1 General news
1.1 Season's Greetings and next Update
Our next Update will be issued on Monday 12 January 2015. With best wishes for the season from the National Tax team at Smith & Williamson.
1.2 Budget 2015 on 18 March 2015
Chancellor George Osborne is to deliver his last Budget of the Parliament on 18 March 2015. www.parliament.uk/about/how/occasions/budget/
1.3 New HMRC home page and landing pages on Gov.uk
As part of the move of information from the HMRC website to Gov.uk, HMRC has a new homepage and a new Agents landing page from which there are links to the manuals etc. These are at:
HMRC homepage
www.gov.uk/government/organisations/hm-revenue-customs
Agents 'landing' page:
www.gov.uk/dealing-with-hmrc/tax-agent-guidance
HMRC manuals
www.gov.uk/government/collections/hmrc-manuals
1.4 OTS response to the Autumn Statement
In its response to David Gauke, MP on the Autumn Statement, the Office of Tax Simplification (OTS) has indicated a progress report should be put together for the March 2015 budget on areas of its competitiveness report that the Government is keen to take forward. It also indicates the OTS will publish its final report on partnerships early in the New Year. The OTS is also drawing together its thoughts on employment status.
1.5 Consultation on closing enquiries
HMRC has issued a consultation document on closing tax enquiries. The aim of proposals is to better enable HMRC to cope with modern complex tax affairs. It proposes a resolution to the issue with the current enquiry rules being very much an 'all or nothing' system, which prevents the formal resolution of one issue without closing the whole enquiry unless both parties agree to refer the issue to a Tribunal. The proposal is to provide HMRC with a power to resolve and close that part of the enquiry into certain aspects, while leaving the remainder open.
The proposals would apply to the self assessment enquiry framework in respect of Income Tax, including NIC Class 2 and 4 in certain circumstances, Capital Gains Tax and Corporation Tax. It also proposes changes to the payment rules to permit HMRC to charge tax on the aspects resolved under the new power.
If the taxpayer does not wish to take advantage of the current 'mutual referral' system, HMRC would have the option to consider 'sole referral' of one or more areas of dispute within a wider tax enquiry to the Tribunal to achieve early resolution of those aspects alone. Any tax found to be due by the Tribunal in respect of those aspects would become payable. Other aspects of the tax enquiry would remain open.
The proposal is asymmetrical, for example, it is not clear how this would help a taxpayer keen to resolve matters, as there seems to be no proposal for the taxpayer to approach the Tribunal alone on individual items (as opposed to closing the entire enquiry), nor whether this represents a fair balance of power between taxpayer and HMRC, as the proposal would appear to permit HMRC to select matters that gave rise to more tax and leave those that reduce a tax liability where there is say a technical disagreement.
Responses are due by 12 March 2015.
1.6 Wales act 2014 receives Royal Assent
The Wales Act, which devolves some tax raising powers to the National Assembly for Wales received Royal Assent on 17 December 2014. With similarities with Scotland, stamp duty land tax and landfill tax are to be devolved, together with some income tax powers subject to approval in a Welsh referendum as set out in the Act.
The Act includes various governance provisions and renames
The Welsh Assembly Government as the Welsh Government.
www.legislation.gov.uk/ukpga/2014/29/contents/enacted/data.htm http://services.parliament.uk/bills/2014- 15/wales.html
1.7 Promoters of tax avoidance regulations
Further draft regulations have been issued under the vires of the promoters of tax avoidance (POTAS) legislation introduced in Finance Act 2014 (FA 2014) Part 5 ss 234- 283, which gives HMRC the power to issue conduct and monitoring notices on certain persons involved in the promotion of tax avoidance arrangements, who breach certain 'threshold conditions'. These draft regulations set out some of the definitions of matters covered by monitoring notices and notification procedures.
The draft regulations define what publications and correspondence the monitored person must include information on its monitor number and breach of conduct notice conditions and also prescribes how that must be disclosed. This includes certain communications with existing or prospective clients and intermediaries together with professional bodies and regulators, whether via the internet, hard copy or other media.
The draft regulations also prescribe the format of notification to HMRC by clients and intermediaries and where to send the information, ie whether in a tax return or the HMRC bespoke form included in the regulations, The POTAS threshold conditions, which include being a deliberate tax defaulter, breaching the banking code, non-compliance with DOTAS and other defaults are set out in FA 2014 as amended by subsequent regulations.
2 Private client
2.1 Extension to contractor loan settlement opportunity
HMRC has extended its contractor loan scheme settlement opportunity (covering tax years up to 5 April 2011). To take up the opportunity, HMRC must receive notification by 30 June 2015 and there must be an agreement to settle by 30 September 2015.
A contractor loan scheme is a tax avoidance arrangement where non-UK employers have paid a person 'untaxed income' or given them a loan instead of all or part of their salary. The original deadline was 9 January 2015.
www.gov.uk/government/publications/tax-on-contractor-loans/tax-on-contractor-loans--2
3 PAYE and employment matters
3.1 Home to work travel expenses for temporary workers HMRC has issued a consultation for response by 10 February 2015 proposing restrictions on the ability to avoid tax on reimbursed travel and subsistence expenses of temporary workers provided through employment and umbrella companies using overarching contracts of employment (OAC). The Government has been concerned about the increase in use of these arrangements, which HMRC estimates costs in the region of £400m tax revenue annually.
OACs are a legitimate form of employment contract used by some employment businesses and umbrella companies to employ temporary workers on multiple separate work placements, but on terms and conditions of a single permanent employment. However, the employer's premises are not the employees' normal place of work, though they are treated as the permanent base location, and the employer is not the organisation which directs the employee in their day to day tasks. This contractual arrangement enables individuals to access tax relief on travel and subsistence costs.
Each separate work placement undertaken is then treated as part of their permanent employment but taking place at a temporary location. OACs, compared to agency worker contracts, generate differences in access to travel and subsistence reliefs, confer additional employment rights on an individual and change the incidence of administrative obligations particularly with respect to operating PAYE.
To place workers on OACs in a similar position to agency workers from a tax perspective, the consultation proposes:
- to change the rules on travel and subsistence so that OAC workers would be treated as having a permanent workplace at the location where they work for the end client (legislation needs to be drawn up so that it does not catch genuine temporary workers); or
- to restrict the availability of tax relief for OAC workers' travel from home to workplace, and associated subsistence costs. This might be by stopping OACs being treated for tax purposes as giving rise to a series of temporary 'employments' under a permanent contract.
3.2 Construction industry scheme
A response document and draft regulations have been issued concerning improvements to the operation of the construction industry scheme (CIS). These are due to be phased in:
- from 6 April 2015:
- relax the requirements for joint ventures to gain gross payment status where one member already has it;
- replace the nil return obligation with a voluntary notification; and
- earlier repayment to liquidators where a company is in insolvency proceedings.
- from 6 April 2016
- for mandating online filing of CIS returns; and
- changes to gross payment status tests; and
- from 6 April 2017 for mandating of online verification.
Response document:
www.gov.uk/government/consultations/improving-the-operation-of-the-construction-industry-scheme-cis
TIIN and draft regulations:
4 Business tax
4.1 OECD discussion drafts
On 18 December the OECD published two discussion drafts, neither of which represent consensus views, on action points from the base erosion and profit shifting (BEPS) project. Responses are requested by 16 January 2015.
Action 4 – limiting base erosion via interest payments and other financial payments
The draft stresses the need to address BEPS using deductible payments such as interest that can give rise to double non-taxation in both inbound and outbound investment scenarios. The document discusses applying best practice on avoidance measures aimed at interest deductions to all forms of interest and entity, including:
- considering whether it should apply to gross or net interest or be applied based on the level of debt;
- whether there should be a de minimis exemption;
- how the position of the group should be taken into account;
- whether interest deductions should be limited to a fixed rate and if so how this should be applied;
Responses are requested by 6 February 2015.
Weekly Tax Update – Monday, 22 December 2014We 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.
