- Date:5.03.03 - 2003 Budget Day Announced by Chancellor
Gordon Brown has just announced that the UK Budget 2003 will be presented to Parliament on 9th April.
To follow the last few weeks run up to this most important date int he UK annual taxc calendar, see our 2003 Budget links section on the Taxstudent.com/uk links pages here.
- Date:18.02.03 - Results of Council of Economics and Finance Ministers, Brussels, 18th February 2003 - Taxation and Financial Services
Savings Taxation
Taxation Commissioner Frits Bolkestein reported to Ministers over lunch on the discussions on savings taxation that have taken place with Switzerland and other third countries since the Council political agreement on the tax package on 21st January (see news item on 23rd January below). The Council has committed itself to formally adopting the tax package before the European Council in March 2003.
Under this political agreement, in the case of savings taxation, twelve Member States are due to implement automatic exchange of information concerning interest income derived from savings in another Member State from 1 January 2004, whereas Austria, Belgium and Luxembourg will apply a withholding tax on savings held by residents of other Member States (15% from 1.1.04, 20% from 1.1.07 and 35% from 1.1.10) and share the revenue with the country of residence (handing over 75% and keeping 25%). It has been a condition of the savings tax negotiations that six third countries (Andorra, Liechtenstein, Monaco, San Marino, Switzerland and the United States) should adopt measures "equivalent" to those agreed within the EU. The Council on 21st January considered that this condition was effectively satisfied in the case of the United States and that it would be satisfied in the cases of Switzerland, Liechtenstein, Monaco, Andorra and San Marino if these countries offered to enter into agreements as outlined in its conclusions. It asked the Commission to continue the negotiations with these countries, in close conjunction with the Presidency of the Council.
Administrative co-operation in the field of VAT
The Council reached agreement on a Regulation which would both strengthen co-operation between Member States' tax authorities to combat fraud relating to value added tax (VAT) and extend the scope of the Mutual Assistance Directive (77/799/EEC) to allow Member States to exchange information concerning taxes levied on insurance premiums. The two legal texts are based on the Commission proposal of 19 June 2001 (see IP/01/857).
Energy taxation
The EU's Council of Ministers has been debating for some years the Commission's 1997 proposal for a Community framework, including minimum tax levels, for the taxation of all competing sources of energy (see IP/97/211). At present only mineral oils are governed by a Community system of minimum taxation and the minimum rates have not been revised since 1992. This can lead to distortions of competition between mineral oils and competing products, particularly gas and electricity, and between different Member States. Once agreed, the Directive would create a level playing field for the first time by subjecting all energy products to minimum rates. At the same time, it would give Member States the necessary flexibility to differentiate the rates of taxation on the basis of environmental criteria, as well as in special situations such as that of energy intensive industries or for public policy reasons that do not involve distortions of competition. In order to avoid jeopardising price stability, transitional arrangements have been included for those Member States that would have to substantially increase their levels of excise duty.
Source: EU Press Release
- Date:23.01.03 - Tax on European Savings
The Europeans, including the United Kingdom, have been arguing for the past 14 years about an appropriate way in which they should tax people who deposit their savings in other countries. The aim was to combat tax fraud and evasion and to make sure EU citizens pay equitable taxes regardless of where they invest their savings.
Gordon Brown threatened to veto a deal in 1997 because he was concerned that having to impose a withholding tax would undermine London’s pre-eminent position as a financial centre. He wanted a regime under which countries would agree to exchange information about investors. In 1999 he scuppered the next plan put forward at the EU summit in Helsinki.
A deal was finally struck on Tuesday 21 January 2003.
The importance of the issues can be gauged by two statistics. German nationals invest Euro300 billion in other countries. 40% of the Gross Domestic Product of Luxembourg comes from financial services. No wonder no-one wanted a new system if it was going to alienate voters or undermine their domestic economies!
So what is the deal?
From 1 January 2004 12 EU countries and their dependent territories will exchange information on non-residents’ savings. Luxembourg, Austria, Belgium and Switzerland will levy a withholding tax of 15% in 2004-2006, 20% from 2007-2010 and 35% from 2010 onwards and share the revenue with the country of residence (handing over 75% and keeping 25%). Similar agreements will apply to other offshore tax centres Liechenstein, Monaco, Andorra and San Marino. Those countries that levy the withholding tax will be able to retain their banking secrecy. Luxembourg, Austria and Belgium will only have to exchange information if the EU unanimously decides that Switzerland and the US are abiding by OECD rules on exchange of information.
Source: ICAEW Tax Faculty - see their news item for more details.
- Date:20.01.03 - Mansworth v Jelley
The outcome of Mansworth v Jelley has changed the way in which gains and losses are determined where assets are acquired by the exercise of certain options. These are options acquired under certain employee schemes or not at arm's length. This document published by the Revenue(pdf document) explains the changes.
Following the decision in this case, where shares or other assets are acquired via options granted otherwise than by way of a bargain at arm’s length or by reason of employment, the acquisition cost is treated as the market value of the item at the time the option is exercised. Of course disposal proceeds for the person granting the option etc will mirror this.
Source: ICAEW Tax Faculty - see their news item for more details.
- Date:20.12.02 - National Insurance Contributions Acts 2002
The National Insurance Contributions Acts 2002 are now available for viewing on the Revenue’s website.
Source: ICAEW Tax Faculty - see their news item for more details.
- Date:20.12.02 - VAT Flat Rate Scheme help
In the Finance Act 2002 an alternative to the normal method of VAT accounting was introduced. Small businesses are now allowed to use the Flat Rate Scheme to calculate their net VAT liability as a flat rate percentage of their total turnover.
New leaflet just published by the Inland Revenue, How will the Flat Rate Scheme help me?, offers advice that clearly explains this new system.
- Date:30.11.02 - Pre-Budget Report 2002 summary
The Chancellor made his Pre-Budget Report to the House of Commons on the 27 November 2002. Links to various summaries and commentaries on the Pre0Budget report this year can now be found on our tax links pages.
Key content/features announced:
- the economy is forecast to grow by 1.6 per cent this year as growth in the world economy stays subdued. The British economy is expected to accelerate next year, growing by 2.5 to 3 per cent in 2003 and by 3 to 3.5 per cent in 2004;
- inflation is set to remain low and close to the Government's 2.5 per cent target - the longest period of sustained low inflation for four decades. Interest rates are at their lowest levels since the 1960s
- piloting more intensive support to tackle employment problems in some of Britain's most deprived areas. From 2004, unemployed people in these areas will be given extra help to acquire new skills and find work, in return for taking up jobs that are available;
- reforming Housing Benefit to simplify the claims process and give greater certainty over the value of awards, making it easier for tenants to move successfully into employment;
- consulting shortly on proposals to help those of working age plan for their retirement, and to simplify the taxation of pensions;
- further development of a new Child Trust Fund to ensure that young people start their adult lives with a pot of savings;
- new measures to tackle VAT fraud and avoidance, designed to save more than £2 billion a year by 2005-06, and further steps to close loopholes in the tax system to improve fairness and protect government revenues.
- improving support for environmentally-friendly waste disposal, such as recycling, while continuing to support local community environmental projects;
- minimising the amount of waste sent to landfill, an environmentally harmful form of disposal, by consulting on increases in the landfill tax;
- updated details on where tax money is spent - total public spending is expected to be around £420 billion this year, around £7,000 for each person in the UK. It is set to rise to £455 billion in 2003-04 and to £482 billion in 2004-05.
- Date:14.11.02 - Pre-Budget Report 2002 date announced
The Chancellor will make his Pre-Budget Report to the House of Commons on the 27 November 2002.
Bookmark this page to access to the full report, related press notices, a transcript of the Chancellor's speech and all associated documents once the speech has been given.
- Date:14.11.02 - Students choose finance for financial reward
The main reason for undergraduates choosing a career in finance is simply financial reward and status according to a survey of university careers advisers conducted by The Chartered Institute of Taxation. Values such as intellectual stimulus, job satisfaction and job security came a poor second.
When asked if students fully understood where their chosen career could lead, advisers were in total agreement that students had little or no idea of what lay ahead of them. According to the survey, the most popular choice of financial career is corporate finance followed closely by banking and commerce and industry. However, when it came to which profession offers the best perks - banking, accountancy and law come top. Careers in government, tax and insurance sectors offered no perceived attraction in terms of career or perks.
Penny Hamilton, President of The Chartered Institute of Taxation, CIOT, said: "Whilst the lure of big city rewards does pull many young people towards a financial career, not everyone achieves success. Money isn't everything. More needs to be done to inform students about the balance between the positive intellectual challenges, the pressures and risks and the financial benefit that a career in finance brings. Results will not come overnight".
The CIOT's Tax Talking initiative for younger students is designed to spread the word that tax isn't just about filling in forms and calculations.
Penny Hamilton added: "One of our key messages over the next year will be that tax is a people profession where one of the most important attributes you can have is the ability to listen and deal with clients on an individual basis."
The problem that the tax profession faces was further highlighted with a number of career advisers admitting to a very limited understanding of tax. They confessed that this made them feel vulnerable when giving students career advice on tax.
Source: TaxZone.co.uk - see their news item for more details.
- Date:14.11.02 - EU gets serious about tax fraud
The European Union’s ‘Fiscalis’ programme, which helps Member States to co-operate in combating tax fraud, will be extended to cover direct taxation as well as indirect taxation when the new version of this programme comes into effect in 2003.
The European Parliament has only recently approved Fiscalis 2003–2007. This replaces and strengthens the existing Fiscalis programme, which applies only to indirect taxes and expires at the end of this year.
The Fiscalis programme uses electronic information exchange systems between national administrations, co-operation in investigations, training seminars for tax officials and experts and the exchange of officials between national administrations to acheive it's goals of combating tax fraud.
Source: ABG Professional Information - see their news item for more details.
- Date:14.11.02 - New Hansard procedure announced
The Revenue has announced a change in its approach towards taxpayers suspected of serious tax fraud who confess to all of the irregularities in their tax affairs under the 'Hansard' procedure.
The Hansard procedure, a practice of the Board of Inland Revenue in suspected fraud cases, is so called because it is set out in a statement by the Chancellor of the Exchequer in the Parliamentary Hansard records. Its earliest appearance was in the Hansard records of 1923 but the statement is periodically updated by successive Chancellors as practice changes. Gordon Brown has now updated the statement again. Before that the last update was by John Major in October 1990.
Gordon Brown's changes makes clear is that: 'The Board [of Inland Revenue] will accept a money settlement and will not pursue a criminal prosecution, if the taxpayer, in response to being given a copy of this Statement [ie the Revised Hansard Statement] by an authorised officer, makes a full and complete confession of all tax irregularities'.
In other words, a taxpayer who makes a full confession under this procedure may be assured that the Inland Revenue will not pursue a criminal prosecution. The Revenue stresses that the confession must be full and complete.
Under the previous version of the statement, a taxpayer who confessed all could still not be absolutely sure that the Revenue would not institute criminal proceedings, even though in practice there is no record of the Revenue having actually prosecuted following a full confession under Hansard.
The change in Revenue practice and Gordon Brown's update of the Hansard Statement follows remarks made by Lord Hutton in the case of R v Allen [2001] UKHL 45. These suggested that a taxpayer would be hard done by if the Revenue were to subsequently prosecute a taxpayer who had made a full confession under the Hansard procedure, especially if the Revenue were to use the confession as evidence in court.
The revised Hansard procedure has immediate effect.
Source: ABG Professional Information - see their news item for more details.
- Date:14.10.02 - Tax burden rising sharply in the UK
The tax burden is rising more steeply in Britain than in any other European country, a new report reveals. The new study from the Adam Smith Institute claims it would be "suicidal" to impose further tax increases to boost spending on hospitals and schools. Last month Tony Blair put the redistribution of wealth back on the agenda, signalling further tax increases in the 2003 Budget.
The new report reveals that the proportion of national income spent on taxes has risen by 1.6%, from 36.7% to 38.3%, since 1997. In contrast, over the same period 13 of the 15 members of the EU reduced the amount of national income taken in tax. The only other EU country which has increased taxes over the last five years is Portugal - but its 1.1% rise was below that of the UK. The US tax burden has fallen by 0.7% to 29.8%, while in Canada it has dropped by 1.5% to 39.2%.
Under Brown's plans to increase spending on schools and hospitals, the proportion of national income spent by the Government is rising from 39% to 41.9%. Many of Gordon Brown's tax increases are indirect, such as the withdrawal in 1997 of the ability of insurance companies to reclaim Advanced Corporation Tax. It raises £5bn a year for the Treasury and only now are its effects being felt.
Source: TaxZone.co.uk - see their news item for more details.
- Date:10.10.02 - Reduced rates of VAT
Directive 1999/85/EC allowed those Member States that so chose (9 in total) to apply a reduced rate of VAT on certain labour intensive services for an experimental period from 1 January 2000 to 31 December 2002, in order to test the impact of such a reduction in terms of job creation and of combating the black economy. It is now proposed to extend this for an additional year until 31 December 2003.
The Commission is proposing the extension so as to allow the present arrangements to continue until the Commission makes an overall assessment and proposals regarding all reduced VAT rates, including the treatment of labour-intensive services, in 2003. The list of categories to which Member States were authorised to apply the reduced rates were:
The repairing of:
- bicycles
- shoes and leather goods
- clothing and household linen (including mending and alteration)
- Renovation and repairing of private dwellings, excluding materials which form a significant part of the value of the supply
- Window cleaning and cleaning in private households
- Domestic care services (e.g. home help and care of the young, elderly, sick or disabled)
- Hairdressing.
Nine Member States (Belgium, Greece, Spain, France, Italy, Luxembourg, the Netherlands, Portugal and the United Kingdom) requested authorisation to carry out this experiment and submitted applications concerning the sectors from the above list to which they wanted to apply the reduced VAT rate. These applications were the subject of a Council Decision 2000/185/EC of 28 February 2000.
Source: ICAEW Tax Faculty - see their news item for more details.
- Date: 10.10.02 - UK to press for tough sanctions against Switzerland
Gordon Brown will use this week's meeting of EU finance ministers to press for tough sanctions against Switzerland for its refusal to exchange information about tax dodgers who abuse its banking secrecy laws.
Tuesday's meeting in Luxembourg of the EU finance ministers' council, Ecofin, will hear a report from the EU's internal market and tax commissioner-Frits Bolkestein on a range of measures that could be taken to bring Switzerland into line. Proposals to be discussed could include restrictions on Switzerland's access to EU markets, and a request to the anti-money laundering Financial Action Task Force to declare Switzerland a 'non co-operating country or territory' - leading to financial institutions in Europe and beyond treating all transactions with Switzerland with great caution. Swiss bank subsidiaries in the UK would face obstacles in trading with non-Swiss institutions in London.
Source: TaxZone.co.uk - see their news item for more details.
- Date:10.10.02 - VAT on hot take-away food
Business Brief 26/2002 clarifies Customs policy on the treatment of hot take-away food. There has been no change of policy in this area.
Most foodstuffs are zero-rated for VAT purposes. But hot take-away food and drink is standard-rated, whether sold from a traditional take-away, supermarket or any other outlet. Standard rating applies irrespective of the customer's intention, the place of consumption or whether the goods are collected or delivered.
Food that is heated in cooking, re-heated or stored hot, is supplied hot or warm, and is to be eaten hot or warm, is standard-rated. This is because the supplier intends that the customer eat the food hot.
The Business Brief answers such questions as ‘How do I know if I can zero-rate hot food?’
You can only zero-rate hot food if the reason it is supplied hot is that it is freshly cooked, and is not supplied for the purpose of being eaten hot. For example newly baked bread.
But what if the supplier is indifferent to the temperature at which their customers eat the food? Tribunals and courts have accepted that some hot food can be sold zero-rated where the circumstances of the case have supported the suppliers' statements concerning their purpose for selling hot food. Customs guidance given in paragraphs 4.3-4.5 of the Catering Notice 709/1 makes it clear that items like chips, hot dogs and baked potatoes are always standard rated. Other aspects of the trade that have been considered by Tribunals as relevant include,
- type of outlet; if advertised as a take-away food outlet, supplies of hot food will be standard-rated
- conditions of storage and sale; if the food is kept hot solely to comply with hygiene regulations this is possibly an indicator of zero-rating
- palatability; if an item is generally accepted to be unpalatable when cold, this would be an indicator for standard-rating
- type of packaging used; if food is packaged to retain heat, this may point towards standard-rating
- availability of condiments, napkins and utensils; this would be an indicator for standard-rating
Source: HM Customs & Excise - see their news item for more details.
