News archive

Interested to see that this campaign resurfaced this week.

Main protagonists appear to be the Scottish Building Federation, Federation of Small Businesses and the Scottish Government.

I was though surprised to see no reference to the Isle of Man when this was being reported.  This was because the Isle of Man reached an agreement with HM Treasury last December to make permanent its 5% VAT rate on repairs or refurbishment of domestic property.

More information on this can be found here.   An article on this from the Scotsman can also be found here.

A number of guides and booklets on “People with Learning Disabilities and the Scottish Criminal Justice System” were published by the Scottish Government on 8 August 2011.

These useful guides and booklets can be found here.

It is now clear that there are two different tax debates going on within the UK and a further European debate just to complicate matters.

Firstly there is the debate over the top rate of income tax.  The various press leaks and briefings show how important the UK coalition parties view this issue.  The Tories are laying the groundwork for its removal.  The Liberals are fighting a rearguard action.  Think of the Treasury Secretary’s “cloud cuckoo land comment.   The Liberals are also briefing on its own “mansion tax” policy.  If the top rate is abolished they want it replaced by a mansion tax.  The SNP and Labour are arguing for the top rate to be retained.

Then there is the devolution of tax powers to the Scottish Parliament.  My blog on this last Sunday can be found here.   The Scottish Government published its paper on corporation tax this week.   The paper can be found here.  As I said last Sunday, it is not what is being discused that I find most interesting but rather what is not being discussed.   I suspect that the real battle on this has still to start.

Then there is the European dimension and in particular the pressure being placed on Ireland by France and Germany over its low rate of corporation tax.   This issue also impacts on the UK tax debate as it poses the question: why is tax competition within the European Union a good thing but not within the UK?   As I said, an interesting week in tax land.

The Office of the Public Guardian from 25th July 2011 and will no longer issue temporary welfare certificates when joint welfare and financial guardianship orders are granted.  This change in practice will be reviewed in January 2012.

More information can be found here.

Another example of how much work, and how effective, HMRC can be when targeting specific groups.

Five plumbers have been arrested and around 600 are under civil investigation by HMRC for failing to pay the right amount of tax.

More information can be found here.

Outer House case relating to an agreement for lease of subjects at the Maxim office park in North Lanarkshire.  Tritax were owners of the development and Regus were to take a lease of part of the development. Monies were to be made available to Regus in respect of its fit out costs as an incentive.  Regus did not meet qualifying criteria for type of tenant to whom parts of the development could be let imposed by the sale agreement and so HUB (a company created to run the restaurant and other facilities at the development) was interposed to sub-let to Regus.

In terms of the agreement for lease, HUB was to deliver a letter to Regus from the Bank of Scotland relating to sums which the Bank held on deposit in respect of the fit out costs. This letter formed the crux of the case and was in the following terms:

“We understand that Heads of Terms have been agreed between TAL CPT and Regus (Maxim) Limited for the lease of the first floor of Building 1 at Maxim.

It may assist the proposed tenant to have confirmation from us that, on behalf of the landlord (Tritax Eurocentral EZ Unit Trust) and TAL CPT, we hold the sum of £913,172 to meet the landlord’s commitment to fit-out costs. These funds will be released in accordance with the drawdown procedure agreed between the parties, whereby the proposed tenant’s contractors will issue monthly certificates.

This is subject always to agreement of wider commercial terms with the incoming tenant.”

Regus carried out the fitting out works and issued invoices to HUB who confirmed that the costs were properly incurred and that the contribution should be paid to Regus. However, the bank refused to release the costs as there had been a default in the facility agreement and they were exercising a right of retention over the sums referred to in the letter.

Regus put forward the following arguments:

1.  The letter was an undertaking in terms of which the bank were obliged to make payment.
2. There was a separate underlying agreement between the bank and Tritax/HUB in respect of which Regus were, by means of a jus quaesitum tertio, entitled to payment from the bank.
3. That the bank was personally barred from relying on the terms of its agreements with Tritax/the developers to resist payment to Regus.
4. That the letter contained negligent misrepresentations acted on by Regus to its detriment and the bank was obliged to make reparation to the Regus for breach of a duty of care.

Lord Menzies rejected Regus’s arguments and dismissed the action. He found that he was unable to construe the letter as amounting to a unilateral undertaking by the bank of a legally enforceable obligation to pay the sum to Regus.

The letter was no more than a letter of comfort, and as such, could carry a moral responsibility but not a legal obligation. The court could not enforce a moral responsibility where there was no legal obligation.

The full judgement is available from Scottish Courts here

(See appeal to Inner House here)

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

Criminal appeal which raises an important question regarding the mens rea of murder. In 2004 Samuel Petto stabbed his flatmate to death and, as part of a scheme to dispose of the body, set fire to the flat with petrol. Mrs Donnachie, one of the other occupants of the tenement was overcome by the smoke and died in hospital the following day. Mr Petto pled guilty to the murder of Mrs Donnachie. The following definition of murder set out in Gordon’s Criminal Law was approved by an Extra Division in HMA v Purcell in 2008:

“the actual situation is that there is murder wherever death is caused with wicked intention to kill or by an act intended to cause physical injury and displaying a wicked disregard of fatal consequences”

Mr Petto claimed that, with regard to his own case, since the libel did not allege that he assaulted Mrs Donachie, or had any intention to cause injury to her or any other person, it did not instruct a relevant charge of murder. His plea of guilty had therefore been tendered in error and he argued that he should be allowed to withdraw it.

In a unanimous five bench decision the appeal was rejected.

The Lord Justice Clerk (Gill) giving the leading opinion found that Mr Petto had not shown a relevant ground on which to allow withdrawal of the guilty plea which, in itself was sufficient to dispose of the appeal. However, the Lord Justice Clerk also noted that the appeal raised an important issue of mens rea and found that the appeal was misconceived in its reliance on Purcell. Purcell was a case in which the accused had driven a car recklessly and caused the death of a child on a pedestrian crossing. This case was different as it concerned the specific act of setting fire to a tenement. Mr Petto had set fire to the building deliberately in the knowledge that there were people living in it. Tenements are densely populated with only means of escape being an internal stairway. Where a person starts a fire on the ground floor of a tenement, the inevitable conclusion is that he does so in the certain knowledge that those on the upper floors will be at grave risk of death or serious injury. The appreciation of the virtual certainty that such a risk will occur and the deliberate acceptance of it should be equated with an intention that the consequences occur.

Since the appeal could be decided on the meaning of intent within the clear cut circumstances of the case, it was not necessary to explore current position with regard to the mental element in murder and culpable homicide more generally. However, the Lord Justice Clerk made it clear that a review of the law in this area would be desirable:

 “I have the impression that other English-speaking jurisdictions may have attained greater maturity in their jurisprudence on this topic than Scotland has. In Scotland we have a definitional structure in which the mental element in homicide is defined with the use of terms such as wicked, evil, felonious, depraved and so on, which may impede rather than conduce to analytical accuracy. In recent years, the authors of the draft Criminal Code for Scotland (2003) have greatly assisted our thinking on the matter; but we remain burdened by legal principles that were shaped largely in the days of the death penalty, that are inconsistent and confused and are not yet wholly free of doctrines of constructive malice. My own view is that a comprehensive re-examination of the mental element in homicide is long overdue. That is not the sort of exercise that should be done by ad hoc decisions of this court in fact-specific appeals. It is pre-eminently an exercise to be carried out by the normal processes of law reform.”

The full text of the decision is available from Scottish courts here.

Glad to see ICAS contributing to the fiscal powers debate.   This follows on from PWC last week.

I have not yet had a chance to read what they have said in any great detail but have outlined some general thoughts below.

1. How can the power to vary a rate of tax be looked at in isolation?

The comments by ICAS concern devolving the right to vary the rate of corporation tax to the Scottish Parliament.  The background to this is that the Northern Ireland Assembly is likely to be given the right to vary the rate at which corporation tax is charged on companies located in the Province.

What is the point of just devolving the right to vary the rate or rates at which corporation tax is charged without devolving underlying or connection legislation?  What about the rest of the corporation tax legislation?  What about company legislation?  The tax rate is only one issue for companies.  What about tax reliefs?  What about company administration?  If this is a serious debate about giving the Scottish Parliament increased fiscal levers why are these points not being discussed?

Secondly.  If we are serious in the need for increasing the number of economic levers the Scottish Parliament has at its proposal what about stamp duty and stamp duty reserve tax?  Taxes do not apply in isolation.  It is rare to only have to consider one tax when advising a business.  As these taxes are being charged on share dealings these should be looked at along with corporation tax.

Also business does not just consider the headline rate of tax when deciding  where to locate.  Many others factors are looked at and not just tax.

My second point about “connected taxes” applies equally to property matters.  In that case stamp duty land tax and capital gains tax.

Also I still find it odd that we are discussing income tax in the context of the Scotland Bill and corporation tax due to what is happening in Northern Ireland.  A more sensible approach would have been to look at areas already devolved to the Scottish Parliament and match up the taxes that apply to these powers.  For example.  Inheritance tax as succession law is already devolved.  Or the environmental taxes as the environment is a devolved responsibility.  Tobacco and alcohol duties as health is devolved or the various car taxes as transport is devolved.   That would give the Scottish Parliament a series number of economic levers and also the chance to learn what to do with them.

2. Institutions.  Scotland is soon to have its own tax system.  That is true even under the Scotland Bill proposals.  The Scottish Parliament although not having control over a complete range of taxes will have control over a number of taxes and have some form of borrowing powers.   The Scottish Government’s Finance Department needs to become an Exchequer, i.e. a body that deals with matters presently the preserve HMRC and HM Treasury.  Why is this issue not being debated?

Again on institutions.  Scotland is a relatively small country.  Much smaller than the rest of the UK.  Do we need our own separate HMRC and HM Treasury?  Why not combine them?  In simple terms HMRC is simply there to administer and collect our taxes.   Does Scotland need its own Companies  House, Registers of Scotland or Stamp Office?  Of course not.  One tax, law and registration body could deal with these and many other functions.   Again why is this issue not being debated?

3.  I was intrigued by the following comment by Elspeth Orcharton, assistant director of tax at ICAS: “Devolving tax powers is contrary to the goal of simplifying tax legislation and stability at a UK level, and you could question whether such a move would make the UK as a whole less competitive on the international stage.”

That sounds as if the starting point for ICAS is what is good for the UK not Scotland.  Also is ICAS saying that no powers should be devolved ever?   I suspect not.

Devolving taxes may actually simplify the present system.  For example when SDLT is devolved there will be no need for the present guidance and forms to explain the differences in Scotland and England due to our different systems of property law.   Also whenever I have discussed the devolving of SDLT one issue has almost certainly been raised.  How can we simplify it.

The last point of the above comment is also also telling.  I, for example, look at this issue from the viewpoint of how can I make Scotland more competitive.  I suspect that many views on devolving fiscal powers may be decided simply by where that person’s starting point is: Edinburgh, Cardiff or Belfast or London.

I am also not sure what is meant “stability”.   I suspect it may be a reference to tax competition.   If it is then that horse has left the stable.  Once taxes are devolved tax competition will soon become the norm.  I for one do not see that as a bad thing.

The term ” tax simplification” in a UK context does also make me smile.   Why is devolving taxes contrary to the principle of tax simplification?  If we in Scotland do not think we can improve on what we have presently then what is the point in having this debate.

What people forget is that the UK does not have a unitary legal system.  Although the tax system applies English law there is on occasion conflict with connected legislation.  For example the introduction of SDLT in Scotland is generally regarded as being a shambles.  HMRC did not take into account Scottish property law.  The conflict there was tax law based on English legal principles and Scottish property law.

Anyway, just a few thoughts on a quiet Sunday afternoon.

More on this from the Scotsman can be found here.

HMRC publish latest list of sports clubs qualifying for Community Amateur  Sports Club status.   Good to see an increasing number of Scottish clubs listed.

The list can be found here.

More information on CASC status can be found here.

A reminder that businesses, regardless of turnover, who registered for VAT on or after 1 April 2010 must submit their returns online and pay any VAT due electronically.

This will apply to all VAT- registered businesses by April 2012.

More information can be found here.