2013 November | Exchange Accountancy Services

Archive for November, 2013

Tax changes ahead for partnerships?

Thursday, November 28th, 2013

HMRC are considering changes to the tax rules for partnerships. Changes arising will be included in legislation that will be effective from 6 April 2014.

HMRC’s formal consultation closed 9 August 2013 and consideration is now being applied to the following issues:

  • Disguising employment relationships through Limited Liability Partnerships, and
  • Certain arrangements involving allocation of profits and losses among partnership members.

In their review notes setting up the consultation HMRC offered the following explanation as to who is likely to be affected by the proposed changes:

 Disguised employment:

 An LLP member who works for the LLP on terms that are tantamount to employment.

 Profit and loss allocation schemes:

 Members of LLPs and other partnerships where the members of the partnership consist of members who are chargeable to income tax and others who are not, but only where it is reasonable to assume that:

  • a main purpose of the partnership profit-sharing arrangements is to secure an income tax advantage for any person; or
  • a main purpose of arrangements in force is to allocate a partnership loss to a partner with a view to that partner obtaining a reduction in tax liability by way of income tax reliefs or capital gains relief.

 Profit and loss allocation schemes also cover tax-motivated arrangements whereby one partner transfers profits to another as a result of a revised allocation of profits in return for payment that is not taxed as income.

These changes will likely require a fresh look at partnership taxation planning when the draft legislation is published later this year.

National Minimum Wage

Tuesday, November 26th, 2013

Many businesses are unaware that the National Minimum Wage (NMW) rules are monitored by HMRC. There are consequences if you fail to pay employees NMW rates.

Currently, the rates set 1st October 2013 apply. They are:

  • 21 and over – £6.31 per hour
  • 18 to 20 – £5.03 per hour
  • Under 18 – £3.72 per hour
  • Apprentice – £2.68 per hour*

 *This rate for apprentices is for the under 19s or those in their first year. Apprentices over 19 years and past their first year qualify for the rate appropriate to their age.

The following notes are copied from the GOV.UK website.

Employees entitled to the NMW are:

Workers must be school leaving age or over to get the minimum wage. (They must turn 16 by the last Friday in June of the school year)

Contracts for payments below the minimum wage are not legally binding. The worker is still entitled to the minimum wage.

Workers are also entitled to the minimum wage if they are:

  • part-time
  • casual labourers, e.g. someone hired for 1 day
  • agency workers
  • workers and home workers paid by the number of items they make
  • apprentices
  • trainees, workers on probation
  • disabled workers
  • agricultural workers
  • foreign workers
  • seafarers
  • offshore workers

And don’t forget that apprentices under 19 or in their first year get an apprentice rate.

Deliberate tax defaulters

Thursday, November 21st, 2013

A new list of deliberate tax defaulters has been published by HMRC on 12 November 2013. It includes a number of food retailers, hairdresser, wholesalers, a yacht brokerage, construction industry firms, haulage operator and a property rental owner.

HM Revenue & Customs (HMRC) publishes details of deliberate tax defaulters – people who have received penalties either for:

  • deliberate errors in their tax returns or
  • deliberately failing to comply with their tax obligations

The law that allows this is Section 94 Finance Act 2009.

HMRC may publish information about a deliberate tax defaulter where:

  • HMRC have carried out an investigation and the person has been charged one or more penalties for deliberate defaults
  • those penalties involve tax of more than £25,000

However, their information will not be published if the person earns the maximum reduction of the penalties by fully disclosing details of the defaults.

HMRC will publish sufficient information to identify the deliberate tax defaulter, the penalties imposed for their deliberate defaults and the amount of tax on which those penalties are based.

The online rogue’s gallery is intended to encourage defaulting tax payers to pay up. Their details cannot be published for longer than 12 months.

Where there\’s a Will…

Tuesday, November 19th, 2013

 There are still many families in the UK whose assets will be distributed in accordance with the intestacy rules – and all because a deceased member of the family did not prepare a Will.

What are the intestacy rules?

Let’s say that the family breadwinner dies leaving a surviving spouse or civil partner and two children. Without a Will the estate will pass as follows:

  1. The surviving spouse receives: all the deceased’s personal property; a statutory legacy of £250,000; and a life interest in any excess over £250,000, the residue.
  2. The children receive the other half of the residue in equal shares.

These rules may reflect the wishes of the deceased person, but they may not. The problem is, without a Will, the letter of the law will apply.

This month many solicitors across the UK support a charity called Will Aid (www.willaid.org.uk). Instead of paying a solicitor you make a donation of £90 for a basic Will or £135 for a pair of “mirror” Wills. The proceeds are distributed to one of nine major UK charities.

Those of us with aging parents may also need to consider Power of Attorney options.

Sorting out these basic items, a properly prepared and executed Will and Powers of Attorney (if required), will save you anxiety and stress when you have to deal with the practicalities of bereavement or loss of competence to manage one’s affairs. Don’t leave either eventuality until it’s too late.

UK signs tax agreement with Cayman Islands

Wednesday, November 13th, 2013

Chancellor George Osborne made the following announcement to MPs on 5 November 2013.

"Today, I can […] announce another step in the fight against tax evasion. We will be signing this afternoon a tax information sharing agreement with the Cayman Islands – the first ever with an overseas territory.

"And as a result, information of UK taxpayers held in the Cayman Islands will be automatically provided to HMRC, who will use it to collect the tax that is due," Mr Osborne said.

The Cayman Islands and other British overseas territories have become major international financial centres thanks to low taxation, light-touch regulation and limited requirements for those who invest to make any formal disclosure to the UK tax authorities.

This, it would appear, is about to change.

A Government press release confirms:

An important step towards the new global standard to be agreed early next year, financial information on UK taxpayers with accounts in the Cayman Islands will now be automatically provided to HM Revenue & Customs.

This will help HMRC to ensure that the correct amount of tax is being paid by those with money in Cayman Islands accounts and increase HMRC’s ability to clamp down on tax evasion.

The announcement follows the agreements signed between the UK and the Crown Dependencies of the Isle of Man, Jersey and Guernsey in October.

The Cayman Islands have also agreed to be part of the G5 multi-lateral information sharing pilot. Initially agreed between the UK, France, Germany, Italy and Spain, the Cayman Islands will join these countries in automatically exchanging information about bank accounts held by taxpayers from their jurisdictions.

In total, 31 jurisdictions have now joined the initiative.

Chancellor of the Exchequer, George Osborne, said:

“The UK has led the way in creating a new global standard for tax transparency and automatic tax information sharing. This was at the heart of our G8 agenda this year and today’s agreement builds on the progress we have already made.

We welcome this signing with the Cayman Islands, the first Overseas Territory to sign this type of agreement with the UK. This demonstrates our shared commitment to tackling tax evasion.

Alongside the significant investment that the government has made in HMRC’s anti-avoidance and evasion work, these agreements will help them to clamp down further on those individuals who seek to hide their assets offshore.

Our message is very clear: it is only fair that people pay the tax they owe. If you are trying to evade tax, we are coming after you.”

Prudential wins important tax case

Tuesday, November 12th, 2013

 The High Court has ruled that HM Revenue & Customs (HMRC) had unfairly taxed ‘several thousand dividends’ between 1990 and 2009. As a direct result thousands of Prudential with-profits investors could receive a share of approximately £150m. The case could benefit other providers who have similar with-profits funds. For example: Aviva, Royal Sun Alliance, Standard Life and Legal & General.

The case centred on the taxation of overseas dividends. Following a change in legislation, 2009, most dividends received from overseas companies are now exempt from tax. Prior to that date the Prudential was obliged to pay corporation tax on the funds in question.

At the end of October Mr Justice Henderson ruled that HMRC had unfairly taxed the funds in question and should reimburse Prudential policyholders the tax paid with compound interest. The High Court judgement read: ‘The Revenue remains unjustly enriched until the date of actual repayment… the interest forms part of the restitutionary claim itself. I would reject the Revenue’s submission that the claimants’ only entitlement is to simple interest…compound interest forms part of the principal sum that needs to be awarded in order to achieve full restitution.’

The ruling is open to appeal by HMRC and it is likely to be a number of years before policy holders affected receive any refunds.

A spokesman for Prudential said: ‘We have taken the action involved, and at this stage it would not be appropriate to comment further as there may be an appeal by HMRC.’

An HMRC spokesman said: 'HMRC is considering this long judgement carefully, before deciding whether to appeal. The uncertainty created by this litigation is largely historic. The key legislation which was the subject of this litigation was changed in 2009.'

Pension liberation

Thursday, November 7th, 2013

HMRC have made the following comments on their website to counter so-called “pension liberation” activity. Here’s what they have to say on the subject:

“HM Revenue & Customs (HMRC) is committed to combating pension liberation activity. HMRC has been working closely with other government departments/agencies and the pension industry to take action to prevent pension liberation and preserve pension savings.

Increasing numbers of pension savers are being targeted by unscrupulous companies encouraging them to access their pension savings early. This is commonly known as 'pension liberation' and has significant tax consequences.

HMRC has made a number of changes to strengthen existing processes to deter pension liberation and safeguard pension savings. These changes will take effect from 21 October 2013.”

As you can imagine the tax consequences of attempts to move funds out of pension savings can be significant. If you are tempted by such an arrangement you may be advised to seek tax advice.

HMRC’s last word?

“HMRC is continuing to take firm action to detect and pursue those who deliberately bend or break the rules by offering schemes to liberate pension savings. These changes are part of a continuing strategy to combat pension liberation, as is the ongoing review of the pension tax legislation and HMRC will not hesitate to make further changes if necessary.”

UK pushing for transparency

Tuesday, November 5th, 2013

David Cameron made the following statement to the members of the Open Government Partnership annual summit last week.

“We need to know who really owns and controls our companies. Not just who owns them legally, but who really benefits financially from their existence.

This summer at the G8 we committed to do just that – to establish a central register of company beneficial ownership. And today I’m delighted to announce that not only is that register going to go ahead – but that it’s also going to be open to the public.

As well as securing stretching new commitments from participating countries, the UK is using the summit to help drive forward the transparency agenda at home, especially on open data and corporate accountability.”

Other announcements include commitments to:

• implement and champion internationally a global standard of financial transparency and accountability in the extractive industries (oil, gas and mining) on the part of governments and companies, in line with the principles in the G8 Open Data Charter

• publish information on official development assistance (ODA) in line with the International Aid Transparency Standard (IATI), so that UK assistance can be tracked through the delivery chain

• ensure a strong legislative framework to encourage workers to speak up about wrongdoing, risk or malpractice without fear of reprisal

• demonstrate the potential of open policymaking by running at least 5 “test and demonstrate projects” across different policy areas

• a pilot study giving parents access to their own children’s data on the National Pupil Database, with a view to developing tools that give them a better understanding of their child’s educational performance

• for NHS England to improve the quality and breadth of information available to citizens, helping them participate more fully in both their own healthcare and in determining the design and quality of health services

Minister for the Cabinet Office Francis Maude said:

“Transparency is an idea whose time has come – and the clock cannot be turned back. The unstoppable momentum building behind open government at home and abroad is accelerating the pace of change, and we are using it to drive innovation and growth, improvements in public services and greater accountability in public and corporate organisations.

The best way to demonstrate the power of transparency is by making it real for everyone. That is why we are announcing a range of open data and transparency commitments at the OGP summit and opening up data in areas from business to education, health and aid that will have a direct and beneficial impact on the way we live and work, on the quality of the public services we use, and on the choices we make as citizens.”
 

Tax Diary November/December 2013

Monday, November 4th, 2013

 1 November 2013 – Due date for Corporation Tax due for the year ended 31 January 2013.

 19 November 2013 – PAYE and NIC deductions due for month ended 5 November 2013. (If you pay your tax electronically the due date is 22 November 2013.)

 19 November 2013 – Filing deadline for the CIS300 monthly return for the month ended 5 November 2013.

 19 November 2013 – CIS tax deducted for the month ended 5 November 2013 is payable by today.

 1 December 2013 – Due date for Corporation Tax due for the year ended 28 February 2013.

 19 December 2013 – PAYE and NIC deductions due for month ended 5 December 2013. (If you pay your tax electronically the due date is 22 December 2013.)

 19 December 2013 – Filing deadline for the CIS300 monthly return for the month ended 5 December 2013.

 19 December 2013 – CIS tax deducted for the month ended 5 December 2013 is payable by today.

 30 December 2013 – Deadline for filing 2012-13 Self Assessment online to include a claim for under payments (under £3,000) be collected via tax code in 2014-15.

HMRC targets certain health professionals

Monday, November 4th, 2013

A new tax campaign was launched by HMRC on 7 October 2013. The campaign targets: physiotherapists, occupational therapists, chiropractors, osteopaths, chiropodists and podiatrists; homeopaths, dieticians, nutritional therapists, reflexologists, acupuncturists, psychologists, speech, language and art therapists, and other health professionals are also covered.

Health professionals have until 31 December 2013 to advise HMRC that they would like to take part in the campaign, and until 6 April 2014 to disclose and pay any tax owed.

As usual with these campaigns HMRC offer favourable settlement terms. Health professionals affected who do not meet the 31 December deadline run the risk that their affairs may be subject to an investigation.