the burden of the wrongly charged tax has been passed on and
borne by someone else.
We noted in particular that the burden of proof is on HMRC to
demonstrate that the taxpayer would be unjustly enriched and
not for the taxpayer to prove that he is not. Further, EU law also
prohibits any process that made it impossible or excessively difficult
for a person to obtain a refund of monies collected in contravention
of EU law.
HMRC’s response
HMRC accept that ‘the onus is on HMRC to prove their case’ but
contend that ‘golf clubs must be prepared to cooperate and respond
to reasonable enquiries into the matter’. We would note here that
it is not necessarily only golf clubs involved, although we have been
advised that it is mainly golf clubs that are involved.
They say they have initiated enquiries with a number of
‘representative golf clubs’ with a view to reducing any burdens
but are not in a position to disclose details as yet. They have also
commented that there is other relevant information. This includes
RCB 20/14 on whether compound interest is payable and Notice
700/45 on the possibility of adjusting a current return to recover a
repayment due in some circumstances.
Further action
We do not propose responding specifically to HMRC’s response but
set out details for those involved. However, we would point out, as
we alluded to in our original submission, that the process may be
excessively burdensome for small clubs that are forced to spend time
and cost providing information not to support their VAT declarations,
but to assist HMRC in preparing their case against the club itself.
That does not to us seem equitable. How, for example, does it rebut
a contention by HMRC that its particular business falls into the same
class as HMRC’s representative sample, or how does it respond
when HMRC argue that it is the club’s own information that supports
HMRC’s unjust enrichment defence?
Members who wish to raise further points on this subject should
email [email protected].
In case you want to review what we said, the non-public link to
the submission and response can be found at www.tinyurl.com/
ok5tlw3
Maric Glaser
[email protected]
42
In recent years there has been a substantial growth in the number
of elderly or disabled people employing a care worker or personal
assistant to attend to their day-to-day needs.
Many such roles are funded by local authorities and
increasingly by NHS England through personal budgets held by
the service user, although some may be funded privately. In
nearly all cases the relationship between the personal assistant
and service user is one of employee and employer. This means
that the employer must operate PAYE and NIC on their care
worker’s wages and pay them statutory sick pay and other
statutory payments. Clearly, this can be a high expectation on
some service users, and another family member will often take
on the role of employer.
Easing the regulatory burden for so-called ‘care and support
employers’ (C&S employers) has been a constant theme of
LITRG’s work in recent years. With the aid of HMRC funding we
provide information on the tax and other obligations of being a
C&S employer and a basic PAYE tool on our website www.tinyurl.
com/pnadhjh. We have also persuaded government to give
easements to people with personal budgets to make compliance
with their obligations easier. The easements are as follows:
Exemption from online filing of PAYE returns
Unless they are already an RTI employer making electronic returns,
C&S employers may instead make a quarterly paper PAYE return
for each employee for whom a deductions working sheet is
maintained. This will detail the payments made to the employee
during the quarter (PAYE Regulations (SI 2003/2682) reg 67D). This
return must be filed within 14 days of the end of the quarter.
A C&S employer for this purpose is defined as an individual who
employs a person to provide domestic or personal services at or
from the employer’s home where the recipient of the services,
who may be the employer or a member of the employer’s family,
has a physical or mental disability, or is elderly or infirm. The
exemption can only be claimed if it is the employer who delivers
the return, not some other person on the employer’s behalf.
This exemption from online RTI filing recognises that many
disabled and elderly individuals who employ carers are unable to
use computer technology. This might be because their disability
makes the process painful or difficult, or they are computer
illiterate (see LH Bishop Electrical Co Ltd & Others v HMRC
Commissioners [2013] UKFTT 522 (TC)). But it does mean that if the
carer or personal assistant is entitled to universal credit they will
have to self-report their monthly earnings from that employment
to the Department for Work and Pensions (Universal Credit
Regulations (SI 2013/376) reg 61(2)).
Employment allowance
When the employment allowance (the £2,000 exemption
from secondary NICs) was introduced in April 2014, domestic
employers, including those in C&S, were excluded because the
relief was intended to help growing businesses.
At the same time, the percentage threshold scheme (PTS),
which enabled some employers who paid their employees
statutory sick pay to claim it back, was abolished, causing hardship
to some C&S employers whose local authority funders may not
have been able to make up the shortfall. Together, the abolition of
the PTS and the denial of the employment allowance delivered a
double blow to C&S employers.
February 2015 | www.taxadvisermagazine.com
TECHNICAL
Technical Team
LITRG and charity Disability Rights UK campaigned hard on
this issue, and were delighted when, in the Autumn Statement,
it was announced that the £2,000 employment allowance would
be extended to care and support employers from April 2015. We
have asked HMRC to take a lenient view of C&S employers who
may have claimed the allowance accidentally under the automatic
RTI procedures, and not charge them the inaccuracy penalty which
they will have incurred in 2014/15.
Board and lodging allowance
The Autumn Statement and draft finance bill clauses have also
announced an income tax exemption for board and lodging
provided to ‘home care workers’, so that a carer will be able to
take a meal with their employer, or spend the night in their home
without incurring a tax liability on the benefit. This, again, was
the outcome of an LITRG representation, and will take effect from
2016/17 when the £8,500 threshold for the charge on benefits in
kind is abolished.
For this purpose a ‘home care worker’ is defined as ‘an
individual employed wholly or mainly to provide personal care to
another individual at the recipient’s home, where the recipient
is unable to care for themselves because of old age, mental or
physical disability, past or present dependence on alcohol or
drugs, or past or present illness or mental disorder’.
Robin Williamson
[email protected]
Rating the Autumn Statement
AUTUMN STATEMENT 2014
In the past we have been asked by thex House of Commons’
Treasury committee to report on how well the Budget met
its six tax policy principles: fairness; supporting growth and
encouraging competition; certainty, including simplicity; stability;
practicality; and coherence. We were quoted extensively in
the committee’s report on Budget 2014 and were happy to
undertake a similar exercise for the Autumn Statement. Our
report to the committee, which includes contributions from the
ATT and LITRG, can be found here: www.tinyurl.com/lbohehu
As in previous years, we had mixed views on how well
the Autumn Statement performed against the six principles,
finding that, although there were some measures that scored
well, others did not. Overall, we felt that a rating of 8/10 was
appropriate, as much in response to what the government has
said it would not do as what it would.
We are pleased that the government has listened to feedback
and has decided that there will be no changes to the rules on a
non-resident’s entitlement to the UK personal allowance. We
had been concerned that the changes proposed earlier last
year would have made the tax system unduly complicated and
placed additional burdens on employers. We are glad that the
government has taken this on board and decided not to proceed
with its plans in this area.
Of the measures that were well received, we picked out the
abolition of the slab system of stamp duty land tax (SDLT) as
scoring highly under the category of ‘basic fairness’. We felt
that the outdated and unfair slab system distorted property
sales by creating huge ‘cliff edges’ at particular property values.
For example, a person who bought a property for £250,000
paid £2,500 in tax while someone who bought a property for
£250,001 paid three times as much. In our view, the move to a
system where SDLT is charged at each rate on the portion of the
purchase price which falls within each rate band is both fairer
February 2015 | www.taxadvisermagazine.com
[email protected]
Sacha Dalton, Technical Newsdesk Editor
Contents
In this month’s Technical briefings we provide a note of
our report to the Treasury Committee, summaries of our
responses to other bodies and we revisit RTI. We also cover
other work carried out by the Technical Teams of the CIOT,
ATT and LITRG.
Newsdesk articles
Author(s)
Sports clubs – unjust enrichment
HMRC have responded to the CIOT’s
submission on unjust enrichment and
sporting club refunds
Maric Glaser
p42
Disabled people and their carers An
update on the tax rules
Robin Williamson
p42
Autumn Statement 2014 Our report to
the Treasury Committee
Stephen Relf
p43
Collection and management of
Will Silsby
devolved taxes in Wales CIOT, ATT and p44
LITRG respond to the Welsh white paper
Reform of close company participator
rules The CIOT considers the Autumn
Statement announcement that no
changes will be made
Margaret Curran
p45
Closure of enquiries – HMRC
consultation A review of the proposals
and a request for comments
Will Silsby/
Margaret Curran
p45
The meaning of ‘dwelling’ The CIOT
continues to monitor the situation
Maric Glaser
p46
Not yet conforming The CIOT responds
to HMRC on the Rapid Sequence case
Maric Glaser
p46
Banning corporate members of LLPs
The CIOT opposes the BIS proposals
Margaret Curran
p47
Working Together Update on HMRC’s
digital proposals
Stephen Relf
p47
Tax and ‘localised’ benefits A summary Kelly Sizer
p47
of LITRG’s response to the call for
evidence
RTI is appealing Dealing with penalty
notices
Matthew Brown
p48
[email protected]
Sacha Dalton,
Technical Newsdesk Editor
43
TECHNICAL
and more sensible, preventing distortions in the market place
and avoidance around the ‘break points’.
The new Diverted Profits Tax (DPT) also raised concerns
particularly because little information was available in the
days after the Autumn Statement. In our report we expressed
concern that the UK may well be developing the tax in advance
of agreement on new principles of transfer pricing and
taxable presence, and urged the government to ensure that
the timing of the changes did not put the UK at a competitive
disadvantage. In a follow-up letter written after the draft
legislation for the DPT was published, we criticised the drafting
of the new rules. We remarked that the legislation could bring
into its scope a wide range of transactions, and a large number
of companies would need to be aware of the new tax and
consider whether they would fall inside it.
We hope that the Treasury committee will take our views
into account when it reports on the Autumn Statement.
Stephen Relf
[email protected]
the Welsh government had issued alongside the consultation
document. As an aside, we commend the thoughtful and
clear design as a model that HMRC and other UK government
departments might wish to adopt. In its general comments,
the ATT endorsed the CIOT response and noted both the
importance of designing the Welsh collection and management
functions to make them appropriate and responsive to the
nation’s circumstances and the need to avoid the temptation
to build in design differences unless they would deliver clear
benefits to the people of Wales.
The consultation comprised 25 specific topics. A recurring
theme in all three responses was the plea to ‘keep it simple and
easy’. The detailed comments by the three bodies included the
following:
CIOT:
zz
the need for clarity on the WRA’s role in the tax
policymaking process;
zz
the importance of hardship situations being identified on
objective criteria;
zz
the dependence of a compliance culture on good
Towards a TMA for Welsh taxes
WALES, DEVOLUTION
The Wales Bill received royal assent on 17 December 2014. The
Wales Act 2014 includes provision for:
zz
the National Assembly to develop Welsh taxes to replace UK
SDLT and UK landfill tax;
zz
the establishment of a mechanism to create new Welsh
taxes on a case-by case basis; and
zz
the Assembly to be able to call a referendum on the
introduction of a Welsh rate of income tax.
In September 2014, in anticipation of these powers, the
Welsh government published a consultation, Collection and
Management of Devolved Taxes in Wales. Responses will be
considered in the design of the tax administration bill which the
Welsh government will present to the assembly in the summer.
The Welsh government will consult separately in the spring on
the key options for Welsh taxes to replace SDLT and landfill tax.
The CIOT, ATT and LITRG each responded and have been
involved in discussions with representatives of the Welsh
government. The CIOT and ATT also conducted a joint
membership survey on the consultation issues which provided
an insight that was incorporated into our responses.
The CIOT response opened with appreciation of the
wide-ranging consultation to date and a recognition of the
opportunity that the design of new legislation provided. At the
same time, it emphasised the importance of considering any
changes in the context of cross-border activity and the need to
synchronise with the UK regime.
LITRG’s response noted that its own main focus was on
income tax rather than either of the first two devolved taxes.
Its comments were intended to assist the development of a
system that would be fit for use if further taxes were devolved.
It called for the Welsh Revenue Authority (WRA) to draw up a
taxpayer’s charter with a statutory basis that set out the rights
and obligations of taxpayers and the government.
It also emphasised the importance of understanding
the needs of unrepresented taxpayers who want to be taxcompliant but find the tax system complicated.
While the CIOT and LITRG prepared their responses as
free-form documents, the ATT used the response form which
44
communications;
zz
the merit of the WRA board, including representation from
the tax profession with significant experience gained in
private practice, of how tax affects business;
zz
the importance of a taxpayer being able to fulfil their
obligations through use of an agent;
zz
the significance of proportionality, particularly in respect of
the powers to collect debt and levy penalties;
zz
the case for extending professional privilege to advice
provided by expert tax advisers;
zz
the need for monitoring of any delegated functions,
including debt collection;
zz
the benefit of engaging with agents and providing a facility
for submitting queries, clearance applications or simply
observations on areas of difficulty; and
zz
the importance of tempering any ‘pay-first’ rule to
accommodate hardship.
ATT:
zz
the benefit of the WRA’s corporate plan incorporating both
short-term and medium-term objectives and proposals;
zz
the possible merit of the annual report on the charter
being prepared by an independent review committee with
a response by the WRA (the reverse of the arrangement for
the UK charter);
zz
the critical importance of any body with responsibility for
the collection and management of Welsh taxes being able
to guarantee a face-to-face meeting facility;
zz
the need for a process to avoid and resolve any conflict
between WRA and HMRC policy in relation to common
powers;
zz
the importance in relation to any penalty regime of
encouraging compliance rather than punishing noncompliance and the particular role within this of suspended
penalties;
zz
the need to identify how the ‘informal discussion’ route to
dispute resolution referred to in the white paper might in
practice be achieved;
zz
the possibility that the proposals concerning the shared
funding of alternative dispute resolution were based on a
misunderstanding of the HMRC basis in relation to disputes
involving SMEs and individuals; and
zz
the risk of creating resentment if there was a divergence
between Welsh and UK taxes in relation to whether
payment of the tax had to be made before an appeal could
be heard.
February 2015 | www.taxadvisermagazine.com
TECHNICAL
LITRG:
zz
the merit of having an independent regulatory body within
the Welsh government to scrutinise the success of the WRA
in achieving its core duties and following the taxpayer’s
charter;
zz
the critical importance in relation to the collection of taxes
of recognising concerns about hardship and fairness;
zz
the importance of easily understandable information and
guidance from the WRA being available through various
channels (such as print in both English and Welsh), including
versions accessible to people who are digitally excluded and
those with disabilities;
zz
the potential benefit of dedicated 0300 helplines in relation
to the devolved taxes;
zz
the possible need to consider initially delaying penalties for
late filing and basic errors while taxpayers became familiar
with the new collection and management systems;
zz
the need to avoid the possibility of a taxpayer having to deal
with parallel enquiries on the same matter by both the WRA
and HMRC;
zz
the importance of balancing the WRA’s right to mandate the
format of returns with individuals’ human rights;
zz
the need for taxpayer obligations to make allowance
for reasonable excuse, exceptional circumstances and
vulnerable taxpayers;
zz
the importance of involving voluntary and charity
organisations in consultations;
zz
the merit of the WRA having the flexibility not to penalise
where there was no intention to reduce tax;
zz
the merit of including a transparent internal review
procedure as part of the dispute resolution process; and
zz
the importance of a properly structured complaints
procedure.
The CIOT response also included specific comments (supported
by LITRG and ATT) in relation to the GAAR and DOTAS.
The Welsh government white paper can be found at www.
tinyurl.com/nnluokp
The CIOT response can be found at www.tinyurl.com/qzykf2k
The ATT response can be found at www.tinyurl.com/omqc52b
The LITRG response can be found at www.tinyurl.com/qhse6ud
Will Silsby
[email protected]
Reform of close company
participator rules
CLOSE COMPANIES
It was announced in the Autumn Statement 2014 that the government
has completed its review into the tax charge on loans from close
companies to individuals, trusts and partnerships that have a share
or interest in them. The government does not intend to change the
structure or operation of the tax charge as a result of this review.
Towards the end of 2013 HMRC consulted on further reform of
the close company loans to participators rules, but decided not to
make any fundamental changes to the existing regime or to change
its operational structure.
However, HMRC told us in spring 2014 that they would consider
the need for less fundamental adjustments to the regime, after
concerns and suggestions were put forward during the consultation.
In particular, areas that were to be given further consideration were
February 2015 | www.taxadvisermagazine.com
loans to partnerships, including LLPs, loans to charities, and loans
to employee benefit trusts (EBTs). HMRC asked for information on
the extent of the problems the regime, including the amendments
made in FA 2013, were causing, and evidence in support of reform on
any of the three areas. The CIOT wrote to HMRC with examples and
suggestions that were put forward by members.
Our response to HMRC can be viewed here: www.tinyurl.com/
pjqfang
It is therefore disappointing that the government has decided,
without explanation, not to make any further changes to the
structure or operation of the tax charge. We intend to follow this up
with HMRC and hope to be able to report back later.
On a separate but related matter, HMRC has published a nonstatutory form that can be used for claims for repayment. Form (L2P)
can be found at: www.tinyurl.com/pmwmhd3
Margaret Curran
[email protected]
Proposed new rules for
dismembering and resolving
enquiries
TAXES MANAGEMENT, CLOSURE OF ENQUIRIES
The Autumn Statement included the announcement that the
government would ‘consult on a proposal to introduce a new
power, enabling HMRC to achieve early resolution and closure
of one or more aspects of a tax enquiry while leaving other
aspects open’. HMRC issued its consultation paper on 18
December.
The consultation is taking place at stage 1 of the tax
policy development process with its stated purpose being
to ‘seek views on the policy design and any suitable possible
alternatives, before consulting later on a specific proposal
for reform’. This is welcomed because it creates the best
opportunity for responses to influence the policy and
legislation that will emerge from the consultation.
The key driver behind the proposals is the concern that the
law on the closure of enquiries, as it stands, prevents any part
of a multi-dispute enquiry being closed until every part can be
closed. HMRC believe that this delays the resolution of disputes
and frustrates challenges to avoidance schemes. In both cases,
this causes the delayed payment of tax.
The main proposal being offered for consideration is a new
power enabling HMRC to refer to the tribunal a specific issue
within an enquiry, as distinct from the whole enquiry.
Currently, such a dismemberment of an enquiry can be
achieved only as a joint referral to the tribunal by the parties
under the seldom used provisions of Taxes Management Act
1970 s 28ZA. Given the purpose of the proposed change, it is
no surprise that the consultation proposes an accompanying
amendment to the act’s provisions to enable closure in
accordance with the tribunal’s decision on the dismembered
part of the enquiry, with consequent implications for the
payment or repayment of tax.
The consultation proposes another amendment, the
purpose of which appears to be to enable agreed aspects of
an enquiry to be closed in advance of the whole enquiry, again
with implications for the payment or repayment of tax.
To align the consequences of a joint referral to the tribunal
under s 28ZA with the consequences of a ‘sole referral’ by
HMRC under the proposed provisions, a further amendment is
45
TECHNICAL
proposed. At present, although a joint referral to the tribunal
brings finality on a particular issue, the payment or repayment
consequences are given effect only when the whole enquiry is
closed. Accordingly, HMRC propose that a joint referral should
result in a ‘tribunal referral closure notice’ in the same way as
where there had been a sole referral. So any tax payable would
be due in advance of the closure of the whole enquiry.
The consultation emphasises repeatedly that HMRC expect
to use the sole referral power ‘sparingly’. Examples are given as
‘cases involving significant tax under consideration or involving
issues which are novel, complex, or have a wider impact,
including those which can include tax avoidance’. Reference is
made to ‘operational; arrangements’, including the nomination
of senior officials whose consent would be required before the
new power could be used.
Provision is included for a taxpayer to be able to appeal
against a ‘tribunal referral notice’, which advises the taxpayer
that HMRC was invoking the new power, but the consultation
does not indicate what grounds of appeal might be considered
by the tribunal.
In keeping with the scope of stage 1, its nine questions
are relatively open and allow answers to be wide-ranging.
Importantly, the closing date for responses is 12 March 2015 so
if you are reading this any time before the middle of February
you can get involved in the consultation. It is often just a couple
of bullet points along the lines of ‘what would happen if…?’
or ‘has anyone spotted that this could mean…?’ that can add
enormously to the strength and credibility of a response to a
consultation. CIOT and ATT members can email comments to
[email protected] or [email protected], respectively.
For readers without the time or inclination to digest the 26page consultation paper, question 3 simply asks for suggestions
on the terminology of the new notice, referred to in this article
by its working title of ‘tribunal referral notice’.
If the terminology suggested by a member is adopted
by HMRC, we will highlight this in a subsequent issue of
Tax Adviser.
The consultation document can be found at www.tinyurl.
com/khox5v5
Will Silsby
Margaret Curran
[email protected]@ciot.org.uk
The meaning of ‘dwelling’ –
update
VAT
Key points
zz
There were two cases (Catchpole and Fox) that dealt with
the issue of whether a dwelling could comprise only one
building;
zz
we wrote to HMRC in June 2013; and
zz
the issue is before the Land and Property Liaison Group
Background
VATA 1994, Schedule 8, Groups 5 and 6 make provision for the zerorating of dwellings. We wrote to HMRC in 2013 after concerns that,
despite losing two tax tribunal cases (Catchpole and Fox), HMRC were
maintaining their position that a dwelling had to comprise a single
building. That meant that the position was unclear for taxpayers (and
their customers).
46
Update
There does not appear to have been any progress on this issue,
although we can report that it is still being considered by HMRC and
has been mentioned in the minutes of the Land and Property Liaison
Group.
We will continue to monitor the situation but would welcome any
further input that members may have on the issue.
Maric Glaser
[email protected]
Not yet conforming
VAT
Key points
zz
The tribunal in Rapid Sequence read words into UK
legislation to give it a conforming approach
zz
We wrote to HMRC questioning the ability to do so
zz
We have now written suggesting actions that HMRC should
take to provide taxpayers with greater certainty
Background
The tax tribunal decided in Rapid Sequence that it could interpret
the words of UK legislation so that they conformed to the EU VAT
law. This was despite the fact that the tribunal had also concluded
that, on the clear wording of the UK law, it would have had no
hesitation in finding for the taxpayer.
We wrote to HMRC pointing out that:
zz
a conforming approach could only be applied if the UK
legislation was capable of being read in two ways – one that
conformed with the EU legislation and the other that did not;
zz
the courts have held in other cases that there are limitations to
what has become known as the ‘Marleasing’ approach in that
when re-interpreting UK law one should not ‘do violence’ to it; and
zz
the tribunal in Rapid Sequence had sought to interpret the
medical exemption in conformity with article 132(1)(c) of the
Principal VAT Directive (PVD) but, since the services were
provided to a hospital, it was arguable that it should have
sought to interpret the UK legislation to conform with article
132(1)(b) instead.
We received a response from HMRC rejecting our view.
Further action
We considered that, although we disagreed with HMRC’s
analysis, a practical approach was needed to address the
problems with the EU law.
We have now written to HMRC, advising that we stand by our
analysis, but also pointing out that:
zz
if a conforming approach had to be adopted, it would mean
that, because the UK legislation attempts to implement two
different provisions of the PVD, it would mean that it would
be necessary to adopt a different interpretation of the same
legislation depending on the facts;
zz
HMRC should not be seeking to enforce a conforming
interpretation in cases such as this where they have failed to
update their public guidance or the UK law to address a clear
difference from their desired policy line;
zz
in any event, it was unsatisfactory that, at present, taxpayers
would have to know not only the UK law but also the approach
taken by the tax tribunal in order to apply the legislation as
February 2015 | www.taxadvisermagazine.com
TECHNICAL
HMRC considered that it should be, which was contrary to the
principle of legal certainty; and
zz
it appeared that the HMRC guidance had not yet been updated
for the department’s view.
We have therefore suggested that, without delay, HMRC should
update their guidance possibly by issuing a Revenue and Customs
Brief followed by the introduction of legislation to implement the
PVD as they consider it should be.
might be withdrawn. Rather, it would be preferable to give an
indication that future policy would not withdraw general use
of LLPs by companies but would consider a targeted approach
should misuse by a minority become material.
The CIOT’s response can be viewed at www.tinyurl.com/
krz9kx8
The BIS document can be viewed at www.tinyurl.com/
pbv2guj
But…
Although we want HMRC to provide certainty for taxpayers, we
still believe it is arguable that interpreting UK law in conformity
with article 132(1)(b) would arrive at a different position from that
found by a tax tribunal.
Margaret Curran
[email protected]
Maric Glaser
[email protected]
Working Together’s digital
future: update
WORKING TOGETHER
Prohibition of corporate
members of LLPs
PARTNERSHIPS
Readers may recall that earlier this year a discussion paper was
published by the Department for Business Innovation, and Skills
(BIS) titled Transparency and Trust: Enhancing the Transparency
of UK Company Ownership and Increasing Trust in UK Business.
Paragraph 169 contained the worrying proposal that LLPs
should be prohibited from having corporate members (see Tax
Adviser, August 2014, p17)
This proposal followed the government’s decision to
pursue a default prohibition of corporate directors of limited
companies, save in limited circumstances. Draft legislation
on this is included in the Small Business, Enterprise and
Employment Bill, now before parliament.
We wrote to BIS objecting to the proposal. We were
concerned that, if the government went ahead with plans
to ban corporate members of LLPs, there would be serious
consequences for many commercial business arrangements,
particularly property development and farming partnerships
We are therefore pleased to report that in its latest paper,
Scope of Exceptions to the Prohibition of Corporate Directors,
BIS agree that there is not a strong case for action to prohibit
corporate members of LLPs. Its thoughts are set out in
paragraphs 68 to 73.
There may be a theoretical risk that corporate membership
of LLPs might be used to mask beneficial ownership – although
the government acknowledges that there is no strong body of
evidence suggesting abuse so far. But it should not be an issue
if information about the beneficial owners of the corporate
member are made public on the Register of People with
Significant Control (PSC Register), as the government proposes.
BIS is proposing that the position be appraised in parallel
with the review of the Small Business, Enterprise and
Employment Bill provisions covering corporate directors of
companies (scheduled to take place five years after the Bill’s
provisions come into force), or sooner if compelling evidence of
abuse of the LLP structure were to emerge.
But we think that these are separate issues and should be
considered on their respective merits. As the review noted, there
is overwhelming evidence that corporate members of LLPs are
there for commercial reasons. We think it would be damaging
to commercial investment to indicate that a well-used entity
February 2015 | www.taxadvisermagazine.com
In last month’s Working Together (WT) update, we reported on
a letter we had sent to HMRC setting out the views of CIOT and
ATT members on the proposals to move WT to a more digital
footing. The letter acknowledged that digital solutions could have
a role to play in WT, particularly in relation to updating agents on
developments. But we argued that they should not replace faceto-face meetings in their entirety because these provide the best
opportunity for agents and HMRC representatives to exchange
views and experiences. Also, we asked HMRC to ensure that the
digital channels selected are easy to use and accessible, and we
encouraged the department to use this as an opportunity to look at
other ways of improving WT.
HMRC welcomed this feedback and they have since
announced a series of regional workshops at which CIOT and ATT
representatives will be able to give their views to HMRC directly.
HMRC will use the regional workshops, which will start in
late February and replace the next round of local WT meetings,
to find out from agents what works face to face and to discuss
the areas where engagement could take place digitally.
HMRC are keen to stress that this is an ‘ongoing
conversation’ and that no decisions have been taken.
Therefore, this is a good opportunity for agents to raise
concerns they have with HMRC’s digital plans, and to make a
case for what they think would work best. We encourage all of
our representatives to engage with the workshops.
For more information on the regional workshops see: www.
tinyurl.com/odxcvmw. At the time of writing, the dates have not
been confirmed. Once we have this information we will post it on
the WT pages of the CIOT and ATT websites.
Stephen Relf
[email protected]
Tax and ‘localised’ benefits
SSAC
The Social Security Advisory Committee (SSAC) released a call for
evidence in late 2014 on ‘localisation and social security’ – www.
tinyurl.com/kmuppln. The SSAC is an independent statutory
body that provides impartial advice on social security and related
matters. It scrutinises most of the complex secondary legislation
that underpins the welfare system.
Although the relevance of tax might not be immediately
obvious from the title of this call for evidence, some specific tax
47
TECHNICAL
questions were posed in the paper – for example, knowledge
of tax by those delivering services at a local level, and the often
complex interactions for claimants of social security.
LITRG responded with a reference to the vast amount and
fragmented nature of information on different government
and local authority websites. This has hampered our efforts to
represent the public.
In the past, when a national tax change was announced,
we could immediately analyse the impact on individuals and
households by understanding what the effect on net income would
be for benefits purposes (including local impacts such as council
tax benefit). With increased localisation (the move to individual
council tax support schemes) we can no longer make such global
comment, which means it must also be more difficult for central
government to understand the impact of national changes on
individuals at a local level.
Localisation is a complex subject and the SSAC paper starts by
seeking views on clarifying what is meant by it and how it relates
to other terms such as devolution.
Although LITRG is generally supportive of localisation to the
extent that it means people are better served by authorities being
able to flex benefits and services to local needs, we are concerned
that it can cause confusion. This arises both in terms of people’s
understanding of to whom they turn for guidance (whether it is a
national, devolved or local authority) and of what power exists to
change things in their community.
LITRG therefore believes that localisation should be approached
with caution, limiting differences to those considered essential to
meet local need, and to minimise any ‘postcode lottery’. But even
if a local authority would wish to put in place a scheme tailored
to its community, there appears to be no global exemption in tax
law for it to do so. Careful consideration of the tax and tax credits
treatment of local benefits would therefore need to be made in
each case, together with their impact on national benefits such as
universal credit. We suggest there would be a case for considering
some form of global exemption for local benefits. This would need
to exempt these benefits from income tax and be copied across
to tax credits and other benefits legislation to exclude them from
income assessment.
There is a lack of understanding of tax matters at a local
level. Particular examples are the different definitions of
income for the self-employed in terms of tax, tax credits
and benefits both at national and local level, and how the
infrequent tax payments made under self-assessment are
treated for benefits purposes. This problem can only have been
compounded with the loss of local knowledge within HMRC as a
result of enquiry centre closures.
LITRG evidence highlighted that guidance for self-employed
claimants is poor. It gave an example from one local authority’s
web materials, pointing out that:
zz
It mentioned nothing about the basis period to use for self-
employed income, nor whether the claimant should report
figures on an accruals basis or ‘cash’ basis and how that is
defined. Further, it referred to ‘the amounts shown on your
accounts for allowable expenses’, thus presupposing that
expenses shown as allowable in a person’s accounts equate
to allowable expenses for benefits purposes, which is not
necessarily the case.
zz
The benefits calculator tool asked the user to enter ‘income
tax paid’ but gave no additional help link when making that
entry. Thus, a self-employed user would not know what
figure is expected from them.
Where do these claimants turn to for help? Given
their circumstances, it is unlikely they will be able to
48
afford professional advice. So do they turn to other web
channels perhaps?
Well, they might try. But where do they go, given the
multiple ‘layers’ of website guidance? We are told to ‘start
at GOV.UK’. But with separate websites being developed in
devolved administrations (such as Revenue Scotland’s www.
tinyurl.com/q4gjteq) and examples of local authority website
guidance such as the above, the man on the street is bound to
be confused.
If you have examples of local tax and benefits interaction
complexities, email [email protected]
Kelly Sizer
[email protected]
RTI is appealing
PAYE
In September 2014 HMRC announced that the start date for
automated in-year penalties for the late filing of full payment
submissions (FPS) would be put back to 6 March 2015 for PAYE
schemes with fewer than 50 employees. That means late-filing
penalties for larger schemes of 50 or more employees started to
accrue from 6 October 2014. Since HMRC plan to issue penalty
notices quarterly, the first in-year late-filing penalties will start to
be issued now. The penalty may be levied if you fail to submit an
FPS or on time, or fail to tell HMRC that no FPS is due, or HMRC
receive fewer FPSs than they expect.
To coincide with the new penalty regime HMRC has also made
available for employers and their agents an appeals system within
its PAYE online service. It is still available only for appeals against
RTI late-filing penalties but it is likely to be rolled out more widely.
Appeals against an in-year late-filing penalty can still be
submitted by post but HMRC will upload these on to their systems
so that they are processed electronically too. Normal time limits
for appeals apply whether you use the electronic appeals system
of write. HMRC may automatically accept an appeal, in which
case a notification will be sent advising that the penalty notice is
cancelled, or it may be referred for further review, in which case
the appeal may be accepted, rejected or you may be asked for
further information. If an appeal is rejected you can apply for it to
be listed for a hearing.
So what should you do if you receive a penalty notification?
First, if it relates to a period between 6 October 2014 and 5 March
2015, check that you are a large employer! The measure of whether
you are one is the number of employees on 6 October 2014. If you
had fewer than 50 you are not a large employer and you should
appeal, giving this as your reason.
Next, check whether there have been any failures to file FPSs
on time. If there were none, appeal on the basis that you ‘filed
on time’. If there were some failures check how many HMRC
have recorded. Remember that the first failure in a tax year is not
penalised (although this exception does not apply to employers
with 50 or fewer employers for 2014/15). So if there has been a
failure in one month but HMRC have also incorrectly recorded a
failure for a different month you can appeal on the basis that it is
the first one of the tax year.
If the penalty notice relates to a failure to file the expected
number of FPSs check that they were due. If either HMRC have
wrongly recorded the expected number of FPSs to be filed each
month, or they expected four each month but only three were filed
for a couple of months because the business closed for a period
and paid wages in advance, submit an appeal. The online system
allows you to choose ‘filing expectation incorrect’ as a reason for
February 2015 | www.taxadvisermagazine.com
TECHNICAL
the appeal.
If no FPSs were due for a month, perhaps because no payments
were made, but a nil employer payment summary (EPS) was not
filed for that month you can appeal on the basis that there were ‘no
payments to employees’.
If the penalty notice relates to the late filing of an FPS, check it
to see which payments to employees were made on a date before
submission. Then check whether these payments were correctly
recorded on the FPS or whether one of the exceptions to the ‘on
or before’ filing requirement applies (but was not recorded in the
FPS) or whether it relates to a correction of a payment previously
but incorrectly reported. If appropriate, appeal on the basis that
of a ‘missed correction/easement’ or ‘data on the returns was
incorrect’.
If none of the above applies but there is a reasonable excuse
for filing the FPS late, an appeal on this basis may be made. HMRC
consider the following may give rise to a reasonable excuse:
zz
fire/flood/natural disaster;
zz
death/bereavement (for instance, of key employee or close
relative);
zz
ill health;
zz
theft/crime; and
zz
IT difficulty.
But HMRC will ask when the reasonable excuse ended
and you must have filed any outstanding FPSs within a
reasonable time of the reasonable excuse ending for an
appeal to be successful. In particular, you should file any
outstanding FPSs before submitting the appeal.
It is probably also advisable to start checking the accuracy
of any Generic Notification Service (GNS) messages received
stating that a late FPS has been filed or none has been received
or insufficient FPSs have been received. Since it is not a penalty
notice, it is not possible to appeal against the GNS message, if it
is incorrect it may be worth notifying HMRC why this is so. If a
penalty notice is subsequently wrongly raised you can use this to
support the appeal.
Even if you agree that there are failures that give rise to
penalties for late filing you should check that the penalty has
been calculated correctly because its size will depend on the
number of staff.
In summary, any RTI penalty notice received should be
carefully checked. If you are in doubt about its accuracy or you
think that there is a reasonable excuse for the late filing, it would
be advisable to appeal.
Matthew Brown
[email protected]
Recent CIOT submissions
Further information
Date sent
Collection and management of devolved taxes in Wales
www.tax.org.uk/Ref847
10 December 2014
Autumn Statement 2014
www.tax.org.uk/Ref878
12 December 2014
Collection and management of devolved taxes in Wales
www.att.org.uk/Ref126
15 December 2014
Draft guidance for tax-free childcare
www.att.org.uk/Ref127
15 December 2014
Collection and management of devolved taxes in Wales
www.litrg.org.uk/ref129
10 December 2014
Localisation and social security – call for evidence
www.litrg.org.uk/ref128
12 December 2014
Tax-free childcare: draft guidance
www.litrg.org.uk/ref130
15 December 2014
Recent ATT submissions
Recent LITRG submissions
Excellence in Taxation
www.taxadvisermagazine.com
• Downloadable PDF from January 2013 issue
• Legislation and case law hyperlinks to TolleyLibrary
• Advanced search function
• Over five years of searchable content
February 2015 | www.taxadvisermagazine.com
49
Branch events
FEB-MAR 2015
Dates for your diary
In this month’s Tax Adviser we have included a listing of the branch events taking place from
mid-February to mid-March 2015.
The engaging, cost-effective meetings and events offered by the branch network deliver
CPD of the highest level of technical excellence. Devised to match the evolving requirements
of our membership, there’s no better way to take your professionalism to the next level.
We are also delighted that more branches are offering webinars for those who are unable
to attend an event: join one live from your computer or watch a recording of it afterwards for
the same price as attending in person. These events are marked below.
For a full list of branches, visit the CIOT and ATT websites: www.tax.org.uk/branches and
www.att.org.uk/branches. Here you will find detailed information about each of the events
listed below and be able to book online.
Aberdeen
Monday 2 March 2015
Tax investigations
Stuart Petrie
12.30 – 13.45
Thursday 12 March 2015
Loans to participators –
practical issues
Rebecca Benneyworth
18.45 – 20.15
Birmingham and West Midlands
Hull
Tuesday 3 March 2015
Practical aspects of probate, case study
and update
Lodders Private Client Team
16.00 – 18.15
Bristol
Monday 2 March 2015
Data protection and CIOT President’s
update on tax and academia
Anne Fairpo
18.00 – 19.15
East Anglia
Tuesday 10 March 2015
Business and partnership structures
John Endacott
Norwich
15.45 – 19.00
Essex
Tuesday 24 February 2015
Intellectual property
Anne Fairpo
Chelmsford
17.30 – 20.00
Glasgow
Tuesday 10 March 2015
Insolvency in an hour
Alec Pillmoor
16.45 – 18.15
Kent
Monday 23 February 2015
Buying and selling companies
Robert Jamieson
Hollingbourne
13.45 – 17.00
Leeds
Monday 2 March 2015
Current private client issues
Wrigleys
18.00 – 19.30
London
16 February 2015
Indirect taxes meeting
18.00 – 19.00
Thursday 26 February 2015
US tax update
David Treitel
17.50 – 19.00
Tuesday 3 March 2015
Key accounts changes and tax impact
Caroline Muir and David McBain
12.30 – 13.45
Tuesday 3 March 2015
ATT day conference
International tax
09.45 – 17.00
Harrow and North London
Student seminar
Tuesday 10 March 2015
Exam technique and use of
legislation
Chris Siddle
17.30 – 19.00
Thursday 26 February 2015
Taxing the family from cradle to grave
Giles Mooney
17.30 – 20.30
Thursday 5 March 2015
Non-doms and remittances –
practical issues
Lynnette Bober
18.45 – 20.15
50
Wednesday 11 March 2015
Expat update
Gill Salmons
18.00 – 19.00
Manchester
Monday 9 March 2015
An international tax update including
an overview of the transfer pricing
debate
Jonathan Schwarz
16.00 – 19.00
Merseyside
Tuesday 10 March 2015
Professional standards
and ethics
Karen Eckstein
Liverpool
16.00 – 18.00
Mid-Anglia
Tuesday 10 March 2015
FRS 102 accounting
standards and pitfalls
Bob Truncheon
Bedford
18.00 – 20.00
North East England
Thursday 19 February 2015
Tax planning ideas for SMEs
and their owners
Robert Jamieson
Newcastle upon Tyne
13.30 – 17.00
Northern Ireland
Wednesday 11 March 2015
Partnership tax planning and
opportunities
Tim Good
Belfast
17.00 – 19.15
ATT 25th
anniversary event
Scottish Borders
Thursday 5 March 2015
Career opportunities in tax and
taxation and renewables
Natalie Miller and Susan Walker
Galashiels
14.30 – 17.00
February 2015 | www.taxadvisermagazine.com
Severn Valley
Wednesday 18 February 2015
PAYE update
Rebecca Benneyworth
Cheltenham
17.15 – 19.30
Wednesday 4 March 2015
Property taxes update
Kate Willis
Cheltenham
17.15 – 19.30
Sheffield
Wednesday 11 March 2015
Employee status, GAAR and tribunal
process update
Keith Gordon
13.30 – 17.00
Somerset and Dorset
Thursday 26 February 2015
Company dissolutions after ESC C16 and
the new disincorporation relief
Robert Jamieson
Yeovil
16.15 – 19.30
South London and Surrey
Monday 9 March 2015
Pensions
Andrew Johnston
Guildford
18.15 – 20.00
Wednesday 11 March 2015
IP taxation
Steven Levene
Croydon
18.15 – 20.00
South West England
Thursday 19 February 2015
Entrepreneurs’ relief and CGT update
Richard Holme
Exeter
15.45 – 19.00
Suffolk
Joint meting with STEP
Tuesday 10 March 2015
Capital taxes update
Amanda Fisher
Ipswich
13.30 – 17.00
Thames Valley
Monday 23 February 2015
Capital allowances update
David Rees
Oxford
18.15 – 19.30
Thursday 26 February 2015
Half-day conference
Capital taxes update
John Barnett
Wokingham
13.30 – 17.00
Wednesday 4 March 2015
Hot topics in VAT
Neil Owen
Reading
18.15 – 19.30
Book review
By Harriet Brown, Tax Chambers, 15 Old Square
Trust Taxation and Estate Planning
(fourth edition)
Emma Chamberlain and Chris Whitehouse
Paperback. Price £210.00
ISBN: 9780414028548
Published: August 2014
Publisher: Sweet & Maxwell
The fourth edition of this increasingly
essential text on trust taxation has been
comprehensively broadened to lend, as
suggested in its title, more emphasis on
estate planning. Building on its previous
contents – the basics of trusts, residence
and domicile issues and the treatment of
trusts for different taxes – it now includes
chapters on the statutory residence test,
the new rules on debt for inheritance
tax, the categorisation of foreign entities,
and the general anti-abuse rules and tax
avoidance generally.
The greater emphasis on estate planning
is clear throughout, including in the detailed
section on entities other than trusts and how
they will be categorised for UK inheritance
tax purposes.
It is also apparent in the detailed
examination of the inheritance tax rules
found in Part V of the text. The paragraphs
on gifts with reservation of benefit are
particularly useful for the practitioner and
provide a clear progression from the basics
of the legislation to the more complex
practical aspects of their application. This
chapter is a good example of the authors’
holistic approach, and starts from the origins
of the legislation in the Eversden case,
before considering the provisions and giving
practical guidance on how to ensure that
clients are not caught by them. Helpfully,
several examples illustrate the practical
difficulties of the legislation.
This practical approach generally runs
throughout the book, not just in the sections
most relevant to estate planning.
www.taxadvisermagazine.com | February 2015
For example, chapter 22, which deals
with non-resident trusts established by UK
resident and domiciled settlors, again sets
out a thorough legislative history of the
relevant provisions (TCGA 1992 ss 86–87),
which is helpful in understanding why the
provisions were first enacted, which in turn
is essential in understanding how they apply
now. The chapter, however, also discusses
the possible planning opportunities arising
out of IRC v Coombes, thus fulfilling the
promise of discussion of planning in the
text’s title.
It seems nit-picking to criticise such a well
thought-out book but, if one were to – if
not criticise but rather hope for expansion
in future editions – chapter 7 on taxation of
non-residents and non-domiciliaries is a little
light, especially when compared with James
Kessler QC’s text. However, since the latter
now runs to five volumes, this chapter does
serve as a useful introduction.
Given the ambitious scope of the book,
the authors deal with their core topics in
useful and commendable detail. For the
practitioner, the examples are particularly
helpful, ranging from simple examples of
the basic principles involved to complex
examples of applying the more obscure
sections of various codes. This edition
is a must-have for all private client tax
practitioners.
51
Recruitment
To place an advertisement contact Nick Lee on
020 8662 2065 or email [email protected]
TAX ADVISOR
EXPAND YOUR CAREER HORIZONS
London, £60,000 + benefits
This FTSE listed and leading international financial services company has an exciting opportunity for an outstanding tax professional as it
looks to expand its tax team. This key role will report into the Head of Tax while maintaining a strong working relationship with the CFO.
As part of the team that oversees all of the tax affairs for the group, there will be significant focus on delivery of the group’s
compliance and tax accounting requirements. Due to the diverse nature of the business there will also be the capacity to
work on tax advisory projects.
The position requires you to be a qualified accountant or chartered tax professional with strong
technical experience. Knowledge of UK corporate tax compliance for large companies is essential
and some exposure to VAT and transfer pricing is desired. This is an outstanding opportunity
for a genuine team player to join a leading organisation.
Ref: 2287759
For further information contact James Carpenter on 020 3465 0138
or email [email protected]
hays.co.uk/taxation
TX-11345 Tax Advisor 01-02-2015.indd 1
22/01/2015 17:02
Advertise your vacancies in the next issue of
Booking deadline:
Friday 13th February
Contact: Nick Lee:
020 8662 2065
[email protected]
52
February 2015 | www.taxadvisermagazine.com
SPECIALISTS IN
INDIRECT TAX &
Transfer pricing
RECRUITMENT
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Build your career with a respected independent firm. You
will advise HNWIs, new and landed wealth on CGT, IHT,
APR, BPR and Entrepreneurs’ Relief. Also manage a team of
experienced personal tax advisers and build your own network
of local professional referrers. Genuine scope exists to progress
towards Senior Manager in a supportive firm. Ref 4334
Just passed the CTA and looking to develop your career to the
next level? We are acting for clients in various locations, who
are keen to grow their Private Client teams. Opportunities
exist to get involved with advisory work and support will be
given with development to Manager grade. See our website for
a selection of roles. Ref 4335
E: [email protected]
T: (020) 7408 9474
Reach new heights
with a specialist guide
howellsconsulting.co.uk
Technical Officer
Vacancies for: a one-year term (c£40K); and
a six-month term to cover maternity leave (c£40K)
Project funding and a period of maternity leave have created the possibility of two roles
for a technically adept tax professional with a real interest in the financial problems of the
low-paid, an enthusiasm for communicating, and an ambition to bring about change.
Although the successful candidates will be based at home, they will be required to travel to London from
time to time. Both roles are full time, or job share might be possible. Maternity cover is required from
mid/late April for a minimum of six months, with the possibility of extending to 12 months.
These roles involve:
• Tax technical work for LITRG covering the whole scope of LITRG’s work on behalf of low-income and
unrepresented individuals;
• Researching and writing technical materials for websites and print media, website content management and
editing, tax technical reviewing and updating of existing materials, and so forth;
• Considering ‘softer’ issues, such as how best to communicate with taxpayers, including people with disabilities,
older people, and those with other language or communication difficulties such as some migrants to the UK –
many of whom might be on low incomes and lack access to support and advice;
• Some general project work and tracking, including drafting progress reports for funders, and so forth;
• Other day-to-day assignments, such as drafting responses to Government consultation documents, attending
consultation meetings, workshops, briefing Parliamentarians, helping to answer enquiries from the public or
press, working with other third sector organisations and assisting them on tax matters.
Suitable candidates will need:
• ideally, the ATT, CTA or equivalent qualification;
• relevant previous experience in tax technical work, an appreciation of how tax might interact with tax credits and
other welfare systems; and
• suitable office space to work remotely from home.
For a Job Information Pack including a job description and our benefits package, please visit the link
www.tax.org.uk/LITRG_TO on our website. Interested applicants are welcome to email the Technical Director of LITRG
[email protected] with any queries about the role.
Applications including a CV and a covering letter explaining how you think you are right for the role must be
submitted electronically by 27th February 2015 to [email protected]
The successful candidates will be employed jointly by the CIOT and ATT. We are an Equal Opportunities employer and
welcome applications from a diverse field of candidates
The Low Incomes Tax Reform Group (LITRG) is an initiative of the Chartered Institute of Taxation (CIOT) to
give a voice to the unrepresented. Since 1998 LITRG has been working to improve the policy and processes of
the tax, tax credits and associated welfare systems for the benefit of those on low incomes.
YOU MAKE ALL THE DIFFERENCE
Fuelled by strong market growth Mazars is looking
to grow its Tax team with people who are strongly
client focussed, driven, creative, able to resolve
complex problems, and willing to embrace challenges.
We have a friendly and inclusive culture and everyone’s
contribution is valued. We are looking for people who can
work well with others and like to work amongst a diverse
team of people from different backgrounds.
Current Tax Opportunities:
London
• Financial Services Tax Manager
Sutton
•
•
•
•
Corporate Tax Senior
Private Client Tax Director
Corporate Tax Manager
VAT Manager
Milton Keynes
• VAT Manager
• Mixed Tax Manager
Mazars is all about people – we believe that each individual
makes a difference to the Mazars culture and our client
service.
East Midlands
Mazars has an internal recruitment team which manages
the recruitment life-cycle for all our vacancies. Email your
CV to experienced.hire @ mazars.co.uk with the vacancy title
in the subject heading. Want to have a chat about the roles
before sending in your CV? No problem, just send us an
email with your contact details and we’ll be in touch.
• Corporate Tax Senior
• Corporate Tax Manager
• Tax Senior
Leeds
Liverpool
• Private Client / OMB Tax Senior
We also welcome all speculative
tax professional applications.
Mazars is an international, integrated and independent organisation specialising in audit, advisory, accounting, tax and legal
services. The Group operates in over 70 countries, and draws on the expertise of 13,800 professionals to assist companies –
major international groups, SMEs, private investors – and public bodies, at every stage in their development.
www.mazars.co.uk
Share Schemes in a Law Firm
Leeds
£45,000 to £80,000 dependent on level
Corporate Tax Compliance Assistant Manager
Birmingham or Glasgow
To £39,000 + benefits
Our client is a large commercial law firm. They ideally would
like to hire two share scheme specialists – a very experienced
lawyer or senior manager and a more junior person. Great
technical work dealing with a wide range of plans and
situations including transactions and international tax aspects.
Call Georgiana Ref: 2030
Fantastic opportunity to work on the tax compliance for
clients of all sizes from a variety of industry sectors in a
collaborative and supportive environment. Full and
part time candidates are welcomed and flexible working
arrangements can also be offered.
Call Alison Ref: 2015
Corporate Tax Senior Manager/Director
Manchester
£60,000 to £80,000 + bonus + benefits
Tax Manager
Southport
To £35,000 + benefits
Our client is a busy tax practice based in a well regarded
independent firm. This team seeks a senior hire to help
work on a wide range of advisory work covering the full
gamut of OMB advice including transactions. This role is a
key hire to help next step in firm’s development.
Call Georgiana Ref: 2020
You will support the Directors in servicing a portfolio of
corporate and personal tax clients. In addition to technical
work including tax advisory and compliance you will
manage a team of juniors. You will ideally be ATT/CTA/
ACA/ACCA qualified with a solid mixed tax background.
Call Alison Ref: 2026
Tax Investigations
London
To £75,000 + benefits + bonus
Mixed Tax Senior
Bury
To £35,000 + benefits
Our client is a tax practice based in Central London. This
business seeks an experienced tax investigations professional to
help run their tax investigations offering. Would suit either a
full time senior manager or a more experienced individual who
is looking for more flexible working – perhaps a 2 day week?
Call Georgiana Ref: 2027
Are you an ATT or CTA qualified mixed tax senior looking
for career progression? This is initially a compliance
focussed role but there is the opportunity for involvement
in advisory and tax enquiry work as you progress and as
the department grows. Good prospects.
Call Alison Ref: 2025
Personal Tax Senior
South East of Leeds
£25,000 to £30,000
Capital Taxes Specialist
Newcastle or Bristol
£55,000 to £80,000 + benefits
Our client is a medium sized independent firm based in
West Yorkshire and South East of Leeds. This practice seeks a
personal tax senior to join a busy tax team. In this role you will
run a large portfolio of weighty personal tax and partnership
tax cases and potentially some trusts. This role is weighted
towards compliance work but there is the opportunity to
work with managers and the partner on ad-hoc advisory work
such as IHT planning. Salary range dependent on experience
and qualification. Ideally you will be ATT or CTA qualified,
but this practice will also consider people who are qualified
by experience. Scope for development within the team.
Call Georgiana Ref: 2035
National law firm seeks an experienced capital taxes
specialist to join their Tax and Trusts team in either the
Newcastle or Bristol office. You’ll be advising partners,
employees and clients of the firm on all aspects of CGT
and IHT, particularly as those taxes relate to trusts and
landed estates. You’ll also be advising on areas such as
Agricultural Property Relief, Business Property Relief,
and Entrepreneurs’ Relief. You will either be a solicitor or
a qualified tax adviser with a minimum of 5 years’ capital
taxes experience. A great opportunity to work in a highly
regarded private client practice in a law firm.
Call Alison Ref: 2033
In-house Tax and Treasury
Bradford, West Yorkshire
£35,000 to £39,000 + pension + benefits
Corporate Tax Assistant Manager
Preston
To £39,000 + benefits
In-house tax team seeks a tax specialist to work on
corporate tax, VAT and some treasury work. This is an
ideal first move in-house for a new or recently qualified
ACA, CTA ICAS or equivalent. There is scope for
development and progression in this team as well as
to broaden your experience into other areas of finance.
Could also suit a tax and treasury accountant looking for
a local role. Candidates from either corporate tax or an
indirect tax background considered. This role involves
compliance, reporting and some advisory work. Good
prospects in a large business.
Call Georgiana Ref: 2034
This international firm is looking for a CTA/ACA/
ACCA/ICAS qualified corporate tax assistant manager to
act as the main contact on the smaller clients and work
with the senior management team on the department’s
larger clients. In addition to reviewing managing the
submissions of the corporate tax computations you will
be involved in advisory and planning work on your client
portfolio. You will also have responsibility for managing
and developing the more junior members of staff. You
may currently be in a mixed tax and accounts role and
looking to specialise in corporate tax.
Call Alison Ref: 1993
Tax Partner Designate
Sheffield
£excellent
Perfect start for the New Year, this role could be the
partner position that you have always aspired to. Highly
regarded office of a national firm seeks a qualified
(ICAS, ACA, CTA or equivalent) director to join the
Sheffield practice. In this role you will manage a tax team
of corporate and private client specialists. You will be
actively involved in business development work and tax
advisory work and generally will be the first point of
call for tax. It is likely that you will have a corporate tax
background and will be looking for a partner position.
Relocation assistance considered.
Call Georgiana Ref: 1940
Find your next promotion
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listed to help you find your dream job in seconds.
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Go to: www.taxation-jobs.co.uk
MAGNETIC
NORTH
GUI DI NG YO U TO T H E BE S T TA X JO BS IN T HE NO RT H O F E NG LAND
MIXED TAX MANAGER
IN-HOUSE TAX ACCOUNTANT
SOUTH MANCHESTER
£45,000 plus car
Dynamic top 50 firm seeks a CTA qualified Tax Manager with strong BD skills and
significant advisory experience in the OMB space. Offers an interesting variety of advisory
work covering both corporate and personal taxes.
REF: A2141
BRADFORD
TAX SENIOR
INTERNATIONAL TAX MANAGER
LIVERPOOL
To £35,000 dep on exp
This large accountancy firm is looking for a recently qualified CTA to manage a portfolio
of private clients. You will be involved in both compliance and advisory work.
REF: A2221
MANCHESTER
R&D SPECIALIST
PERSONAL TAX SENIOR
To £48,000
Growing UK business seeks a Group Tax Accountant with responsibility for all aspects of
tax compliance (including SAO issues) as well as providing ad hoc tax advice for senior
management across all areas of the business.
REF: R2238
To £48,000 plus bens
Exciting opportunity for an ambitious individual with significant experience in advising multi
national groups on a wide range of tax issues related to international restructuring projects.
REF: A2230
LEEDS
£Competitive
Our Big 4 client is looking for experienced R&D Tax Specialists who can project manage all
locally run R&D assignments & investigations. Lots of opportunities for career advancement
in this high profile team.
REF: Z2236
NEWCASTLE
To £25,000 dep on exp
This global accountancy firm has an opening for a Personal Tax Senior. It offers a
full support package including study for the CTA exams and opportunities for career
progression. The firm has a great client base which provides a variety of work.
REF: Z2172
TAX ACCOUNTANT (temp or perm)
TAX DIRECTOR
MANCHESTER
£40,000 to £48,000 plus bens & bonus
A new in-house opportunity. You will be responsible for corporation tax compliance and
accounting for the Group’s UK companies, and associated overseas branches, alongside offering
advice on CT and PAYE.
REF: R2235
CHESHIRE
To £65,000
One of the most respected independent firms in the region is looking to recruit a future
tax partner. The role offers the opportunity to work in a modern and friendly environment
as well as the chance to advise across a broad range of tax issues.
REF: M2233
Tel: 0845 6125 777 Web: www.taxrecruit.co.uk
Mike Longman FCA CTA: [email protected]; Ian Riley ACA: [email protected]
Alison Riordan: [email protected]; Michelle Bhanji ATT: [email protected]
Career Change Ahead
Corporate Tax Partner
London
£150-250,000
This ranked practice is a highly profitable
enterprise that has no trouble attracting talent
from much larger firms. The tax business is a
highlight of the firm and the tax partners are an
important part of the overall practice.
As a senior tax professional at this firm you will
be part of the strategic decision making process
and contribute to the overall direction of your
function and firm. The degree of freedom and
responsibility on offer is rarely matched by
larger entities. The reward structure and client
base is comparable to the top tier and the
tax practice is currently enjoying double digit
growth.
As a tax partner, you will work with
entrepreneurial and owner-managed businesses
as well as the firm’s larger corporate clients to
deliver tax advisory and tax planning advice.
In particular you will be advising on company
reorganisations, mergers and sale structuring,
enterprise initiative schemes, EMI share option
schemes and research and development tax
planning.
In addition to the technical work you will also
assist the practice in generating new work from
existing clients and raising the profile of the firm.
Ref: 5290
Go to www.creativetaxrecruitment.com to apply
or call 0207 872 5819
Private Client Tax Manager
Global Firm, London
£59-64,000 Plus car and benefits
Personal Tax Senior
Top 10, Bristol
£28,000 Study support and benefits.
The private client tax team of this international firm has generated
a tremendous amount of new work in 2014 and 2015 looks equally
bright. The role will involve you advising UK domiciled individuals and
families on IHT, funds and CGT, in addition to offering solutions to
protect and optimize your client’s wealth. This is a great opportunity
for anyone who is feeling frustrated by the lack of opportunity at their
current firm. Ref: 5202
Dramatically increase your career prospects by making a move to this
Top 10 firm in Bristol. As a personal tax senior, you will run your own
high quality portfolio of HNWI’s and deal with complex compliance and
advisory work.This is one of the premier teams in the SW and the firm
is known for its high standard of excellence.The tax team has a friendly
and supportive culture, which is an ideal environment to learn and
develop in. Ref: 5160
Go to www.creativetaxrecruitment.com for more details on this role.
Go to www.creativetaxrecruitment.com for more details on this role.
International Tax Director
Global Firm, London
£Six Figure package
Personal Tax Senior
Mid-Tier Firm, London
£40,000, Supportive environment & benefits
This role will involve you taking responsibility for the strategy and
successful delivery of technically complex consulting projects for a
client base of multinational companies. As a senior member of the
international tax team you will lead client engagements and work
alongside partners to develop global tax strategies. This is an ideal
position for a senior international tax professional who wants to
advance to partner. Please contact us for more details. Ref: 5208b
This firm offers you a structured career path, with regular appraisals
and a market leading salary package.You will work with a diverse
range of entrepreneurial clients and deal directly with the owners of
companies. The quality of the client base and challenges associated
with dealing with a complex client base will greatly enhance your
technical knowledge. This is a great opportunity to work for a firm
that offers both a decent work life balance and progression. Ref: 5240
Go to www.creativetaxrecruitment.com for more details on this role.
Go to www.creativetaxrecruitment.com for more details on this role.
Expatriate Tax Manager, Financial Services
Big 4
£58,000–62,000 plus cash benefits
Corporate Tax Assistant Manager
Well Known Firm - London
£42-50,000 Great Prospects
This is a great opportunity for a professional with strong relationship
management skills to step up and take charge of a diverse and highly
challenging range of clients.You will be part of the UK/US team focused
on the financial services market. Clients range from global organisations
to private equity houses and hedge funds.The FS sector is a big growth
area for this global firm and the opportunity to make senior manager in
an 18 month time frame is highly realistic. Ref: 5133
This innovative firm has an excellent reputation and has no problem
attracting top draw talent. This position will allow you to develop
your advisory skills and commercial acumen.You will provide
bespoke corporate tax advice and compliance services to a UK and
International client base of large SME’s. The firm is recruiting for the
ambitious and promotion to manager can be achieved within a 12-18
month time frame. Ref: 5302
Go to www.creativetaxrecruitment.com for more details on this role.
Go to www.creativetaxrecruitment.com for more details on this role.
Go to www.creativetaxrecruitment.com
for more detailed job descriptions.
Write 1 Northumberland Avenue
Trafalgar Square
London WC2N 5BW
Call 0207 872 5819
Email [email protected]
Visit www.creativetaxrecruitment.com
2015
AWARDS
NOW OPEN
Rewarding excellence
Calling the top-performing individuals and teams in the tax
profession: it’s time to start preparing your entries for the
Taxation Awards 2015. These highly prestigious prizes are
awarded in a range of categories covering the whole of the
tax profession: in practice, in-house, from a big four firm to
a single office practice.
Entries are now open, and close 27 February 2015.
Please visit www.taxationawards.co.uk or email
[email protected] or call 020 8652 8036
The awards will be presented during a spectacular blacktie dinner at the London Hilton, Park Lane on 21 May 2015.
#taxawards2015
www.taxationawards.co.uk
Dreaming big.
Where do you start?
How do you chose the right recruiter to steer your
career towards success?
At Pure Search, our statistics speak for themselves:
- We have over 65 live opportunities at newly
qualified level, of which 28 are in-house
- 68% of newly qualified professionals that register
with Pure Taxation find a new role in less than 6
months and 1 in 3 within just 3 months
- 76% of tax professionals we have helped find a job
are still at the same company after 3 years
- We are constantly researching, analysing and
benchmarking salaries across all levels – we know
the answer to “What am I worth?”
For more information or for a confidential discussion please contact:
Patrick Evans
In-house - Commerce & Industry
+44 20 7429 4434 | [email protected]
Paul Kempton
In-house - Financial Services
+44 20 7429 4416 | [email protected]
Kofi Kyei
In-house - Commerce & Industry
+44 20 7429 4487 | [email protected]
Una Ward
Professional Services
+44 20 7429 4415 | [email protected]
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