“Applicants applying under the access to funds scheme are reminded that applications in which an incapable adult’s income consists solely of Department of Work and Pensions (DWP) benefits, is likely to be returned.

This is because the least restrictive option, as per of the Adults with Incapacity (Scotland) Act 2000 is to manage an incapable adult’s funds through DWP appointeeship. Sections 1(2) and 1(3) of the the Act provide further guidance to support this.

However, in those circumstances where there is income over and above DWP benefits, such as the individual being in receipt of:

• a private pension,
• savings above the lower capital limit, or
• a lump sum required to pay accrued expenses or debts,

an access to funds application can be completed, if required. This applies to all applicants wishing to make an application to access the adults funds.”

More on this can be found here.”

HMRC has added new guidance to its inheritance tax manual regarding the entitlement of a farmhouse to agricultural property relief under the character appropriate test.

The guidance reflects the taxpayer’s victory at the First-tier Tribunal in Golding v HMRC [2011] UKFTT 351 (TC)). 

More on this can be found here.

Let’s start with Scotland.

According to a new report by the Scottish Government, the tax-take per person is higher in Scotland that the rest of the UK.  Finance Secretary John Swinney says the analysis of tax revenue over three decades proves the country “more than pays its way”.  More on this from the Herald can be found here and the Scottish Government here. 

One of the UK’s foremost ­experts on devolution has warned that new tax-raising powers for the Scottish Parliament have “serious limitations”.  Speaking to Holyrood’s ­finance committee, Gerard Holtham, who chaired a commission in Wales examining the case for more devolved powers for the principality, backed a much wider remit to allow the Scottish Parliament to vary individual bands within the income tax system.

Under the forthcoming Scotland Act powers, Holyrood will take control of a new Scottish rate of income tax, allowing MSPs to reduce or increase the levy as they see fit.  However, they will not be able to change the rates within the system, meaning that any change will apply to lower, middle and higher rates equally.  As I have argued on numerous occasions the Scotland Act 2012 income tax proposal is a mess and does not devolve any meaningful power to the Scottish Parliament.  More on this from the Scotsman can be found here here.

Interesting to see how the First Minister of Wales is following the First Minister of Northern Ireland.  They are both trying to use the Scottish independence referendum as a means to pressure the UK Government into devolving tax and fiscal powers.  More on this from the BBC news website can be found here.

An explanation as to why the First Ministers feel that they have to use this type of argument is shown by the failure of the UK Government to devolve air passenger duty.  Not all of the Calman Commission proposals were implemented by the UK Government.  Air passenger duty was one of the taxes although recommended for devolving was not devolved.  That is why the Scotland Act 2012 is called “Calman minus”.  That is also why we are still hearing calls for air passenger duty to be devolved.  More on this from the BBC news website can be found here.

It also seems that London does not want to be left behind.  Boris Johnson, the Mayor of London, is again calling for new financial powers for London.  The proposals, by the London Financial Commission who were appointed by Johnson, call for London to have the power to raise property and tourism taxes, and various housing and infrastructure spending powers.  More on this from the Guardian can be found here.  No matter the result of the Scottish independence referendum pressure on the UK Government to devolve power away from London, and ironically to London, will continue.  What is particularly interesting is that this does not just mean Scotland but almost every part of the UK.

The UK Chancellor should stop discriminating against visiting foreign musicians and artists by denying them tax breaks which are offered to top foreign footballers and athletes, leaders of Britain’s biggest orchestras have argued.  More on this from the Telegraph can be found here.

Launched in June 2010 by the UK coalition government, the National Insurance “holiday scheme” was aimed at cutting staffing costs for newly-established businesses outside London and the south-east of England.  Eligible firms do not have to pay NI contributions for their first ten employees, with a maximum saving of £5,000 per staff member in their first year.  However, the initiative, which is due to end in September, has failed to live up to its promise and it seems only a few companies have benefited from it. More on this from the Scotsman can be found here.

The House of Commons Public Accounts Committee has claimed that the UK’s largest accountancy firms are using inside knowledge from staff seconded to HM Treasury to help leading companies and wealthy individuals avoid paying UK taxes.  The Public Accounts Committee has also recommended that these companies should be prevented from advising the UK Government on tax law.  In its report on this issue they also claim that these firms have “undue influence over the tax system”.  More on this from the BBC News website can be found here.

A controversial “sweetheart” tax deal between HMRC and Goldman Sachs worth up to £20m, was agreed in part to avoid embarrassment to George Osborne, according to the UK Government’s former head of tax.  Dave Hartnett has said that he decided to settle the long-running dispute after Goldman Sachs threatened to pull out of a prized new tax framework a week after the UK Chancellor had announced that the bank had signed up to it. More on this can be found here.

HMRC raises yield from wealthy taxpayers again.  The top 1% of earners paid 26.5% of the total income tax take in 2012/13, according to figures from HMRC.  More on this from the STEP journal can be found here.

The Scottish Government has published a bill aimed at tackling illegal dumping. The Landfill Tax (Scotland) Bill will transfer responsibility from the UK Government for administering the tax and encourage the proper disposal and recycling of waste.  More on this can be found here.

The Financial Transactions Tax has been in the news again.  The negative reaction from the City of London is as expected.  What is slightly more surprising is how far the UK Government will go to prevent this tax from coming into existence.  The UK Government has launched a legal challenge against plans for a European Financial Transactions Tax.  More on the UK Government’s challenge from the BBC news website can be found here and more generally from the Telegraph here.

Now to an example of European cooperation.  The UK Chancellor of the Exchequer has signed an information exchange agreement with the finance ministers of France, Germany, Italy and Spain in yet another attempt to crack down on tax evasion.  Under the agreement, banks in these countries will be forced to reveal financial details of foreign clients.  More on this can be found here.

Now to matters further afield and a relatively new area for taxation, the internet.  By a vote of 75 to 24, US senators adopted an amendment to a Democratic budget resolution that, by allowing states to “collect taxes on remote sales,” is intended to eventually usher in the first national, i.e. American  internet sales tax.  More on this can be found here and here.

Now to Greece.  The International Monetary Fund has criticised Greece for making very little progress in tackling its notorious tax evasion problem.  It says the rich and self-employed ‘are simply not paying their fair share’ and the tax authorities are still bedevilled by ‘pervasive political interference’.  The IMF also said that Greece is making progress in overcoming deep-seated problems in the midst of a very serious and socially painful recession. More on this can be found here. 

Finally the not unexpected news that Silvio Berlusconi’s four-year conviction for tax fraud on TV rights bought by his Mediaset TV empire has been upheld.  Mr Berlusconi had appealed against a sentence passed by a lower court in 2012, which had found him guilty of tax fraud, but the appeals court reinstated the 2012 conviction and said he should serve four years in jail. More on this can be found here here.

Have a good weekend. 

Legislation introduced in Finance Bill 2013 puts the rules which determine an individual’s tax residence on a statutory basis.

HMRC has published guidance to help customers decide if they are resident in the UK for the purposes of paying tax.

The guidance can be found here.

An interesting case concerning an attempt to have a Will set aside.

The deceased’s children attempted to overturn their father’s Will on the basis that their father was delusional.  Their father left almost £6.7 million largely  to a charitable trust.

The Court of Session however was “not satisfied that the pursuer [the children] have established that there were periods when the testator’s paranoid personality disorder was of such delusional intensity as to deprive him of testamentary capacity. ”   In other words, although the testator was paranoid he still had mental capacity

The case report can be found here and a report from the Herald here.

The UK Government has launched the Charities Online system allowing charities and sports clubs to claim gift aid repayments via HMRC‘s website.

The Gift Aid Small Donations Scheme has also gone live, allowing charities to claim top-up payments on cash donations of up to £20 without donor declarations.

More on this can be found here.

There were few surprises arising from the publication of Scottish Labour’s Devolution Commission’s interim report.

The starting point for these commissions is always the same.  They look around for reasons why a particular power should not be devolved.  They do not look at what could be achieved by control of that power being passed to the Scottish Parliament.

The main problem that I have with this report is that we have heard all this before and in fact quite recently.  The Calman Commission taught all of us with an interest in seeing the creation of a Scottish tax system how its opponents behave.   I like to call this the Calman doctrine.

“Make a huge fuss about having someone look at the issue, take your time, offer as little as possible, exaggerate any problems, minimise or ignore any advantages and ensure HMRC and HM Treasury remain in control.”

Calman also taught us that even if a report is produced and its recommendations are accepted not all of those recommendations actually make it to a Scotland Act.  That is why the Scotland Act 2012 is called “Calman minus”.

The absence of common sense is also a problem.  Why not look at which powers are already devolved and then devolve the areas of taxation most closely connected to these already devolved powers.  For example inheritance tax and succession law, tobacco and alcohol duties and health and vehicle excise duty and transport.  This would greatly help the development of policy and at the same time provide the Scottish Parliament with a serious number of economic levers.

Simplification for both the UK tax system and the new Scottish tax system is not even considered.

So what does report say?

The main taxes other than income tax are quickly dealt with and also the largest area of law not yet devolved, welfare.  The report rules out devolving National Insurance and with it any control of the welfare state, corporation tax and North Sea revenue.  That immediately restricts what can be done.    As VAT can only be devolved if Scotland becomes independent, of the 5 major sources of revenue, that only leaves income tax.

The report is quite clear and does not recommend devolving complete control of income tax.  At most it recommends devolving control of the rates, thresholds and allowances.  Almost all of the underlying law that governs how income tax is charged, or the type of reliefs, or the collection rules or who pays and when would not be devolved.   That means that income tax would have two masters.  As with the Scotland Act income tax proposal this is a recipe for disaster.

The report then looks at a number of minor taxes and uses a number of the “usual suspect” reasons as to why they should not be devolved.  They generally do not say that a particular minor tax should not be devolved but rather there is an “issue”.   The main issues are “concerns about avoidance” and “subject to EU law”.  This covers fuel duties, tobacco duties, alcohol duties, stamp duties other than SDLT which is already being devolved, insurance premium tax, betting and gaming duties, most of capital gains tax and a number of other minor taxes on income and wealth.  It is not clear what is proposed regarding climate change levy. Revenue from our TV licences and the National Lottery are simply described as “not relevant”.

So, along with slightly more control of income tax, what is left?  Possibly air passenger duty and aggregates levy as recommended by Calman but not included in the Scotland Act, possibly vehicle excise duty, possibly part of capital gains tax, possibly inheritance tax and possibly control of the Crown Estate.  The recommendations are not that dissimilar to the Liberal Democrat Home Rule Commission proposal.  Please see my earlier blog on this which can be found here.

The conclusion is simple.  The vast majority of tax revenue and taxes will remain controlled by the UK Government.   In any case, the response from a number of Labour MPs to the interim report tells us all we need to know as to the likelihood of these relatively minor proposals being enacted.

“A new bill introduced to the Scottish Parliament [on] April 17th could see Scotland adopt a new tax to replace UK Landfill Tax and tackle illegal waste disposal while bringing benefits to community and environmental groups.

Finance Secretary John Swinney introduced the Landfill Tax (Scotland) Bill, which will see Scotland take responsibility from the UK Government for administering landfill tax.  If passed, the Bill will help tackle the problem of unauthorised dumping activity and encourage the proper disposal and recycling of materials.

The Bill also introduces a Scottish communities fund which will support environmental organisations and provide assistance to communities living in close proximity to landfill sites. “

More on this can be found here.

Latest HMRC Stamp Taxes bulletin can be found here.

Content:

All Taxes

Changes to Stamp Taxes telephone/fax numbers

Land

Disadvantaged Areas Relief
New Annual Tax on Enveloped Dwellings
15% SDLT
Paying Stamp Duty Land Tax (SDLT) into the correct bank account
Tenancies at will
Variable or uncertain rent- adjustments in line with RPI
When a land transaction return should not have been submitted
Recent updates to the Stamp Duty Land Tax Manual

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Andy’s contact details can be found here.