Search News and Articles
Legal Developments in the The Legal 500 United Kingdom 2012
The Hiring Incentives to Restore Employment Act 2010, enacted on 18 March 2010, imposes a new US withholding tax and reporting regime, known as the Foreign Account Tax Compliance Act (FATCA). The FATCA regime applies generally to payments made after 31 December 2012, except on obligations (to be defined in future guidance) outstanding on 18 March 2012. Substantial effort is required by foreign entities to bring their worldwide operations and policies into compliance with the FATCA rules as of the effective date.
Continuing the recent trend of expanding the UK’s already extensive body of tax legislation, 2011 looks likely to be a busy year for the law makers. This article summarises the key tax changes that are set to take place over the next year.
In its June 2010 Budget the Government announced several proposals as part of a five-year plan to reform corporation tax, including a proposal to exempt foreign branch profits from corporation tax. This followed the previous government’s announcement in the 2009 Pre-Budget Report that it recognised foreign branch taxation as a ‘matter of growing importance’ and intended to engage with businesses to explore potential future rule changes. A discussion document setting out the proposal for such an exemption and key issues arising from it was published on 27 July 2010, alongside the reform of the Controlled Foreign Company (CFC) rules.
The Coalition Agreement made between the Liberal Democrats and Conservatives, published on 20 May 2010, together with the Queen’s Speech delivered on 25 May 2010, contained several proposals for tax reform, which in the government’s view are aimed at creating a fairer and simpler taxation system. The tax measures that have been proposed widely reflect most of the Conservative and Liberal Democrat manifesto pledges, though the scope of a few of the measures has been reduced.
This article provides a summary of the coalition government’s key proposals for taxation reform, which are widely expected to be introduced in the emergency budget. In addition, this article specifically focuses on the proposed changes to the capital gains tax (CGT) regime and considers the implications that these proposed changes may have on certain taxpayers.
It was hardly surprising and perhaps inevitable given the current economic and financial crisis, coupled with a general election, that the government would attempt to find ways to raise funds to repay the public debt, without adversely affecting the majority of voters. One such method devised by the Labour government was to restrict tax relief on contributions to registered pension schemes, with effect from 6 April 2011, for high-income earners.
The Labour government introduced legislation in the Finance Act 2010 to restrict the tax relief for those people with pension savings, and for those who have a gross income of £150,000 and over. Relief will be tapered away so that for those earning in excess of £180,000, it is worth only 20%, the same as to a basic rate taxpayer. This means that individuals affected by the restriction will continue to receive at least basic rate relief on all pension contributions (subject to the existing annual and lifetime allowances).
6 April 2006 saw the introduction of the Employer Financed Retirement Benefit Scheme (EFRBS), replacing the now defunct Funded Unapproved Retirement Benefit Scheme. An EFRBS is an unregistered (ie not registered with HM Revenue & Customs) pension scheme commonly used to provide retirement benefits to high-net-worth individuals (defined as those earning over £150,000 per annum for the purposes of this article). It is commonly used as a retirement vehicle to incentivise and reward key employees, directors or shareholders.
The employer will usually establish a trust that has the purpose and power to enable the employer to provide retirement benefits to employees. Employees cannot make contributions to the EFRBS. There are two types of EFRBS: a funded EFRBS and an unfunded EFRBS.
The First tier Tribunal’s finding in Swift v HM Revenue & Customs (HMRC)  that a Delaware limited liability company was not an opaque vehicle for UK tax purposes has caused a stir in the international tax structuring arena. However, while this decision appears to go against HMRC’s stated general view that Delaware LLCs are not transparent vehicles and so are treated as companies rather than look-through vehicles for UK tax purposes, the tribunal reached its decision in Swift on its particular findings of fact relating to the agreement governing the LLC in question.
It is important to note that the decision does not cover all LLCs and it results from the tribunal’s finding that under the agreement governing this LLC the members of the LLC were entitled to the LLC’s profits as they arose. This decision highlights, however, that taxpayers cannot automatically follow HMRC’s published general practice and assume that a Delaware LLC will be treated as a company for UK tax purposes. Instead, the taxpayer must look at the particular rights of members of the LLC in question and cannot assume that all Delaware LLCs (or other non-UK entities) will be treated in the same way for UK tax purposes. The individual facts of each case must be considered.
The world of tax is quite interesting at the moment – to me, at least – because it brings into sharp focus the way that tax is used as an instrument of policy and what role it is playing in the field of social policy. It is hardly news that the state of public finances in most western economies is, to be charitable, delicate. No doubt the finances will be redressed, to an extent, by cuts in spending. However, it is equally clear that some of the improvement will have to come from an increase in public revenues.
In this month’s corporate tax article, we have considered some of the proposed international tax measures introduced inthe Pre-Budget Report (PBR 2009). The headline-grabbing measures of the PBR 2009, such as the bank bonus tax or the increases in national insurance contributions, have already received considerable media attention and commentary, and therefore this article does not seek to review those measures. Instead, I will focus on some of the international tax measures introduced in the PBR 2009, and consider whether the proposed changes are an effective and proportionate response to the problems that the new rules are seeking to address.
A consultation document, ‘Disclosure of Tax Avoidance Schemes’ (the consultation document), has beenpublished in respect of proposed changes to the disclosure of tax avoidance schemes (DOTAS) regime, which are largely aimed at improving compliance and widening the scope of the types of transactions that are disclosable. It is clear that HMRC consider this legislation to be extremely effective in countering and reducing tax avoidance, and consequently they would like to improve and develop the disclosure regime by broadening its application. This article will briefly review the current DOTAS rules and consider whether the proposed new rules are likely to have a positive impact on tax recovery and mitigatingtax avoidance.
The Government announced on 14 October 2009 in a written ministerial statement that changes will be made in next year’s Finance Bill, with retrospective effect to 14 October 2009, to amend the UK tax rules applying where existing debt is purchased at a discount by a company connected to the debtor.
Background and current law
In the present economic conditions many banks and other businesses have issued debt that is trading at a discount to the amount borrowed. Given the uncertainty and volatility in the financial markets, many banks and other businesses are seeking to buy back their debt.
In Airtours Holiday Transport Ltd v HM Revenue & Customs (HMRC) , the tax chamber of the first-tier tribunal decided that Airtours Holiday Transport Ltd (Airtours) was entitled to a credit for input VAT on fees that it had paid to PricewaterhouseCoopers (PwC). HMRC argued that Airtours was merely a third-party payer and that PwC’s services had been provided to financial institutions, not to Airtours. The tribunal applied the ratio of the decision of the House of Lords in Commissioners of Customs & Excise v Redrow Group Plc  and determined on the facts that the supply of accountancy services was made both to Airtours and the banks. Accordingly, Airtours was entitled to an input tax credit as it had been a recipient of a supply of services.
Although it may go unnoticed by the world at large, HM Revenue & Customs (HMRC) recently issued a further release on the subject of the correct tax treatment of unapproved options. While this may appear a fairly dry subject at first, the history to the recent announcement is illuminating and highlights issues that are of concern to all taxpayers (and not just those who are affected by the recent announcement).
Offshore corporate structures have been, and will remain, an important tool in corporate tax planning. However, there has been a renewed interest in the taxation of offshore corporates, highlighted by the recent emigration of certain high-profile listed companies from the UK. Although relating to a disposal back in 1996, the decision in Laerstate BV v HM Revenue & Customs (HMRC)  has therefore arrived at an opportune time.
THE BUDGET 2009 INTRODUCED SEVERAL unexpected reforms to the current tax regime with arguably the greatest surprise to businesses and advisers being the introduction of legislation relating to senior accounting officers (SAO). Specifically, Schedule 46 to the Finance Act (FA) 2009 was introduced to make SAOs of large companies liable to taxes and duties in the UK, responsible for ensuring and certifying that appropriate tax accounting arrangements have been established and are maintained on an annual basis.
The Government announced in the 2009 Budget that the cross-border VAT rules would be amended and there would be changes to the way the intra-EU reporting regime is operated. HM Revenue and Customs (HMRC) has published draft legislation and guidance setting out further information on the changes announced in the 2009 Budget.
In the 2007 Pre-Budget Report the government indicated that it was committed to simplifying tax legislation, particularly in the areas of VAT, anti-avoidance and corporation tax for related companies. The government has now published a consultation document, ‘Simplification Review: capital gains rules of companies – a discussion document’, in relation to simplifying certain aspects of the existing capital gains rules for groups of companies.
In the 2008 Pre-Budget Report the government announced a package of reforms to the taxation of foreign profits to be introduced in the Finance Bill 2009 (the Bill). Draft clauses were released for consultation on 9 December 2008, together with explanatory notes (the original rules). In IHL168 (p54), we focused on the draft legislation and explanatory notes published by HM Revenue and Customs (HMRC) and HM Treasury (HMT), and outlined the approach of the draft legislation.
As a result of Sir Andrew Leggatt’s Review of Tribunals in 2001 and the Tribunals, Courts and Enforcement Act 2007, a new two-tier tribunal structure is, over time, replacing all the old tribunals.
On 18 December 2008, the government announced that it proposed to introduce new legislation in the Finance Bill 2009 to address two distinct problems that have arisen as a consequence of the recent turbulence and volatility in the global financial markets. Although the issue has come to light with regard to the financial sector, the new rules will apply to all relevant companies and not only those companies within the banking industry.
The UK government has agreed a new convention with the Netherlands (the new Treaty), which will enter into force once both countries have completed their legislative procedures. It is expected that the provisions of the Treaty will take effect from 1 April 2009 (for corporation tax purposes) and from 6 April 2009 (for income tax and capital gains tax purposes).
Extra-statutory concessions (ESCs) have been a feature of the UK’s tax system for decades and will continue to be made and withdrawn as necessary. However, following the decision in R (on the application of Wilkinson) v Inland Revenue Commissioners , it is now clear that the scope of HM Revenue & Customs’ (HMRC’s) administrative discretion to make ESCs that depart from the strict statutory position contained in the legislation is not as wide as HMRC previously thought.
The 2008 Pre-Budget Report (PBR), published on 24 November 2008, contained widely anticipated measures for individuals designed to support the economy, together with some unexpected measures to claw back some of the tax giveaways from higher-rate taxpayers in the future. The tax rate changes and temporary reduction in the rate of VAT have been widely reported in the press and accordingly this article does not attempt to summarise any of those changes. Instead, the article focuses on a number of measures that were introduced that may affect UK corporates and their businesses.
Changes to the residence and domicile rules were announced in the 2007 pre-Budget report. The final changes to the legislation have now received Royal Assent and can be found in ss24 and 25 and Schedule 7 to the Finance Act (FA) 2008. The revised rules are extremely complicated and will likely result in having the desired effect for HM Revenue & Customs (HMRC) of causing many non-domiciled individuals to be taxed on an arising basis of taxation (as opposed to the remittance basis of taxation), especially those non-domiciled individuals who have little in the way of foreign assets, income or gains.
Following consultation with various employers and interested professional bodies, HMRC has published guidance on how it will deal with cases involving an underpayment of PAYE.
The roller coaster litigation of Maco Door and Window Hardware (UK) Ltd v Revenue and Customs  has finally concluded with a 3-2 victory in the House of Lords for HMRC. The point in issue was whether the phrase ‘a part of a trade’ in the definition of an industrial building or structure in s18 of the Capital Allowances Act (CAA) 1990 referred to a trade that was itself part of a composite trade or whether the phrase referred to an activity that was a constituent activity of the overall trade but not itself a trade.
THE DECISION GIVEN BY THE HIGH COURT IN Vodafone 2 v Revenue and Customs Commissioners  (published 4 July 2008) is the latest subplot to the ongoing uncertainty surrounding the application of the controlled foreign company (CFC) rules and the taxation of foreign profits.
EXTENSION TO THE DEFINITION OF ‘CONTROL’ IN FINANCE ACT 2008
It is worth noting that in spite of the uncertainty surrounding the CFC regime as a result of the pending hearing before the Special Commissioners of Cadbury Schweppes after the European Court of Justice (ECJ) decision in 2006 (Cadbury Schweppes plc & anor v Inland Revenue Commissioners ) and the decision of the High Court in Vodafone 2, the Finance Act 2008 actually increases the scope of the CFC rules by extending the definition of control to companies who control the economic rights of a subsidiary (being the entitlement to dividends, proceeds on a sale of shares or assets on a winding up).
Prior to 12 March 2008, the control test for CFC purposes turned only on voting control. Although beyond the scope of this article, companies who previously have not fallen within the CFC regime will need to consider whether the extended definition of control brings any of their overseas subsidiaries within it.
THE COURT OF APPEAL HAS CONFIRMED THAT GROUP companies must be ‘associated’ both at the time of intra-group transfer as well as on exit from the group if the exemption from the exit charge under s179(1) of the Taxation of Chargeable Gains Act (TCGA) 1992 is to apply.
HM REVENUE & CUSTOMS (HMRC) RECENTLY published the consultation document ‘Changes to corporation tax rules on late payments of interest between connected companies’ (Revenue & Customs Brief 33/08). It has acknowledged that recent decisions of the European Court of Justice (ECJ) have questioned whether the current rules concerning late payments of interest between connected companies are compatible with the principles of European Community law, which legislate against non-discrimination.
THE TREASURY HAS MADE PUBLIC AN EXCHANGE of letters between Richard Lambert, directorgeneral of the CBI, Julian Heslop, chairman of the Hundred Group fiscal committee, and Jane Kennedy, the Financial Secretary, in which HM Treasury has indicated that it will back down on some aspects of the proposed changes to the UK tax system in relation to foreign profits earned by UK multinational enterprises.
The VAT tribunal has upheld HMRC's assessment that the sale of a restaurant business was not a transfer of a going concern (TOGC) because the buyer did not carry on the same kind of business as the seller after the transfer.
The House of Lords has upheld the claims for refund of tax made by two taxpayers – Mr Fleming (F) and Condé Nast Publications (C).
Draft legislation, that affects the income tax and CGT treatment of UK-resident, nondomiciled individuals was issued on 18 January 2008. The legislation was subject to a consultation process until the end of February and follows on from the announcement in the 2007 PBR.
In July 2007, The House of Lords determined in the case of Jones v Garnett (HM Inspector of Taxes) (the Arctic Systems case), that profits of a company owned by a husband and wife, which were paid equally to them by way of dividend, would be taxed on each of them. HMRC had attempted to tax the dividends solely on Mr Jones, as he was undertaking most of the work that generated the profits.
In the 2007 pre-budget report (PBR), the government announced significant changes to the UK capital gains tax (CGT) regime. Individuals, trustees and personal representatives will be subject to the new rules. Companies liable to corporation tax are not affected by the new proposals. The draft legislation, published on 24 January 2008, will implement a number of changes, including:
HMRC has published Business Brief 41/2007 on the substantial shareholding exemption.
HMRC has published further guidance on the new managed service companies legislation.
The Court of Appeal has held that a Swiss company with a UK branch was liable to pay UK VAT on consultancy services supplied to the UK branch.
The Court of Appeal has provided further guidance about how ‘residual' VAT is to be recovered (HM Revenue & Customs v Mayflower Theatre Trust Ltd).
According to new HM Revenue & Customs (HMRC) guidance, although certain managed service company (MSC) providers consider themselves outside of the new tax legislation for MSCs, they may in fact be caught by the new rules. The guidance states that whether or not a provider is caught depends on the precise relationship between the MSC provider and the client company. The full guidance is available at www.hmrc.gov.uk/employment-status/current.htm and a summary of the new rules is set out below.
There have been interesting developments regarding the VAT treatment of services provided to investment funds. Advocate General Kokott recently delivered her Opinion in JPMorgan Fleming Claverhouse Investment Trust Plc and the Association of the Investment Trust Companies v Commissioners of HM Revenue & Customs, which challenges the scope of the UK's VAT exemption for investment funds.
The Court of Appeal has issued guidance to the Special Commissioners in relation to Marks and Spencer Plc's claim for cross-border group relief.
There were several headline-grabbing announcements in the 2007 budget, including the main rate of corporation tax falling from 30% to 28% and the basic rate of income tax falling from 22% to 20%, both with effect from 1 April 2008. However, the overall impact of these announcements is expected to be largely neutral due to offsetting tax increases elsewhere in the budget. The main announcements are considered below.
As examined in the February 2007 corporate tax briefing (IHL147, p66), a new s75A of the Finance Act 2003 has been inserted by the Stamp Duty Land Tax (Variation of the Finance Act 2003) Regulations 2006, which came into effect on 6 December 2006. HMRC has recently published interim guidance on this section to assist taxpayers and their advisers. This is available at: www.hmrc.gov.uk/so/sdlt_regs06_intguidance.htm.
In the recent case of SCA Packaging Ltd v HM Customs & Excise the High Court held that payments made to redundant employees in lieu of unexpired notice were emoluments from employment which were taxable.
In the recent case of Total Network SL v Commissioners of Customs & Excise, HMRC tried an alternative method of recovery in relation to VAT carousel fraud - conspiracy to cheat the public revenue by unlawful means.
In Tumble Tots (UK) Ltd v Commissioners for Her Majesty's Revenue and Customs it was held that a franchisor of a well-known activity programme that supplied a number of benefits in consideration of payment of a registration fee made a single supply for VAT purposes, namely the supply of membership.
The ECJ has ruled that the UK legislation that taxes the receipt of dividends from UK resident and non-UK resident companies differently is in breach of EC law.
The European Court of Justice has ruled that the EC Treaty precludes any national legislation that imposes a greater liability to tax on non-resident parent companies that receive dividends from resident subsidiaries than to resident parent companies that receive dividends from such subsidiaries. This is so even if a Double Tax Treaty authorises the tax and provides for set-off of the tax in the state of the non-resident parent company.
The High Court has held that capital gains tax (CGT) roll-over relief is not available where an individual, resident in the UK, takes loan notes in exchange for their shares in a company with the intention of ceasing to be a UK resident before the loan notes are redeemed.
The Chancellor delivered his pre-Budget report on 6 December 2006. This edition of the corporate tax briefing examines some of the important announcements.
The government plans to amend the VAT legislation so that the ';reverse charge' rules apply to the trade in mobile telephones, computer chips and certain other goods.
The High Court has held that the assignment of receivables, in the context of a securitisation, did not constitute a supply for VAT purposes.
The House of Lords has held that a taxpayer is entitled to recover taxes paid under a mistake of law, and that the time limit on when such payments can be recovered should begin on the date that the mistake was discovered and not the date that the tax was paid.
The case of Indofood International Finance Ltd v JP Morgan Chase Bank NA London Branch has caused considerable uncertainty in relation to many cross-border funding structures.
Previously, we considered the Advocate General's Opinion in Cadbury Schweppes Plc, Cadbury Schweppes Overseas Ltd v Commissioners of Inland Revenue. The European Court of Justice (ECJ) has now passed down its judgment, which broadly supports the Opinion.
HMRC has issued Business Brief 14/06, containing detail of its proposals to introduce a ‘reverse charge' procedure for trade in certain goods, such as mobile telephones, computer chips and certain other goods. Since an EU derogation is required, the changes are not expected to come into force before 1 December 2006.
Advocate General Juliane Kokott of the ECJ has issued an Opinion that the awarding of the new 3G licences to operators was not a taxable supply for VAT purposes. If the ECJ follows her Opinion, it would appear to preclude the operators from recovering any sums in respect of VAT.
In Wood and another v Holden (Inspector of Taxes) the Court of Appeal provided further guidance on when a company is resident in the UK for capital gains tax purposes.
Jones v Garnett (Inspector of Taxes) concerned arrangements between the taxpayer (J) and his wife, and whether these constituted a ‘settlement’ for the purposes of s660 of the Income and Corporation Taxes Act 1988 (ICTA 1988).
In Optigen Ltd and others v Commissioners of Customs & Excise, the European Court of Justice (ECJ) ruled that traders who are unwitting parties to ‘carousel fraud’ may nevertheless recover the VAT they have paid. HMRC has responded by stating that it will seek a derogation from the VAT ‘Sixth Directive’ to amend the current legislation.
The Advocate General of the European Court of Justice (ECJ), Poiares Maduro, has delivered his opinion in the ongoing Marks & Spencer case in response to questions referred by the High Court. In simple terms, the questions ask whether the UK rules conflict with EU law by disallowing tax losses that Marks & Spencer has made in subsidiaries in France and Belgium from being deducted from UK profits of a Marks & Spencer company in the UK.
In IHL 132 (July 2005) the corporate tax briefing examined the Kretztechnik case and HMRC
As referred in IHL 134 (October 2005), the Construction Industry Scheme will be replaced by an entirely new computerised system. However, the date for implementation has been pushed back to April 2007, to give the industry additional time to prepare for the new regime.
Jonathan Legg, solicitor, Lawrence Graham
Following the merger of the Inland Revenue and HM Customs & Excise, it is proposed that the separate fraud procedures used by the two departments (ie the Hansard procedure for the Inland Revenue or the civil evasion procedure for HM Customs & Excise) will be replaced by a new ‘civil investigations of fraud’ procedure (NB the civil evasion procedure will be retained for suspected evasion at ports and airports).
The recent case of Demibourne Ltd v Revenue and Customs Commissioners has shown that an employer is still liable to account for income and national insurance contributions, even if the employee has self-assessed the tax.
In Bookit Ltd v Revenue and Customs, the High Court has ruled that services provided by the taxpayer that allowed customers to book cinema tickets were exempt for VAT purposes.
HMRC has admitted that the Stamp Duty Land Tax legislation did not allow it to charge interest on the late payment of the tax. HMRC has stated that it will repay interest to parties that have incorrectly accounted for interest by 31 January 2006. The error has been amended going forward, so interest may be validly charged from 26 September 2005. Details can be found at the following link:
The House of Lords in College of Estate Management v Commissioners of Customs and Excise has restored the earlier tribunal decision by holding that the taxpayer made a single exempt supply of services in the provision of its ‘distance learning’ courses.
The government stated in the pre-Budget report of 2004 that it wished to remove the distortion in the current tax system between the tax treatment of different forms of finance. This included aligning the tax treatment of leased plant and machinery with other forms of finance. A technical note has now been issued, setting out the commencement/transitional provisions and providing details of the new regime:
The Construction Industry Scheme (CIS) sets out how payments to subcontractors for construction work can be made. Under the existing rules, a contractor must make a tax deduction from payments made to subcontractors holding a CIS4 registration card. If the subcontractor holds a tax certificate (CIS5 or CIS6), then the payment can be made gross. If they have neither a registration card nor a tax certificate then the payment cannot be made at all.
The European Court has ruled in favour of the taxpayer in relation to the amount of VAT that can be deducted when assets are acquired for both business and non-business use. HMRC has responded to this case in Business Brief 15/05.
The High Court has ruled that 'virtual assignments' can qualify as the 'leasing or letting of immovable property' for the purposes of the Sixth Directive. HMRC has published its response to Abbey National Plc v Commissioners of Customs & Excise in Business Brief 16/05, and has been given leave to appeal to the Court of Appeal.
Wood and another v HM Inspector of Taxes involved a complex scheme designed to avoid the capital gains tax arising on the sale of a trading group by the taxpayer. As Park J commented:
'… the success or failure of the scheme does not turn on sophisticated points of statutory construction… it turns on one of the basic concepts of UK tax law, the concept of "residence" of a company.'
In IHL123 we reported on the High Court decision of Lindsay J in Debenhams Retail Plc v Commissioners of Customs and Excise. The Court of Appeal has now allowed HMRC's appeal.
From 1 August, Stamp Duty Land Tax (SDLT) has been brought within the tax avoidance disclosure rules. Set out below is a brief overview of the new regime. It should be noted that, if an arrangement has to be disclosed, this does not necessarily mean that the scheme does not 'work' for tax purposes.
The Finance (No3) Bill was published on 26 May 2005. As referred to in IHL131 (June 2005), this Bill includes the provisions that were taken out of the Finance Act 2005 (which was passed in truncated form due to the general election at the beginning of May 2005). Certain provisions have also been amended in light of various representations. These include provisions relating to:
The European Court of Justice (ECJ) has ruled that an issue of shares is not a supply for VAT purposes. This ruling conflicts with HMRC's historical position and means that taxpayers who make taxable supplies for VAT purposes should be able to recover VAT on costs associated with share issues. HMRC has responded to this case in Business Brief 12/05.
The High Court has opined on the operation of the three-year cap for repayments of overpaid VAT and the concession that HMRC has issued regarding the cap. In R (BT Plc) v HMRC, BT was unsuccessful in obtaining a judicial review of HMRC's decision not to apply the concession in this case.
HMRC has confirmed its change of policy in relation to the VAT treatment of inducement payments on the grant of a lease. In most cases, a tenant will not be making a supply for VAT purposes if it simply agrees to be bound by the normal covenants in a lease and receives payment from the landlord for doing so.
The Commissioners of Revenue and Customs Act 2005 received Royal Assent on 7 April 2005. This Act forms the basis of the new combined department, HM Revenue and Customs, and the separate prosecutions office, the Revenue and Customs Prosecutions Office. The departments were launched on 18 April 2005.
The Income Tax (Trading and Other Income) Act 2005 received Royal Assent on 24 March and came into effect on 6 April 2005.
The Advocate General of the ECJ has issued an opinion in response to questions referred by the High Court and the VAT and Duties Tribunal. If the opinion is followed by the ECJ, the case will have a significant impact on the VAT regime and tax planning.
This Corporate Tax Briefing examines the main proposals announced in Budget 2005 which were not covered by last month's briefing.
In Kretztechnik AG v Finanzamt Linz the Advocate-General has issued an opinion in favour of the taxpayer in relation to the recovery of VAT on fees paid for a stock exchange listing. This case will be beneficial to many companies engaged in corporate finance activity if the European Court of Justice (ECJ) follows the Advocate General's analysis.
On 16 March 2005 Gordon Brown delivered his ninth Budget. This article focuses on the main issues affecting property in the UK. Next month the 'Corporate tax briefing' will examine other corporate tax issues.
As referred to in IHL124 (p42), the Savings Tax Directive (designed to counter cross-border tax evasion by collecting and exchanging information about foreign-resident individuals receiving savings income outside their resident state) is due to come into force on 1 July 2005.
To encourage employers to set up 'payroll giving' schemes, the Home Office has launched a grants programme for firms with fewer than 500 staff. Additionally, the first £10 given by each employee will be matched.
The 'IR35 legislation' is designed (as per the Revenue website) to:
'… remove opportunities for the avoidance of tax and Class 1 National Insurance Contributions (NICs) by the use of intermediaries, such as service companies or partnerships, in circumstances where an individual worker would otherwise be an employee of the client or the income would be income from an office held by the worker.'
In Telewest Communications and another v Commissioners of Customs and Excise the Court of Appeal ruled in favour of the taxpayer regarding the VAT structuring of its broadcasting services and the provision of its listings magazine.
The Pre-Budget Report was made on 2 December 2004. This briefing summarises some of the more significant announcements. Links to the relevant sections of the Inland Revenue and HM Customs and Excise websites are set out below.
The House of Lords has given judgment on two important cases, clarifying the scope of the anti-avoidance principles set out in the Ramsay line of cases. The first is Barclays Mercantile Business Finance Ltd v Mawson (HM Inspector of Taxes).
The Special Commissioners have ruled that the proceeds of a share buy-back could not be treated as a capital receipt due to the purpose of the transaction.