HMRC has published a consultation paper on amending the qualifying conditions for Community Amateur Sports Clubs for comments by 12 August 2013.
More on this can be found here.
Trustees of David Zetland Settlement v HMRC [2013] UKFTT 284 (TC)
The First-tier Tax Tribunal has denied inheritance tax business property relief on a block of office lettings owned and managed by a trust. The main reason given was that a commercial letting is mainly an investment rather than a business even though many of the services provided were over and above what would normally be expected under a tenancy.
The decision shows how difficult it is to persuade a tribunal that let property is not mainly the holding of an investment.
The report from the First-tier Tax Tribunal can be found here.
Let’s start with the incredible revelation that large multi-national companies put a great deal of effort into paying as little tax as possible. The debate surrounding this issue is long overdue. I am also glad to say that there has been some great commentary on this issue.
Examples include: Ian Bell’s: “It’s not an accident Westminster’s financial system allows tax avoidance … it’s designed that way”. His article from the Herald can be found here.
Joyce McMillan outlines the wider debate and criticises the focus at Westminster on benefit fraud rather than tax avoidance. Her article from the Scotsman can be found here.
George Kerevan’s article titled: “Taxing questions for complicit governments” from the Scotsman can be found here. This is from the article: “The current generation of highly profitable internet companies have taken (legitimate) transfer pricing to extraordinary new limits. Google manages to operate almost tax-free in the UK, France and Germany, despite generating more than £35 billion in revenues in all three countries.”
Alsion Rowatt writing in the Herald comments on the increasing evidence of multinational corporations’ tax avoidance and criticises the HMRC for not keeping up with the internet age. This article can be found here.
And from the Guardian: “The bosses of some of Britain’s largest multinational corporations have urged David Cameron to stop moralising and rein in his rhetoric on tax avoidance.” The article in full can be found here.
For an example as to how far some companies will go look no further than our utility companies. More on this from the Telegraph can be found here.
To summarise. Companies rarely consider “morality” when deciding how much tax to pay. I use the word “decide” intentionally. These companies after all have a duty to their shareholders. The fact is that UK and international taxation law is full of holes and has always been. The politicians know this. The politicians have always known this. In the so called good times this issue was simply ignored. Is there an easy answer? Of course not. Do the politicians desperately want to be seen to be doing something? Of course. Is there a huge amount of hypocrisy around this issue? Yes. Do governments want inward investment? Yes. Will they offer tax breaks to achieve this? Yes. Is the headline rate of tax the only deciding factor for companies? Of course not. Is there a growing perception in the UK that the taxation favours certain sectors over others? I believe so. Is this debate going to continue? I hope so.
Now to the fiscal powers debate and two stories on the Scottish Conservatives. The headlines contain the phrases “under attack” and “under fire” and show how difficult a position Ruth Davidson is in. It seems she is damned if she does, damned if she doesn’t. The Scotsman article can be found here and the Herald article here.
The head of one of the UK’s largest quarries has accused tax collectors of “arrogant and high-handed behaviour” ahead of a case this week involving millions of pounds in unpaid aggregates levies. Aggregates levy was of course one of the taxes recommended for devolving under Calman. The article from the Scotsman can be found here.
Now to London. Boris Johnson continues to argue that London should have the same fiscal powers as those available to the devolved parliaments in Scotland and Wales. This is a debate that is going to run and run. More on this can be found here.
HMRC has begun a campaign to make professional football managers and coaches regularise their tax position. It has forced the English Football Association to provide a list of its 3,300 registered coaches, and has written to them all warning that “we have received extensive data about coaches from sources in the football community”. Presumably HMRC knows that football is played in Scotland as well. More on this can be found here.
Now to Europe and another example of the increasing role it is playing in tax matters. The European Commission will present a legislative proposal to require the EU-wide automatic exchange of all types of information on taxable incomes, including dividends, capital gains, salaries, directors’ fees, pensions, life insurance and rents, rather than just interest as now. It will be implemented by an amendment to the EU Directive on Administrative Cooperation which came into force in January. More on this can be found here.
Now to the USA. Criminal investigations by the Internal Revenue Service rose 9% to 5,125 in the last fiscal year. The number of convictions has risen to 2,634 aided by a 93% conviction rate. More on this can be found here. I suspect the trend is similar in the UK.
Again from the USA and a story that will I am sure run and run. The IRS has admitted that its staff gave special scrutiny to the tax-exempt status of organisations supporting the conservative Tea Party alliance during the 2012 presidential election campaign. The IRS says it was trying to distinguish between political organisations as such, and social welfare organisations that are not allowed to engage in political campaigning as their primary activity. US President Obama has now sacked the Head of the IRS, Steven Miller and the FBI has launched a criminal investigation into the affair. Two articles on this from the Wall Street Journal can be found here and here.
And finally to France. The French Government has dropped plans for corporate governance legislation to cap executive pay. Instead the 2014 Budget will introduce the long-threatened 75% levy on employers who pay salaries over €1m. More on this from Reuters can be found here.
Have a great weekend.
The taxpayer’s success in the case of Joseph Nicholas Hanson has been confirmed by the Upper Tax Tribunal. It echoed the lower tribunal’s view that ‒ contrary to HMRC guidance ‒ the ownership of a farmhouse does not affect its entitlement to agricultural property relief from inheritance tax. The only relevant question is who occupies the house.
My earlier blog on this can be found here.
The decision from the Upper Tax Tribunal can be found here.
“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:
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.
