3 Jan 2014 05:29pm

Weekly tax update

Our look at the technical updates and notices in the tax world over the last fortnight

RTI reporting for micros

Two draft statutory instruments extending the real time reporting relaxation for micro businesses have been published for comment. They are The Income Tax (Pay as You Earn) Amendment Regulations 2014 and The Social Security (Contributions) (Amendment) Regulations 2014.

The deadline for comments is 24 January 2014.

CFC financing arrangements

HMRC has issued supplementary guidance on the interaction of s 441, Corporation Tax Act 2009 and the controlled foreign company rules in Part 9A, Taxation (International) and Other Provisions Act 2010.

SDLT and de-enveloping transactions

HMRC has issued guidance on the tax consequences of “de-enveloping” property.

It says that there are a number of reasons why companies de-envelope properties, including removing themselves and the people to whom they distribute the property outside the scope of the Annual Tax on Enveloped Dwellings. One example of de-enveloping could happen through a capital distribution to the shareholders after the company is liquidated. The tax consequences will depend on whether or not consideration is given.

There are two situations where HMRC will not consider there to be any consideration given. The first is where the company is debt free: its only asset is the property and there are no liabilities (other than issued share capital). In such a situation the shareholders have given no consideration directly or indirectly for the property and therefore there is no Stamp Duty Land Tax (SDLT) liability.

The second of these situations will be where there is debt but this debt is owed solely to the shareholder.

Draft investment transactions consultation

HMRC has published for consultation the draft Investment Transactions (Tax) Regulations 2014. These list investment transactions for authorised investment funds, investment trust companies, certain offshore funds (reporting funds), exempt unauthorised unit trusts, and the Investment Manager Exemption.

The deadline for comments is 17 January 2014.

CFD definition amended

The Corporation Tax Act 2009, Section 582 (Contract for Differences) (Amendment) Order 2013 came into force on 31 December 2013 for all accounting periods ending on or after that date.

The order amends the definition of “contract for differences” in the derivative contracts rules in the Corporation Tax Act 2009. It brings “contracts for difference” (CFDs) and “investment contracts” under the Energy Act 2013 within the scope of those rules.

The Order was made in breach of the rule that requires statutory instruments to be laid before parliament for 21 days. It was dependent on the Energy Act receiving the Royal Assent (which did not take place until 18 December) but needed to be effective from 31 December to ensure that the correct tax treatment was applied in relation to any CFDs or investment contracts entered into before that date, as any companies affected are likely to have an accounting period ending on that date.

Tax avoidance scheme warning

HMRC has issued one of its Spotlights, giving details of tax avoidance schemes that are not effective.

The current Spotlight refers to the case of Philip Boyle v HMRC, in which the First Tier Tribunal judge threw out all the arguments put forward by Boyle, an IT contractor, as to why his his contractor loan tax avoidance scheme worked and the money he received was not taxable.

She found that money paid over to him as loans was ‘in substance and reality income from his employment’ and therefore taxable.

SRT guidance published

HMRC has issued a new guidance note on the statutory residence test (SRT) which was introduced in Finance Act 2013. It explains how HMRC interprets the legislation in the context of applying the SRT to an individual’s circumstances.

HMRC says that the note needs to be read in conjunction with Sch 45, Finance Act 2013, to provide a comprehensive understanding of SRT.

SRT applies to the 2013/14 year onwards.

The department has also updated the tax residence indicator tool for taxpayers to determine whether or not they are resident for tax purposes.

Clarification of online filing assistance

HMRC is consulting onmaking changes to VAT law to clarify the assistance available to VAT registered businesses that are required to file their VAT returns online but have difficulty in doing so.

The move follows September’s decision by the First Tier Tribunal in joined appeals lodged against the requirement to file of VAT returns online by a number of VAT registered businesses, including LH Bishop Electrical Co Ltd and A F Sheldon t/a Aztec Distributors.

The judge found that the failure of the 1995 VAT Regulations to take account of a person’s ability to comply with the requirement because of age, disability, computer literacy (linked to age) or remoteness of location was a breach of the European Convention of Human Rights.

 It was also held that the Filing by Telephone service was an unlawful concession that had not been properly published and that its availability to appropriate businesses could not therefore close the breach.

As a result, HMRC has decided to clarify the legal position and to reconsider its communications on VAT online filing to ensure that businesses that find it difficult to file online are clearly advised of the options available to them.

The deadline for comments is 14 February 2104.

VAT refunds by manufacturers

HMRC has published for consultation a draft statutory instrument, The Value Added Tax (Amendment) (No X) Regulations 2014, about the VAT treatment of refunds made by manufacturers.

In the 2013 Budget, the government announced its intention to legislate to allow manufacturers to adjust their VAT to take account of refunds they make to final consumers.

Usually, it is the retailer that refunds the money when goods are returned but sometimes the purchaser seeks a refund of some, or all, of the price from the manufacturer, for example, when there is a major fault in the goods.

The move is intended to make the situation clear since reg 38 of the 1995 VAT Regulations is not explicit.

The draft SI is based on the responses to a consultation document which was issued last summer. The deadline for comments is 31 January and the legislation will be introduced on 1 April 2014.

VAT liability of caravans

HMRC has issued a revised notice, 701/20, relating to the VAT treatment of caravans and houseboats.

This incorporates into paragraph 2.2 the change in the VAT liability of caravans, announced in the 2012 Budget, which came into effect on 6 April 2013.

Intrastat threshold raised

The Statistics of Trade (Customs and Excise) (Amendment) Regulations 2013, SI 2013/3043, came into operation on 1 January 2014. They increase the threshold, expressed in terms of annual value of intra-European Union trade, at or below which a business is exempt from providing any Intrastat information.

The threshold applies separately for goods dispatched and goods received. For arrivals, the exemption threshold is increased from £600,000 to £1.2m while for dispatches it remains at £250,000. The delivery terms threshold goes up from £16m to £24m.

Other headlines

Top excuses for late tax returns

Should companies pay tax at all?

ECJ rules against VAT on green fees

Jump in Christmas tax returns

French "millionaires' tax" upheld

Film inveestment scheme fails

HMRC failing to tackle big business


Julia Irvine