This page provides current tax news for you to stay up to date with contemporary issues in taxation in the UK.
- Date: 25.3.05 - UK Finance Bill 2005 released
The UK Finance Bill 2005 was published on 24 March. The Bill and the Treasury's explanatory notes are available via the Parliamentary website at www.publications.parliament.uk/pa/pabills.htm .
Details and analysis of the UK 2005 budget proposals, announced on 16 March, are available on Deloitte's website at www.ukbudget.co.uk .
Source: Deloitte UK Tax News - 24th March, 2005
- Date: 28.2.05 - ICAS CALL UK COMPANY TAX REFORM A MISSED OPPORTUNITY
The UK Government's latest proposals on corporation tax reform do not go far enough, according to The Institute of Chartered Accountants of Scotland (ICAS).
In December 2004, the Inland Revenue published proposals for changing both the current 'schedular system', which requires individual components of a company?s activities to be taxed on different rules, and the scheme of capital allowances, that relieves some but not all of the expenditure on capital assets that businesses use.
Responding to the current consultation, ICAS welcomes schedular reform but argues that the Government's limited proposals are insufficient and would fail to eliminate many of the existing complications. The Institute points out that they could fail to simplify tax compliance for the companies that should have benefited most from a simple non- schedular system ? for example, those that are expanding through diversification, and those hoping for tax relief on losses already incurred.
ICAS does welcome the proposal to reform the scheme of capital allowances, provided that this reduces the burdensome compliance currently faced by many companies. However, it is disappointed with planned changes in the tax treatment of some leased plant and machinery, where completely new rules are to be introduced, apparently to close loopholes relating to overseas leases.
John Cairns, Convenor of the Corporate Tax Sub-Committee at ICAS, said: "These proposals are a missed opportunity as they do not go far enough. Companies need substantial simplification of the tax rules. For example, many companies would benefit from a simpler and fairer scheme of capital allowances. The existing rules for allowances on cars are particularly complicated, and savings could be made by consolidating these into a simple new code. There are fears that the existing rules, favouring less expensive cars and those with lower exhaust emissions, might be retained to satisfy the environment lobby, but this would be inappropriate. There are limited environmental benefits flowing from the current detailed tax rules, which many businesses do not understand. The use of environmentally friendly vehicles should be encouraged in other more effective ways."
The Revenue's consultative paper entitled "Corporation Tax Reform ? Technical Note" was published on 2 December 2004 and can be found by clicking here
The Institute's submission in response to the consultation is available on the ICAS web site by clicking here
Source: Institute of Chartered Accountants of Scotland
- Date: 24.2.05 - 2005 BUDGET TO BE PRESENTED 16TH MARCH
Gordon Brown has announced that the 2005 Budget will be presented to parilament on 16th March.
See our Links section to follow the pre-Budget debate and then to see the results and discussion on the Budget announcements after the event is over.
- Date: 12.1.05 - ICAS POINTS OUT POSSIBLE CONCERNS OVER NEW HMRC OFFICERS' POWERS
In the most radical shake up of the UK's tax raising bodies ever, the merger of the Inland Revenue and Customs & Excise - as currently the two main tax departments of the UK Government overseeing all aspects of direct and indirect taxation respectively - are set to merge into one super-tax body. The new powers of officials in this new body have just been outlined. ICAS have already come out against them.
The new Commissioners for Revenue and Customs (CRC) Bill is set to enhance HM Revenues and Customs (HMRC) officers' powers but without the appropriate safeguards, according to The Institute of Chartered Accountants of Scotland.
In its submission on the new CRC Bill, which it has also sent to a selection of MPs, the Scottish Institute highlights its concern and makes a number of proposed amendments.
Under the new legislation, an HMRC officer who obtains information which is relevant to other areas of HMRC are now permitted to pass on that information for immediate or future follow up action. The Institute points out that some officers might abuse these enhanced powers and that there is no check available within the legislation. It would be all too easy for an officer to dress up a belief that their question was relevant to the tax liability, enabling the officer to use the enhanced powers. There is no obvious right of appeal which would enable the taxpayer to query the request via an independent body such as a tribunal or the Commissioners.
Derek Allen, ICAS Director of Tax, said: "To redress the balance, we recommend that a new right of appeal needs to be created and incorporated into the Bill to enable the taxpayer to question why an officer should come to a belief and whether it is reasonable.
"Therefore an officer, formerly of Customs, who has visited the business with a view to checking the VAT return should not confront a taxpayer with a request to see the records relating to the income tax or corporation tax liabilities, especi ally as these will inevitably relate to a different time period. The mirror image would also apply, so that an officer enquiring into the income tax or corporate tax return could not gain access to the current VAT records as these would relate to a different period.
"Our aim is in the public interest to ensure that the new Department has adequate powers to perform its job while at the same time ensuring that the public has the protection of an independent review given by a right of appeal."
ICAS also highlights confidentiality as another area of concern. Derek Allen added: "Information about a person's income is rightly treated as confidential, and the present statutory provisions allow only limited exchanges of information under carefully defined procedures. The Institute is concerned that this should not lead to a leakage of confidential details from HMRC. It will be essential to maintain a 'Chinese wall' to prevent information on particular taxpayers from passing out of HMRC."
The Commissioners for Revenue and Customs (CRC) Bill was introduced to Parliament on 24 November, and published on 25 November. The Bill integrates the Inland Revenue and HM Customs and Excise to form a single new department named HM Revenue and Customs (HMRC). Further information on the Commissioners for Revenues and Customs Bill is available from HM Treasury web site by clicking here.
Source: Institute of Chartered Accountants of Scotland
- Date: 10.12.04 - PRE-BUDGET SPPECH - THE HIGHLIGHTS
The UK Chancellor - Gordon Brown - made his annual Pre-Budget speech this year on the 2nd December. This speech is used each year to make both specific policy announcements (like what the range of personal, age allowances and NICs will be from next April) but mostly is about floating ideas to gauge the reaction of the country before deciding if they are right to make them policy, or what changes may be needed before so doing. The highlights of this year's speech include:
- Economic growth is expected to be 3.25% in 2004 and forecast to be between 3% and 3.5% in 2005
- Inflation in 2004 will be 1.25% an rise to 1.75% next year
- Government borrowings for the year to reach £35billion (and drop slightly to £34bn next year)
- The UK to have a trade deficit for the year of 2.9% of GDP
- Extra £1bn Council tax support promised
- Increases in maternity leave
- Further anti-avoidance measures were announced - eg related to debt securities involving the manipulation of 'repo' and stock lending arrangements, money invested in UK film production, CFCs and exploiting double tax relief (arising from information the government has obtained following its new laws on revealing tax planning schemes)
- Draft legislation on tax implications of Internal Accounting Standards
- New small busines unit to be created as part of the HMRC to review and help develop tax administration for smaller businesses
- NIC thresholds and limit to increase to £94 per week and £630 per week from April 2005 (in line with inflation - as usual)
- Basic personal allowance to increase to £4,895 for 2005-6 (to £7,090 if >65 and £7,220 if >75)
- Increase of £65 in the child element of Child Tax Credit from April 2005
- Current higher limits for ISAs (due to expire in 2006) to be extended until 2009
- Freeze on most road fuel duties for the tax year
- Pensions earnings cap to increase to £105,600 from April 2005 (but watch out for the major changes in this area to start in April 2006)
See further details of this speech, including expert commentary to help you see through the implications, by following the relevant links from our links section.
- Date: 29.11.04 - INLAND REVENUE KEEN TO GIVE BACK TAX
Up to 4 million savers stand to gain from a new Inland Revenue initiative to encourage people to claim tax back on their savings. Already, over the past few months thousands of pensioners on low incomes have heard from the Inland Revenue wanting to give them back tax they have paid on their savings. Over £7.3 million tax has been repaid to more than 21,000 pensioners.
Now the Taxback campaign will encourage all savers on low incomes to check if they are eligible to claim back tax that has been automatically taken off their bank and building society interest before they receive it.
Remember from chapter 4 that banks and building societies automatically take tax off at the lower rate of 20% from interest before it is paid to savers, unless savers who are not due to pay tax tell them not to. Anyone whose income is below the taxable limit, currently about £91 a week, or more if they are over 65 (at least £131 a week) or over 75 (at least £133 a week), does not have to pay tax. This will generally mean children, and could include students, part-time workers and people out of work, as well as pensioners. All savers who aren't due to pay tax can claim the tax back from the Inland Revenue for up to six years and tell their bank or building society not to take tax off in the future.
Some people on higher incomes will also be able to claim back some of the tax that has been deducted automatically. This may be the case, for example, if they are due to pay tax only at the 10% starting rate, or, depending on their income, if they are still entitled to the married couple's allowance (i.e. they were born before 6 April 1935).
If savers claim by 31 January 2005 they can go back as far as the year 1998-1999 to get tax back.
The campaign will include posters and flyers, national and local press advertising and radio broadcasts. It aims to make sure that all savers on low incomes know how claim tax back and how to register their accounts so that tax does not get taken from the interest paid on their savings in future. The Inland Revenue will be working with various organisations including the Citizens Advice Bureaux to get the message out.
There is a campaign Taxback site at http://www.claimyourtaxback.com which also provides information, and includes a link to the new improved Inland Revenue Taxback website http://www.inlandrevenue.gov.uk/Taxback
Source: Inland Revenue
- Date: 15.11.04 - CHANCELLOR ANNOUNCES PRE-BUDGET DATE AS 2ND DECEMBER
Gordon Brown, the UK's Chancellor of the Exchequer, has announced that his annual Pre-Budget speech will be given on 2nd December this year. This speech, while not usually making policy itself, is usually the second most important tax related speech given each year, after the Budget itself of course. The Chancellor uses this speech to outline areas he is thinking of making changes to in the Budget itself next March/April. Describing outline proposals at this stage gives people the chance to respond to his ideas over the next few months before the real Budget so that, hopefully, the plans that do then become law in the Budget have had wide circulation and debate.
For further details on the Pre-Budget this year see the HM-Treasury website pages here.
- Date: 8.11.04 - ICAS CALLS FOR SIMPLIFICATION OF UK TAX SYSTEM TO HELP SELF ASSESSMENT
The UK's tax regime is onerous, costly, complex and almost impossible to understand, according to The Institute of Chartered Accountants of Scotland (ICAS).
In a detailed paper sent to the Chancellor, the Scottish Institute points out that self-assessment imposes a legal obligation on taxpayers to complete their return to the best of their knowledge and belief as being correct and complete. Using a number of examples the Institute's paper lists areas where the legislation is incompatible with the requirement to self-assess. The incompatibility can be caused by complexity or by the creation of fiscal fictions. Neither complexity nor fiscal fictions are an acceptable means of taxing ordinary people in a self-assessment regime.
Ian Dewar, Convener of the ICAS Taxation Committee said: "In principle, self-assessment is to be welcomed. It does impose additional responsibilities on the taxpayers affected who are required to declare their total income. That requirement presumes that the taxpayer is able to understand the UK's fiscal regime.
"Unfortunately, the UK's fiscal regime has become very complex. It retains out of date provisions and instead of going back to basics to achieve the policy objective, has a habit of piling layer upon layer of complexity into the legislation. There is no easy solution but we have recommended that there is an urgent need to review the legislation and attempt to simplify it. We are concerned that many provisions in the Taxes Act fail to achieve their policy objective. Many fiscal provisions are unnecessary, complex, anomalous and fundamentally flawed. The paper lists a number of examples but the list is not complete."
Copies of the Institute's paper are available by calling 0131 347 0292 or by e-mailing ICAS-tax@icas.org.uk
Source: Institue of Chartered Accountants of Scotland
- Date: 18.10.04 - ROONEY'S GIRLFRIEND LEARNS ABOUT CUSTOMS DUTIES FIRST HAND
Coleen McLoughlin, the teenage girlfriend of the £27m Manchester United football star, has been in trouble with the authorities. Returning to Manchester from a trip to New York, CusToms officials found she had £40,000-worth of undeclared designer clothes and jewellery in her bag. She said she was "entirely unaware" that she had to pay import duty on valuables over a total value of £145.
Any why should she be? Since every country has its own different rules, confusion abounds for all travellers - including rich ones! Is there an argument to scrap these kinds of taxes on tourists? What might be the justification for keeping them? [Ed - possible discussion question for a classwork exercise?]
Source: Adam Smith Institue Website
- Date: 13.09.04 - EUROPEAN TAX SURVEY HIGHLIGHTS NEED FOR SINGLE EU-WIDE CORPORATE TAX BASE AND FOR VAT ONE-STOP SHOP SYSTEM
A survey of the compliance costs of EU companies published today confirms the need for the Commission's suggestion (see IP/03/1593) that companies should be allowed to use a single basis of assessment for corporate tax for all their EU-wide activities so as to avoid the costly inefficiencies of dealing with EU Member States' twenty-five different company tax systems.
The survey also underlines the need for the proposal that the Commission intends to present in the next few months for a one-stop shop system whereby a trader could fulfil his Value Added Tax (VAT) obligations for his EU-wide activities solely in the Member State in which he is established (see IP/04/654).
The Commission's European Tax Survey, in which seven hundred EU companies participated, shows that cross-border activity currently leads to higher company tax and VAT compliance costs for companies. Compliance costs are significantly higher for companies with at least one subsidiary in another EU Member State compared to companies without subsidiaries abroad and the costs increase according to the number of such subsidiaries. Compliance costs are also proportionately greater for SMEs than for large companies.
"I welcome this European Tax Survey which demonstrates the potential costs that arise from the lack of co-ordination of EU taxation systems" commented Taxation Commissioner Frits Bolkestein. "I hope that Ministers will have regard to these results in their discussions on reducing the administrative burden and on company taxation during the informal meeting of Member States' Economics and Finance Ministers this weekend."
The European Tax Survey
The Survey is based on a questionnaire concerning company taxation and VAT compliance costs in the EU that the Commission sent to more than 2000 companies in September 2003, via the European Business Test Panel (see http://europa.eu.int/yourvoice/ebtp/index_en.htm ).
Seven hundred companies from fourteen EU Member States participated in the Survey. The main findings are that:
- a parent company with subsidiaries in other EU Member States appears to have significantly (about 5 times) higher compliance costs than companies without subsidiaries
- annual compliance costs are about Euro 202,000 for the average SME compared with Euro 1,470,000 for a large company, corresponding to an estimated cost-sales ratio of 2.6% for SMEs compared to 0.02% for large companies
- the principal company tax compliance problems relate to transfer pricing, with an estimated 81.9% of companies indicating difficulties linked to documentation requirements
- the top VAT compliance problem is difficulties in coping with the procedures relating to the repayment and refund of VAT expenditures in other Member States, in particular for companies registered in a Member State where they do not have a permanent establishment. An estimated 53.5% of large companies have not requested refunds to which they were entitled at some point due to these problems
- taxation is a factor for investment location decisions and affects company structure decisions.
The survey is available on the Europa internet site: http://europa.eu.int/comm/taxation_customs/whatsnew.htm
Source: EC website
- Date:13.09.04 - 11th edition website launched
