1 GENERAL NEWS
1.1 Automatic exchange of information agreement with Gibraltar
The UK has signed an automatic exchange of information agreement with Gibraltar.
www.hmrc.gov.uk/fatca/uk-gibraltar-imptax-comp.pdf
2 PRIVATE CLIENT
2.1 Consultation on legislative changes to permit paperless self assessment
HMRC has issued a consultation proposing that those registered to use its Self- Assessment Online service will be able to provide their consent to HMRC using electronic communications in connection with their tax affairs rather than receiving paper notifications and outputs by post.
Those who opt in to the new service will be sent a message by HMRC informing them information has been delivered to their secure mailbox and is available to view via their online account. Taxpayers logging in to their online account will be able to read the delivered notice or reminder, and if necessary act on it. Statutory notices and reminders made available to them in this way will have the same legal validity as a paper statutory notice and reminder sent by letter and post. Where possible, the taxpayer will be able to respond to the statutory notice or reminder and complete their transaction online.
The specific areas in Self Assessment that are within the initial scope of this proposal include:
Statutory notices – tax returns, enquiries, determinations and assessments
- Notice requiring a customer to file a tax return;
- Notice of a correction of a customer's tax return by HMRC;
- Notice of the opening of an enquiry into a customer's tax return;
- Notice requiring information or documents as part of an enquiry into a customer's tax return;
- Notice of the amendment of tax during an enquiry to prevent loss of tax;
- Notice of the completion of an enquiry into a customer's tax return;
- Notice of the determination of tax by HMRC where no return has been delivered;
- Notice of amendment of partnership statement where loss of tax discovered.
Statutory notices – penalties
- Notice of penalties where return is late or not delivered;
- Notice of penalties/surcharges on unpaid tax;
- Notice of penalties for failure to comply with an information notice or deliberately obstructing an HMRC officer's inspection;
- Notice of penalties for errors in a tax return.
Reminders and other tax related communications
- Self Assessment Statement is available to view online;
- Confirmation of payments and repayments made;
- Reminders to file a tax return;
- Reminders to pay tax due;
- 'Exit' message for customers deregistering for self-assessment.
The proposal is for a staged introduction to fit in with the availability of HMRC's technical capacity.
www.gov.uk/government/uploads/system/uploads/attachment_data/file/261228/digital_self_assessment.pdf
2.2 Capital Taxation and the National Heritage
HMRC has updated its guidance on Capital Taxation and the National Heritage. It now includes further guidance in Appendix 15 on chattels that qualify for:
- conditional exemption;
- support by a maintenance fund.
Paragraph 4 of Appendix 3 has also been amended to reflect changes regarding when interest is charged on objects exempted from Estate Duty which are sold at auction.
www.hmrc.gov.uk/inheritancetax/conditionalexemption.pdf
2.3 Guidance on the taxation of unauthorised transfers to pension schemes on the QROPs list
HMRC has issued guidance concerning transfers of sums or assets which took place before 24 September 2008 from a registered pension scheme to a scheme that was included within the list relating to qualifying recognised overseas pension schemes (QROPS). The guidance will operate in relation to the small number of transfers where the scheme was not a QROPS when the transfer took place. The guidance is related to the case of R (Gibson) v Commissioner for HM Revenue and Customs.
www.hmrc.gov.uk/pensionschemes/transfers-to-qrops.pdf
3 PAYE AND EMPLOYMENT MATTERS
3.1 Employment-Related Shares & Securities Bulletin
HMRC has published the eleventh Employment-Related Shares and Securities Bulletin providing information and updates on developments relating to employment-related securities, including the tax-advantaged employee share schemes.
www.hmrc.gov.uk/shareschemes/erssbulletin11.pdf
3.2 PAYE for employers: Advisory fuel rate updates
HMRC has published revised advisory fuel rates to operate from 1 December 2013.
www.hmrc.gov.uk/payerti/forms-updates/rates-thresholds.htm#7
3.3 Consultation on changes to real time information (RTI) reporting
HMRC has issued draft regulations and a technical note for comment by 24 January 2014 on changes to the RTI regime under the following broad headings:
- To provide for direct collection where HMRC is satisfied that it is not practicable for the employer to deduct tax by reference to the tax tables, for example where an employer has no place of business in the UK, and no special arrangements have been made, unless the employee objects within 30 days of receiving written notification of the Direct Collection procedure;
- To provide for those who are exempt from on-line filing to submit their data quarterly rather than at the time of payment;
- To provide for late filing penalties (the penalty level is set according to number of employees) and late payment penalties (there is a £100 tolerance in assessing whether a payment is late) and to remove the application of the penalty applicable to the last return filed late each year for returns relating to tax year 2014-15 and onwards.
4 BUSINESS TAX
4.1 Community amateur sports clubs (CASCs)
Following consultation in August 2013 HMRC has issued a consultation response setting out new rules applicable to community amateur sports clubs. The new rules will provide for the following:
- Clubs that charge more than £520 a year must make special provisions for members on a low or modest income to participate for £520 or less, subject to an upper membership fee threshold of £1,612.
- Clubs will be able to pay any number of players to play up to a total limit per club of £10,000 a year (including the cost of any benefits).
- Clubs will be able to pay reasonable subsistence expenses and club tours subject to limits that will be set out in HMRC guidance.
- At least 50 per cent of a club's members must be participating (sporting) members.
- A participating member will be defined as a person who participates in the sport at least 12 times a year.
- Clubs will be able to generate unlimited income from their members.
- Clubs will be able to generate up to £100,000 turnover (receipts) from trading and other miscellaneous transactions with non-members.
- The threshold on the exemption from corporation tax on trading income will be increased from £30,000 to £50,000. Clubs will pay no tax on trading income so long as the turnover from non-members is no more than £50,000.
- The threshold on the exemption from corporation tax on income from property will be increased from £20,000 to £30,000. Clubs will pay no tax on income from property so long as the receipts from non-members are no more than £30,000.
- All companies will be able to obtain tax relief on qualifying donations to a CASC under corporate gift aid.
Finance Bill 2014 will include provisions to extend corporate gift aid to donations of money made by companies to CASCs. The provisions will allow companies to claim tax relief on qualifying donations they make on or after 1 April 2014.
Draft regulations will be published for a short technical consultation in the new year before being laid in draft before Parliament.
4.2 Review of the EU parent subsidiary directive
The Confédération Fiscale Européenne (CFE) has issued the following note:
Today [25 November 2013], the European Commission has proposed a review of the Parent-Subsidiary-Directive, with a view to;
- avoiding non-taxation of distributed profits. According to the current Directive, the parent company either has to refrain from taxing such profits or provide for a tax credit, regardless of whether the payment is tax-deductible in the country of the subsidiary (source country). Under the proposed rules, the member state of the parent company would only be allowed to grant exemption to the extent the payments are not deductible in the source country, limiting the policy options of the parent company´s residence country.
- Introducing an anti-avoidance rule in the Directive, stating that the benefits of the Directive shall be withdrawn in the case of artificial arrangements.
The Commission hopes that the Directive could be implemented by 31 December 2014, but adoption will require unanimity in the EU Council.
- Text of the proposal COM(2013)814: (de) (en) (fr)
- Questions and answers:
http://europa.eu/rapid/press-release_MEMO-13-1040_en.htm - Impact assessment:
http://ec.europa.eu/taxation_customs/resources/documents/taxation/vat/key_documents/legislation_proposed/swd(2013)474.pdf - Summary:
http://ec.europa.eu/taxation_customs/resources/documents/taxation/vat/key_documents/legislation_proposed/swd(2013)473_en.pdf
4.3 Whether monies raised for the purpose of an EIS qualifying activity
Shortly after incorporation in June 2001, Harvey's Jersey Cream Ltd became a partner in the business of L & R Harvey and Partners. The other partners were Mr L Harvey and his three adult children: James, and David and Wendy. The share capital of the company was owned by those four partners. The partnership business was the manufacture and delivery of ice cream and dairy products, and included the running of the dairy herd which produced some of the milk for the ice cream and dairy products on land owned or occupied by the partnership.
On or around 26 November 2003:
- each partner took drawings from the partnership;
- each partner subscribed for shares in the company in amounts corresponding to those drawings;
- the company paid the total amount raised by the share issue, some £1.25 million, to the partnership.
The process of withdrawal, subscription, and payment to the partnership was repeated on 27 July 2004. The amount involved on this occasion was in total some £750,000.
The company applied to HMRC under section 306(4) TA 88 (now ITA s204) for authority to issue EIS certificates in respect of the shares it had issued in these transactions. HMRC refused to give that authority.
The First-tier Tribunal concluded that the enterprise investment scheme conditions for use of the money from the fund raising (that they be employed wholly for the purpose of the qualifying trade) were not met, as the funds were already used in the qualifying trade, and instead were used to fund a change in partnership sharing ratios.
www.bailii.org/uk/cases/UKFTT/TC/2013/TC03045.html
4.4 SDRT
There has been an increasing trend recently for gross transactions in securities (stocks & shares) to be aggregated or netted off outside of CREST before settlement, which means that Euroclear UK & Ireland Limited EUI cannot assess the gross transactions as the legislation requires.
HMRC in consultation with key market participants and stakeholders has therefore asked EUI to develop and deliver a new enhanced SDRT assessment service.
The aim of the new enhanced SDRT assessment service is to help rebalance the established market practice of gross transactions being sent for reporting and assessment for SDRT at a centralised point. It is planned that the service will go live in June 2014.
www.hmrc.gov.uk/so/sdrt-assessment.htm
5 VAT
5.1 Partial exemption framework for NHS trusts
HMRC has issued a document setting out principles for VAT recovery calculations by National Health Trusts which if adopted may facilitate HMRC's agreement of the method.
www.hmrc.gov.uk/menus/frame-nhs.pdf
5.2 The use of First-tier Tribunal Rule 18 to add cases as related cases to an existing lead case
In a case concerning Group 288 Ltd and others the First-tier Tribunal (FTT) has concluded that five additional cases should be added as 'related cases' behind the lead case ZipVit which questions: "whether a taxable person, who has received supplies of services from Royal Mail which were at the material time treated by Royal Mail as exempt under the Value Added Tax Act 1994, but which were properly chargeable to VAT under the Sixth VAT Directive or Principal VAT Directive, is entitled to an input tax credit in respect of those supplies." It is understood this lead case will be heard in May 2014.
Rule 18 directions do more than merely stay one case behind another. They make the FTT decision in the lead case binding on the related cases in the FTT. To this extent the FTT decision in the lead case creates binding precedent when, as the FTT is not a court of record, its decisions normally do not have this effect. The advantage of a Rule 18 direction to those cases related to ZipVit is that if Zipvit is successful, they will not need to re-litigate the issue with HMRC. HMRC will be bound to apply the Zipvit decision in their favour. This is not the position with normal FTT decisions as they do not create precedent.
The application of Rule 18 is not, however, without its difficulties. Most of these difficulties stem from the fact that a designation of cases as lead cases and related cases does not survive on an appeal. The Upper Tribunal has no mirror to rule 18. In this Rule 18 in effect diverges from the process that would apply at the Upper Tribunal and later courts, where a group litigation order survives on appeal.
HMRC objected to the application of Rule 18 in the cases considered on the grounds that their facts were not identical to ZipVit, and there were 'out of time claim' issues to be considered which would make the application of Rule 18 inappropriate. Otherwise they accepted that the cases raised the same issues as in ZipVit. The FTT concluded that none of the objections had sufficient grounds for denying the application of Rule 18 in four of the cases, and its application in the remaining case would be dependent on the re- drafting of the grounds of appeal in that case and the consideration of any objections by HMRC's to those revised grounds of appeal.
www.bailii.org/uk/cases/UKFTT/TC/2013/TC03041.html
We have taken care to ensure the accuracy of this publication, which is based on material in the public domain at the time of issue. However, the publication is written in general terms for information purposes only and in no way constitutes specific advice. You are strongly recommended to seek specific advice before taking any action in relation to the matters referred to in this publication. No responsibility can be taken for any errors contained in the publication or for any loss arising from action taken or refrained from on the basis of this publication or its contents. © Smith & Williamson Holdings Limited 2013
