Horwath Clark Whitehill - Corporate Taxes Update - 21 July 2008

Apr 6, 2009 | Publisher: CroweClarkWhitehill | Category: Business & Jobs |  

A summary of the latest UK tax news www.horwathcw.com Corporate Taxes Update 21 July 2008 In this issue: • HMRC powers • Tax on employment- related securities and split- year treatment • VAT HMRC powers The 2008 Finance Act gives HM Revenue & Customs (HMRC) surprising new powers, sometimes without any right of appeal in the primary legislation. HMRC argues that there will be safeguards in guidance notes but these have no statutory force and are written by HMRC itself. Concern has been expressed about provisions allowing HMRC to look at records before a return has been filed. This would be reasonable in cases where fraud is suspected but for the ordinary business this seems a fairly wide ranging power. The fear is that it will be used for ‘fishing expeditions’ and will lead to a lot of wasted time and cost. Powers are given to HMRC to regulate what records should be kept and preserved. Currently a taxpayer is required to keep only those records needed to make a correct and complete return. The new Finance Act enables the record-keeping requirements to be extended by notice published by HMRC. Schedule 36 of the new Act gives HMRC power to obtain information and documents from taxpayers and third parties. It appears to extend the powers of HMRC to enter into business premises and inspect the premises, the business assets and the business records. It is fair to say that HMRC went out to consultation on this and other compliance issues, but it announced its findings in the March Budget, only one week after the consultation period ended. This gives the impression that consultation is cosmetic. Companies will soon need to deal with a new range of penalties for incorrect returns. The proposed penalties look higher than the level of penalties that could be negotiated with HMRC under the old rules. There are also provisions to offset sums payable to the taxpayer against sums owed to HMRC by the same taxpayer. The setoff is exercisable at the discretion of HMRC and there is no right of appeal. Tax on employment-related securities and split-year treatment HMRC has recently issued guidance on its website about the application of Extra- Statutory Concession (ESC) A11 as it applies to employment-related securities (as set out in Part 7 of ITEPA 2003). HMRC accepts suggestions that there was uncertainty on its view and it has now sought to clarify this. In broad terms HMRC seem to be prepared to give taxpayers the benefit of the doubt where HMRC’s view were not clear and where years are still open. ESC A11 is a useful concession for people coming to the UK and those leaving permanently or to work abroad under a full-time contract of employment. The concession means that a person is treated as non-resident in the UK prior to the date of their arrival or after the date of their departure and income falling in each part of the ‘split’ tax year is taxed accordingly. Corporate Taxes Update A summary of the latest UK tax news www.horwathcw.com 21 July 2008 For more information please contact: Angela Lazda Tax Partner angela.lazda@horwath.co.uk Stuart Weekes Senior Tax Manager stuart.weekes@horwath.co.uk Horwath Clark Whitehill LLP Aquis House 49-51 Blagrave Street Reading, RG1 1PL Telephone: 0118 959 7222 Fax: 0118 958 4640 www.horwathcw.com HMRC’s view ‘has always been’ that for people coming to the UK, ESC A11 does not apply to income falling within Part 7 of ITEPA 2003 (employment-related securities). However as this view was not widely known by employers or taxpayers, the good news is that until a statutory basis is introduced HMRC will accept that the ESC will apply. For people leaving the UK, HMRC says that ESC A11 broadly applies in the same way but that until a statutory basis is introduced it will apply the same principles as above – that is, it will operate the concessional ‘split’ year treatment. The exception to this will be where employment-related securities are acquired at less than market value (otherwise than by way of an option) where the ESC will continue to not be available. This ESC is likely to be replaced by legislation – either as part of a wider review of all extra-statutory concessions or as part of the introduction of a statutory test of residence. VAT (1) Condé Nast - any claims for over-declared VAT to be made following the principles established in the Condé Nast/Flemming decision (that the three year cap was incorrectly imposed by HMRC and can be disregarded) must be made by 31 March 2009. (2) Pringles – after cakes and biscuits we have the legal view on crisps and Pringles. Much food (including cake, but not biscuits or crisps) is zero-rated in the UK. Proctor & Gamble have won a case in the High Court that has stated they can zero- rate the supply of Pringles as unlike most crisps they do not fall into the exception from zero-rating. They have now proved to HMRC, what we all suspected, that Pringles are not really potato-based and are prepared sufficiently differently so as to distinguish them from conventional crisps. This information is published without responsibility on our part for loss occasioned to any person acting or refraining from acting as a result of any information published herein. © Horwath Clark Whitehill LLP July 2008.

Horwath Clarke Whitehill - Corporate Taxes Update - 21 July 2008.pdf

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