Archive for June, 2013

The G8 declaration on steps to reduce off-shore tax evasion

Thursday, June 27th, 2013

At the conclusion of the recent G8 summit at Lough Erne, a form of consensus was achieved in order to tackle the thorny issue of tax transparency: who is accountable for what and where!

Their full declaration is set out below, the aim, to improve tax transparency and to bring the international tax system into the modern age.

The G8 Lough Erne Declaration – issued 18 June 2013

Private enterprise drives growth, reduces poverty, and creates jobs and prosperity for people around the world. Governments have a special responsibility to make proper rules and promote good governance. Fair taxes, increased transparency and open trade are vital drivers of this. We will make a real difference by doing the following:

  1. Tax authorities across the world should automatically share information to fight the scourge of tax evasion.
  2. Countries should change rules that let companies shift their profits across borders to avoid taxes, and multinationals should report to tax authorities what tax they pay where.
  3. Companies should know who really owns them and tax collectors and law enforcers should be able to obtain this information easily.
  4. Developing countries should have the information and capacity to collect the taxes owed them – and other countries have a duty to help them.
  5. Extractive companies should report payments to all governments – and governments should publish income from such companies.
  6. Minerals should be sourced legitimately, not plundered from conflict zones.
  7. Land transactions should be transparent, respecting the property rights of local communities.
  8. Governments should roll back protectionism and agree new trade deals that boost jobs and growth worldwide.
  9. Governments should cut wasteful bureaucracy at borders and make it easier and quicker to move goods between developing countries.
  10. Governments should publish information on laws, budgets, spending, national statistics, elections and government contracts in a way that is easy to read and re-use, so that citizens can hold them to account.

No doubt parties that have been campaigning to have UK trading businesses, Google, Amazon and so on, taxed on profits made in the UK, will watch progress on the implementation of these lofty words with interest.


PAYE – new online service

Tuesday, June 25th, 2013

HMRC have a recurring issue with individuals that have changes to their employment circumstances. Due to the “instantaneous” impact of PAYE, tax is deducted when you are paid, then if HMRC are unable to determine what allowances should be set-off against each employment, then under or over payments of tax may occur.

In the general run of things tax payers would not need to fill in a self-assessment tax return in order to advise HMRC if they have more than one employment or if they vary, add to or reduce, the benefits provided by an employer. However, all of these issues would need to be taken into account when Notice of Coding forms are issued to employers.

In an attempt to provide a simple means for taxpayers to communicate these changes, HMRC have decided to trial an internet based service, to be called PAYE Online. The idea is to provide a simple but secure way to advise HMRC of relevant changes in personal circumstances to ensure that the correct amount of tax is deducted under PAYE.

The new service is not to be considered a replacement for self-assessment. Self-employed individuals and those with more complex tax affairs will still have to complete a return. PAYE Online will also have no effect on employers’ obligations to submit payroll data to HMRC under the new RTI (Real Time Information) system.


European Courts rules that 98% tax rate is in breach of human rights!

Monday, June 24th, 2013

An aggrieved public sector worker in Hungary was dismayed when a lump sum, paid to her on retirement, was taxed at 98%.

She appealed the imposition of the tax to the European Court of Human Rights. The Court ruled that the legislation, imposing the 98% tax, was in breach of Article 1 of the first Protocol of the European Convention on Human Rights. It awarded her damages of 11,000 Euros and costs of 6,000 Euros.

Older readers may remember that the UK imposed a similar rate of tax on investment income in the 1970’s when Lord Healey was Chancellor of the Exchequer.



Thursday, June 20th, 2013

The debate continues! 

David Cameron has advised the G8 summit that the UK will draw up a register of beneficial owners of companies. The measure would aim to expose the real owners of businesses and strip away the secrecy created by faceless, offshore shell companies. Cameron has said he would make the UK register public as long as there is international support. At present this proposal awaits a formal decision by the G8.

The issue has now attracted the support of aid agencies who are lobbying for more transparency. An open letter has been released by these agencies which has been endorsed by 1,500 business groups and companies. The letter says:

“The current system enables the most unscrupulous corporations and wealthy individuals to deprive our governments of billions of dollars of revenue that should be invested in quality education, research, infrastructure and health care. We call for unanimous G8 support for key measures including automatic information sharing among all countries, a public registry showing beneficial ownership for all companies, trusts and foundations, and getting multinationals to publish a country by country breakdown of their accounts".

There does seem to be a gradual move to bring beneficial ownership into the public domain. The UK tax authorities would dearly like the information and the tax revenue that currently escapes via off-shore arrangements. UK businesses that declare and pay tax in the UK based on their UK trading activities are also keen to level the playing field. And lastly, there now seems to be a political will to accommodate the necessary registers.

Ultimately, it may be difficult for David Cameron to achieve consensus, Canada and Russia are known to be against the measure and the USA are ambivalent.


G8 summit to tackle international tax law shortcomings?

Thursday, June 13th, 2013

Next week the world’s richest nations will be meeting in Northern Ireland and are expected to consider ways that they can address the present exploitation of international tax law, especially by larger, corporate groups, who seek to move profits to lower tax jurisdictions in order to minimise their group tax liability.

The economic costs are significant. As Google and Amazon have demonstrated in the UK, they can quite legitimately divert profits off-shore, and pay tax in countries with lower tax rates, on turnover generated in the UK.

Politically, George Osborne is under pressure to address this issue on behalf of smaller UK businesses that are required to pay tax on UK profits and in reality cannot afford to set up the complex off-shore arrangements available to wealthier companies. Whether a constructive solution will be found remains to be seen but all parties at the G8 will be under pressure to create a level playing field.


Change in LLP tax?

Tuesday, June 11th, 2013

Our Government believes that it can recover £300m within two years by redefining the tax status of certain partners as “salaried”. At present all individual members (partners) of Limited Liability Partnerships (LLPs) are taxed as self employed. Accordingly, any regular withdrawals they make from the partnership can be treated as a share of profits rather than a salary and taxed as self employed earnings. The LLPs save the employer’s National Insurance charge which is currently 13.8% of members’ earnings.

HMRC has issued a consultation on its proposals to change the tax treatment of LLP members who it considers to be salaried employees. The change in legislation will likely be effective from 6 April 2014.

Salaried members will be redefined as those:

  • Who have no economic risk of loss of capital or repayment of drawings should the LLP make a loss.
  • Who are not entitled to a share of profits beyond their fixed income.
  • Who are not entitled to a share of surplus assets when the LLP is wound up.

The Government also has “mixed partnerships” in its sights. These are partnership with corporate partners who are included in partnerships to take advantage of the lower corporation tax rates.

Now may be a good time to re-assess tax planning for partnerships and LLPs in light of these proposed changes.


High Street to complain about unfair tax burden

Wednesday, June 5th, 2013

The British Retail Consortium is setting up a working group to look at the burden of taxation now suffered by the High Street retail sector in the UK. They are concerned that online retailers have an unfair advantage as they pay less business rates and employ fewer staff than their High Street competitors.

Recent research has revealed that High Street retailers have seen a significant rise in business rates in recent years. This, coupled with employment taxes and corporation tax payments, compares unfavourably with online competitors who are able to “organise” the residence of their profits to offshore tax areas that offer lower tax arrangements.

For example, in 2011 Amazon reported UK sales of £3.35bn, with pre-tax profits of £74m. These profits were officially earned by Amazon’s Luxembourg company which owns the inventory, bears the risk of losses and processes payments. As a consequence Amazon paid just £1.8m in UK corporation tax for that year.

If the present trends continue we are likely to see more High Street chains follow HMV and Blockbusters into obscurity and this whilst online competitors flourish.


Tax Diary June/July 2013

Wednesday, June 5th, 2013
  • 1 June 2013 – Due date for Corporation Tax due for the year ended 31 August 2012.
  • 19 June 2013 – PAYE and NIC deductions due for month ended 5 June 2013. (If you pay your tax electronically the due date is 22 June 2013.)
  • 19 June 2013 – Filing deadline for the CIS300 monthly return for the month ended 5 June 2013.
  • 19 June 2013 – CIS tax deducted for the month ended 5 June 2013 is payable by today.
  • 1 July 2013 – Due date for Corporation Tax due for the year ended 30 September 2012.
  • 6 July 2013 – Complete and submit forms P11D return of benefits and expenses and P11D(b) return of Class 1A NICs.
  • 19 July 2013 – Pay Class 1A NICs (by the 22 July 2013 if paid electronically).
  • 19 July 2013 – PAYE and NIC deductions due for month ended 5 July 2013. (If you pay your tax electronically the due date is 22 July 2013.)
  • 19 July 2013 – Filing deadline for the CIS300 monthly return for the month ended 5 July 2013.
  • 19 July 2013 – CIS tax deducted for the month ended 5 July 2013 is payable by today.


Don’t miss tax credits renewal deadline

Tuesday, June 4th, 2013

Individuals who were claiming tax credits for 2012-13 should be receiving a “Renewing your tax credits – Getting it right” pack.

It is vital that you complete the Annual Review form for the year ended 5 April 2013 and send it to the Tax Credits Office (TCO) Preston before 31 July 2013. Failure to do this will result in your tax credit payments being stopped and you may have to pay money back.

Claimants should note:

  • If you are self-employed, or if your other joint income details for 2012-13 are not available by 31 July 2013, you can submit estimated figures. Actual figures must be submitted by 31 January 2014.
  • Once your income is reported to the TCO they will send you a revised award notice. 

It is possible to call TCO and advise them of changes. The help line is 0345 300 3900. You can also use this number to chase up your renewal pack if not received by 28 June.


Transferring the unused Inheritance Tax nil rate band

Tuesday, June 4th, 2013

Married couples and registered civil partners are allowed to transfer assets to each other during their lifetime or when they die without incurring an Inheritance Tax charge. There is no limit to this relief as long as the receiving spouse or civil partner is UK domiciled.

This relief is known as the spouse or civil partner exemption.

Everyone’s estate is currently exempt from Inheritance Tax if valued, including gifts in the last seven years, at £325,000 or less – the so-called nil rate band. If the entire estate is passed to a surviving spouse or civil partner no Inheritance Tax would be payable due to the spouse or civil partner exemption, so for these couples the nil rate band used to be potentially wasted on the first death. To counter this, legislation was introduced that allowed the unused nil rate band on a first death to be passed, by claim, to the surviving spouse. This applies to second deaths on or after 9 October 2007.

Accordingly a surviving spouse or civil partner could have a nil rate band of up to £650,000 on their death. 

This additional relief should be taken into account when you are planning your estate tax position. Evidence of the position from the first death should be retained.