8 Nov 2013 12:07pm

Weekly tax update

Our look at the technical updates and notices in the tax world this week

Road fuel scale charge

HMRC has reminded businesses of the impending withdrawal of the partial exemption concession for road fuel scale charges. The change, which comes into effect on 1 January 2014, will affect businesses that reimburse employees for their business mileage and are partially exempt for VAT. 
HMRC brief 33/2013 explains what action these businesses will need to take to ensure that they continue to “achieve a fair result” following the withdrawal.

Inheritance Tax Manual updated

HMRC has updated the Inheritance Tax Manual to reflect the changes contained in the Finance Act 2013. These include new guidance on:

  • elections for non-UK domiciled and civil partners to be domiciled in the UK
  • additions of value and property to settled property
  • restrictions to liabilities that can be deducted for Inheritance Tax purposes
  • a model clause for wills, developed by the Society of Trust and Estate Practitioners, about the reduced rate of Inheritance Tax.

The update also explains the changes to the limit on spouse or civil partner exemption for spouses and civil partners who are domiciled outside the UK.

As a result, the temporary guidance that HMRC published on 22 July 2013 has been removed from the website.

New inheritance tax forms

HMRC has published updated versions of IHT400IHT419 and IHT400 Notes, which incorporate changes enacted through the 2013 Finance Act.

EU clearance ruling pilot scheme

Businesses, their agents or advisers can apply to HMRC for a clearance ruling where they can show that there is uncertainty about how legislation will affect transactions they are involved in. HMRC will then provide a view on how the tax law is applied.

Currently, the department is participating in a trial of VAT ruling requests for complex cross-border transactions which ends on 31 December 2013.

Businesses planning cross-border transactions to one or more of the participating member states can request a ruling from HMRC provided they are registered for VAT in the UK.  The request must comply with the conditions for non-statutory clearance and relate to a complex, cross border transaction in two or more of the following member states: Belgium; Estonia; Spain; France; Cyprus; Lithuania; Latvia; Malta; Hungary; Netherlands; Portugal; Slovenia and the UK.

If the request is accepted and consultation is specifically requested, the member states will consult on the issue but, HMRC warns, there is no guarantee that they will agree on the correct VAT treatment of the situation envisaged.

Contact points in the member states can be found here.

Latest Spotlight issued

HMRC has issued the latest edition of Spotlight, which contains information about tax avoidance schemes which it wants the public to be aware of. The list is not comprehensive but describes just some of the schemes which HMRC believes are being widely offered to help those using them to avoid tax.

For example, in November, HMRC won another case in the tribunals involving an attempt to avoid income tax and national insurance contributions on employee bonuses.

 In LM Ferro Ltd v HMRC, a bonus was paid in the form of an award of shares. The decision confirmed HMRC's view that these types of devices to avoid tax simply do not work; if employers pay what is really a bonus, tax and NICs are due no matter how it is dressed up.

The scheme in LM Ferro was marketed by Powrie Appleby but similar avoidance schemes were marketed by other promoters. HMRC considers cash received by beneficiaries of awards in those schemes is also chargeable to income tax and NICs.

HMRC expects those who used these schemes to make full payment of the tax due, plus interest. Those companies and employees affected should contact HMRC on 03000 532624 to settle their liabilities and prevent additional interest accruing.

Loan relationships and derivative contracts

HMRC has amended The Loan Relationships and Derivative Contracts (Disregard and Bringing into Account of Profits and Losses) Regulations 2004, SI No 3256, which allow certain profits and losses from loan relationships and derivative contracts to be left out of account, to be brought into account in a different way or to be brought into account at a later date.

The replacement statutory instrument, The Loan Relationships and Derivative Contracts (Disregard and Bringing into Account of Profits and Losses) (Amendment) Regulations, SI No 2781, comes into operation on 21 November in relation to loan relationships and derivative contracts entered into on or after that date.

It defines “Additional Tier 1 instrument” and “deferred shares”, and also extends the matching provisions to deferred shares issued by building societies and Additional Tier 1 instrument issued by the company, to the extent that they are accounted for as equity instruments in accordance with generally accepted accounting practice.

Cayman Islands sign tax IGA


The UK government has signed an intergovernmental agreement with the Cayman Islands on automatic exchange of tax information.

The move follows hard on the heels of the IGAs that the UK Treasury signed last month with Jersey, Guernsey and the Isle of Man.

The agreement is modelled on the Foreign Account Tax Compliance Act (FATCA) arrangements agreed between the UK and the US governments. It will affect all financial institutions based on the islands and will require them to report any financial accounts held by UK residents.

Italian VAT rate

HMRC has issued a reminder that on 1 October the VAT rate in Italy went up from 21% to 22%.

Special scheme currency exchange rates

HMRC has drafted an information sheet about some of the most commonly used currency exchange rates needed by non-EU businesses that are registered for the Electronically Supplied Services Special Scheme in the UK so they can complete declarations and make payments to HMRC in sterling.

VAT exemption change

HMRC has posted the text of The Value Added Tax (Education) Order 2013,SI No 1897, on its website. The order amends Item 1 of Group 6 of Sch 9 (exemptions: education) to the VAT Act 1994 to remove the supply of research by an eligible body to an eligible body from exemption from VAT.

The Order applies with effect from 1 August 2013 but excludes supplies that are made pursuant to a contract entered into before that date if they are made within the scope of that contract as it stood immediately before that date.

More tax news and analysis from this week

Aggressive ACA’s appeal rejected

Losing one’s temper with HMRC staff has proved rather expensive for ICAEW member Run Chai Pan

Here for the gear

Now is the time for businesses to invest in capital equipment. Caroline Biebuyck advises on when and where to do so

UK property taxes dwarf OECD average

Britain has the highest property taxes in the developed world according to thinktank Policy Exchange

Mazars boosts tax team

Mid-tier firm Mazars has boosted its London tax team with three new hires

Prince Charles has “unfair” tax advantage

The PAC has called for greater scrutiny of Prince Charles’ tax arrangements in a report today

Justin King argues “tax is a moral issue”

Justin King has told a conference of business chiefs that tax is a moral issue 

Deloitte rejects ActionAid tax claims

Deloitte has come under fire for issuing double tax treaty advice to large companies operating in poor countries


Julia Irvine