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Tax Bulletin Issue 82

 By

HM Revenue and Customs -Tax Authorities

Tax Articles
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April 2006

Contents

interpretations

miscellaneous

Tips, Gratuities, Service Charges & Troncs The NICs Position

Introduction

The Tax Bulletin issued in June 2005 provided guidance for employers regarding tips, gratuities and service charges. That bulletin included guidance on the National Insurance contributions (NICs) treatment of tips, gratuities and service charges.

Booklet E24 'Tips, Gratuities, Service Charges and Troncs: A guide to Income Tax, National Insurance contributions, National Minimum Wages issues and VAT' has been included on the Employer's pages in the HMRC website since February 2005.

Following further legal advice, the booklet was amended to exclude guidance about NICs. The changes were announced on HMRC's website.
Leaflet E24 will be updated to reflect the changes. There are no changes to the Income Tax and VAT guidance contained within the leaflet. This article provides interim guidance about NICs liability.

In this guidance, where the word 'tips' is used it is intended to refer to payments of tips, gratuities and voluntary service charges.

Change of view on National Insurance contributions and tips

If tips paid by customers are paid to employees through an independently-run tronc, they are not liable for Class 1 NICs even where they go to meet a

  • contractual obligation, or
  • legal requirement such as the National Minimum Wage (NMW).

There are 2 reasons why such payments are not liable for Class 1 NICs

(1) the amounts paid are in respect of tips i.e. gratuitous payments made by customers, and

(2) the employer has not allocated the tips directly or indirectly to his employees.

It is implicit in the phrase 'independently-run' that the facts show that the employer has not allocated the tips directly or indirectly to his employees.

Payments of tips, or in respect of tips

For a payment to be disregarded from earnings under paragraph 5 of Part 10 to Schedule 3 of the Social Security (Contributions) Regulations 2001 (SI 2001 No 1004), ('the tips disregard'), the payment made to the employee

  • must either be a tip or a payment in respect of a tip, and
  • either condition 1 or 2 must be satisfied.

Where a payment is traceable to payments that were tips, for example, voluntary payments made by customers, the payment is 'in respect of tips'.

The conditions are that a payment is

(1) not paid, directly or indirectly, to the employee by the employer and does not comprise or represent monies previously paid to the employer, or

(2) not allocated, directly or indirectly, to the employee by the employer.

Payments that are not

  • tips, or
  • in respect of tips

cannot be excluded from earnings under the tips disregard. If not disregarded the payments must be added to any other earnings paid in the same earnings period for the purposes of calculating Class 1 NICs.

Compulsory service charges

Customers are obliged to pay compulsory service charges so if such payments are the source of payments made to employees, they are not tips or in respect of tips. Such payments are earnings and liable for Class 1 NICs. This remains unchanged.

NICs and National Minimum Wage (NMW) obligations

In the June 2005 edition of the Tax Bulletin you were told that HMRC did not consider that payments that count for NMW purposes could be disregarded from earnings under the tips disregard. Following further legal advice HMRC has changed its view. Where employees receive payments which are tips or payments in respect of tips and they are not

  • paid directly or indirectly to employees from sums previously paid to the employer; or
  • allocated, directly or indirectly to employees, by the employer

the payments are not liable for Class 1 NICs.

The fact that payments are taken into account for NMW purposes does not determine whether the payments can be disregarded from earnings under the tips disregard for Class 1 NICs purposes. Payments can, in principle, count for NMW purposes but be disregarded from earnings and so not liable for Class 1 NICs.

Amounts paid by a customer as service charges, tips, gratuities and cover charges count towards NMW pay if they are paid by the employer to the employee via the employer's payroll and the amounts are shown on the pay slips issued by the employer.

Tips and gratuities given directly to the worker by a customer do not count towards NMW pay.

Tronc money paid directly from the tronc to an employee does not count towards NMW pay. However, if the tronc money is passed to the employer, and is both paid to the employee via the employer's payroll and reflected on payslips issued by the employer, then it will count towards NMW pay. It will also count towards NMW pay where the troncmaster operates PAYE on tronc distributions and uses the employer to pass the net payments to each employee, provided the amounts are paid to the employee via the employer's payroll and are reflected on their payslips.

Contractual payments and NICs

Our guidance currently advises that if an employee's contract of employment indicates that they can participate in a tronc, any payments made by a tronc are liable for Class 1 NICs because they are contractual payments and therefore not gratuitous.

Contractual terms may vary, but HMRC now accepts that where

  • the terms of a contract do not entitle an employee to receive a specific amount from a tronc, and
  • the employee is receiving payments from an independently-run tronc funded from tips paid by customers, and
  • the employer is not allocating tips to the employee either directly or indirectly the tips disregard applies so no Class 1 NICs are due on payments from the tronc.

Payments do not cease to be tips or payments in respect of tips because an employee merely has a right to participate in a tronc.

In the event that an employer pays amounts to a tronc which exceed the total value of the tips paid by customers, the excess is not a payment of or in respect of a tip, so Class 1 NICs are due on the excess.

The tips disregard may also apply even where an earner's contract of service, whether written, verbal or implied, entitles an earner to a specific amount that originates from tips and the employer is obliged to pay the specified amount. In these types of cases, Class 1 NICs will only be due where the

  • payments are in respect of tips and the employer does not satisfy either of the conditions in the tips disregard, or
  • the employer makes payments sourced from his own funds and not payments in respect of tips.

One of the conditions referred to above is that the employer must not allocate payments directly or indirectly to the earner. HMRC consider that where the employer promises or guarantees a certain amount from the tronc, that may indicate that the employer has sufficient de facto control over the operation of the tronc to constitute an indirect allocation by the employer. Further investigation may be required to establish the true nature of the arrangements.

Allocating payments directly or indirectly to the earner

Despite the fact that HMRC has changed it's view about
the types of payments that are payments of or in respect of tips, for payments to be excluded from Class 1 NICs liability, the employer must still satisfy one of the conditions in the tips disregard.

Liability for Class 1 NICs will depend on the specific arrangements regarding the distribution of the tips operated by individual employers. 'Allocate' connotes deciding

  • who is to be the recipient of the payment and
  • how much the recipient is to get.

The employer does not allocate a payment to a particular employee merely because it is a term or condition of the employment that the employee is entitled to share in a tronc run independently of the employer. Neither is it allocated just because the employer reserves the right to make certain deductions from the tips before they reach the tronc.

'Indirect allocation' refers to cases where the employer does not allocate payments in person or through an agent, which HMRC regard as 'direct allocation'. Rather, the employer establishes and controls a system that performs the allocation in such a way that the allocation can reasonably be said to reflect and give effect to the employer's wishes.

As noted above, if an employer promises or guarantees receipt of a certain amount from the tronc, that may suggest that the employer has sufficient de facto control over the operation of the tronc to constitute an indirect allocation of that amount to the employee.

If tips are paid by an independently run tronc and the employer is not involved in the allocation either directly or indirectly, there is no Class 1 NICs liability.

Compliance

HMRC compliance staff will, when looking at tips which an employer has not included in gross pay for Class 1 NICs, establish facts to help them determine whether the

  • payments are tips or in respect of tips, and
  • the payments were made directly or indirectly by the employer from sums previously paid to him; and/or
  • the employer allocated the payments either directly or indirectly.

As arrangements can vary it is not possible to be prescriptive about what conclusions can be drawn from certain facts.

NICs examples

Booklet E24 will be amended to include examples which reflect HMRC's current views.

Class 1 NICs paid in error

If employers consider that Class 1 NICs have been paid in error the action to take will depend upon whether the NICs were included in a contract settlement following a review of the employer's PAYE and NICs records.

Class 1 NICs paid in error included in a contract settlement

If some or all of the Class 1 NICs paid in error were included in a contract settlement, the employer can expect the local Revenue and Customs office that dealt with the settlement to write to the employer no later than 31 May 2006. The employer will be given the opportunity to apply for a refund.

Those Class 1 NICs paid in error included in a contract settlement will be returned to the employer together with the proportion of any penalty and interest that related to those Class 1 NICs included in the settlement. Where appropriate, repayment interest will be paid in accordance with paragraph 18 of Schedule 4 to the Social Security (Contributions) Regulations 2001 (SI 2001 No 1004).

If some Class 1 NICs paid in error were included in a contract settlement and some were paid and returned on forms P14 and P35

  • those Class 1 NICs paid in error in a contract settlement will be refunded by HMRC's Accounts Office, and
  • those returned on forms P14 and P35 will be refunded
    by the National Insurance Contributions Office
    Refunds Group.

If an employer does not receive a letter telling them about the changes and how to claim a refund before 1 June 2006, they should write to the local Revenue and Customs office that dealt with the contract settlement and request a refund.

Class 1 NICs paid in current tax year not included in a contract settlement

Where Class 1 NICs have been paid in error in the current tax year the employer should take action as set out in paragraph 10 on page 17 of booklet CWG2(2006) 'Employer's Further Guide to PAYE and NICs' to correct their records and refund overpaid employee's NICs to employees.

Class 1 NICs paid and returned on forms P14 and P35

If all Class 1 NICs paid in error were not included in a contract settlement the person requesting the refund should write direct to H M Revenue and Customs, National Insurance Contributions Office, Refunds Group, Employers Team, Room BP1001, Benton Park View, Newcastle upon Tyne NE98 1ZZ. Refunds Group will tell the applicant what information is needed to process their request.

Employers should not write to Refunds Group if some Class 1 NICs paid in error were included in a contract settlement and some were returned on forms P14 and P35. The local Revenue and Customs office that dealt with the contract settlement will write to the employer no later than 31 May 2006 telling them what to do. See 'Class 1 NICs paid in error included in a contract settlement' above.

Return of Class 1 NICs paid in error by employees

We expect most refund requests to be initiated by employers but there is nothing preventing employees from requesting a refund of Class 1 NICs paid in error.

However, HMRC will ensure that when requests for refunds are made by employers that

  • where employees have paid primary Class 1 NICs in error, they will be returned to those employees subject to the provisions contained within regulations 51, 52 and 57 of the Social Security (Contributions) Regulations 2001 (S.I 2001 No.1004). (Secondary Class 1 NICs and primary Class 1 NICs paid by the employer will be returned to the employer if the employer did not recover any of the NICs from the employees); and
  • secondary Class 1 NICs paid by the employer will be returned to the employer.

Legislation

For Class 1 NICs the legislation relating to 'gratuities and offerings' is contained at paragraph 5, Part 10, Schedule 3 of the Social Security (Contributions) Regulations 2001 (S.I. 2001 No. 1004).

The NMW legislation relating to service charges, tips, gratuities and cover charges that do not count for national minimum wage pay purposes is contained at regulation 31(1)(e) of the National Minimum Wage Regulations 1999 (S.I. 1999 No. 584).

The draft Income Tax Bill

Background

On 27 February 2006 the Tax Law Rewrite project published for consultation its fourth draft Bill - the Income Tax Bill. Publication of this draft Bill represents the final stage of a public consultation process that has involved publication of 30 papers in the last two years. Comments are requested by 31 May 2006.

The remit of the project is to rewrite the existing legislation without changing its effect apart from minor identified changes. Accordingly even though the ordering and detailed drafting of provisions may have been changed substantially in order to make them more easily understood, there is no change to their effect except where minor changes are specifically identified. These minor changes (of which there are 141) are explained in detail in Annex 1 of the Explanatory Notes to the draft Bill.

The Bill will be amended during the summer to reflect legislation in the Finance Act 2006.

Contents of the Bill

The draft Bill, which has 923 clauses and 4 Schedules, contains the following provisions:

  • basic provisions about the charge to income tax, income tax rates, the calculation of income tax liability, and personal reliefs;
  • various specific reliefs, including relief for losses, the enterprise investment scheme, venture capital trusts, community investment tax relief, interest paid, gift aid and gifts of assets to charities;
  • specific rules about trusts, deduction of income tax at source, manufactured payments and repos, and tax avoidance; and
  • general income tax definitions.

This Bill, building on the Income Tax (Earnings and Pensions) Act 2003 (ITEPA) and the Income Tax (Trading and Other Income) Act 2005 (ITTOIA), completes the work of the project on rewriting the legislation on income tax.

Particular Features

The tax calculation

A key feature of the draft Bill is the tax calculation. This sets out how amounts liable to income tax and eligible for relief are brought together to arrive at the measure of a person's income tax liability. The calculation provides a focal point for not only the income tax provisions in the draft Bill but also those in ITEPA and ITTOIA.

Charges on income

A significant simplification is the abolition of the concept of "charges on income" with relief for allowable payments now given as a deduction from income.

Income tax only

The draft Bill continues the process of greater separation of the income tax and corporation tax codes, not least in relation to the general definitions found in Part 15 of the draft Bill. As was the case with ITTOIA, the draft Bill makes necessary consequential amendments to the source legislation. Though this adds to the volume of tax law, it has been welcomed by users for providing greater clarity.

Origins and Destinations

The material published on the HMRC website (see below) includes (in Volume 4) tables of origins and destinations. These will assist anyone studying the draft Bill to identify the source material for any given provision and trace what has happened to it.

Consultation

Public consultation on this Bill will run to the end of
May 2006.

The draft Bill reflects the results of earlier consultation. In particular, views are sought on 93 specific Questions set out in the explanatory notes, many of which are about proposed minor changes in the law. But comments on any aspect of the Bill will be welcome.

The draft Bill and its explanatory notes can be viewed on the HMRC website at www.hmrc.gov.uk/rewrite and a limited number of paper copies are available through the contact shown below. Two versions of the draft Bill can be viewed, one showing the origins to the rewritten legislation and one not showing them.

Comments on the draft Bill should be sent

by post to:

Tax Law Rewrite
Room 826
South West Wing
Bush House
Strand
London
WC2B 4RD

 

Sending Employer's Annual Returns Online In 2006

This article went to press before the start of the online filing period. See the very latest information about filing Employer's Annual Returns online.

Time is running out

The deadline for getting 2005-06 Employer's Annual Returns (P35 and P14s) to us is 19 May 2006. So if you have not already sent Returns for your clients, time is running out.

Register now!

Before you can register for PAYE Online for Agents Internet, you will need a PAYE Agent Reference. You get this from our Agent Reference Service.

To give us time to update our records, wait at least four working days before registering for our online services.

To register for PAYE Online for Agents Internet visit 'practitioner zone', then choose 'PAYE for Employers' from the 'do it online' menu.

If you are a new user, choose 'Register' in the 'I am a new user' box and then choose the 'Agent' option and select 'Next'. Now choose 'PAYE Online for Agents' and select 'Next'.

The next screen shows the services you have registered to use and the information you need to complete registration. You will need your PAYE Agent Reference Number and postcode. You are then guided through a simple five-step registration process.

Quality matters

We will be applying the full range of quality checks to Returns, and they will be rejected if these are not met. Check out details of the most common errors made in 2004-05 before completing your Returns.

If we reject a Return, you must put right any errors and re-send it successfully as soon as possible, but no later than 19 May to avoid a late filing penalty.

New tax-free payment box on the 2005-06 P35

If the employer had a 2004-05 tax-free payment for online filing you need to show this in a new box on the 2005-06 P35. The 4 examples below show you how to complete this box.

Example 1

Q. The employer 'self-served' the 2004-05 tax-free payment by taking it off a 2005-06 payment to us. What should I put on the P35?

A. In the field marked 'Tax-free incentive payment received during the year' you should enter 250. The payment should not be included in any other field on the P35.

Example 2

Q. The employer received the 2004-05 tax-free incentive payment as a cheque payment. What should I put on the P35?

A. Where the cheque payment is for the whole 250, the 'Tax-free incentive payment received during the year' field should be 'zero' filed. It is a mandatory field and if it is left blank the Return will fail our quality checks.

Example 3

Q. What if the cheque payment of the tax-free payment was for less than 250?

A. If, for example, the employer asked for 150 to be set against the 2005-06 liability and to receive the balance of 100 as a cheque, you must enter 150 in the 2005-06 P35 field 'Tax-free incentive payment received during the year'.

If the employer had part of the tax-free payment as a cheque, and the balance set against earlier years' arrears (years other than 2005-06), the field should be 'zero' filed. It is a mandatory field and if it is left blank the Return will fail our quality checks.

Example 4

Q. What if the employer 'self-served' the 2004-05 tax-free payment, but has not yet received a tax-free payment award letter?

A. If the award letter has not yet been received, the 'Tax-free incentive payment received during the year' filed on the P35 should be 'zero' filed. It is a mandatory field and if it is left blank the Return will fail our
quality checks.

The following queries may also arise as a result of the award, or non-award, of the 2004-05 tax-free payment.

Q: What will happen if the employer's 2004-05 tax-free payment is not awarded by the time their 2005-06 Return is submitted?

A. This will only be a problem where the employer has self-served the tax-free payment, as there will be an underpayment for 2005-06 of 250. When awarded, the 2004-05 payment will be allocated to 2006-07 and the employer should request their Accounts Office to re-allocate the payment to 2005-06.

Q. What if there is a balance of the tax-free payment at the end of the year?

A. If the 2004-05 Return was filed online and HMRC credited the tax-free payment of 250 to the employer's payment record, but for 2005-06 the 'Total amount payable for the year' on the P35 is only 50 for example, there will be an overpayment of 200. The 200 will be automatically allocated against the 2006-07 payment record.

Avoid the peaks

You might find that you have a smoother filing experience if you avoid the peak days (18 and 19 May), or file outside of office hours or at weekends if you prefer.
Some third party software allows you to complete the
Return, save the details and set your computer to send the Return automatically at a time you specify. If your software has this facility you might want to send the Return outside the peak times.

Do not double up!

Remember, you must only make one complete and accurate Return and you cannot replace the Return once we have sent you a message saying that we have accepted it. You can, however, make amendments to it. Do not send a paper P35 as well as the Return online. We might process the paper Return first and the employer will get a penalty notice for not sending the Return online if they have 50 or more employees, or not get the online filing tax-free payment if they have fewer than 50 employees.

We have had requests from agents for blank paper 2005-06 P35s, when all their clients filed their Employer's Annual Returns online last year. They are using these P35s for their own internal audit purposes, and ask their clients to sign the paper P35 and give agreement to the details before sending the online Return.

Both parties need to keep a record of the agreement to the details, but it does not need to be on a form P35, it can, for example, be an online confirmation.

If you are sending an online Return for an employer, you do not also need to send us a signed paper P35 confirming their agreement to the details. A blank P35 is available. While it is marked 'specimen', it will meet the audit requirement.

Testing times

We cannot accept a 'test in live' Return as if it was an actual online Return. So if you have done a test, do not forget to send us the actual Return online. You must take the 'test' flag off the Return before you send it for real.
You do not have to test the Return, you can just send it for real. If the Return does not meet our quality checks it will be rejected, but we will send you a message telling you the reason why. You will then need to put any errors right and get the Return back to us as soon as possible, but no later than 19 May.

What happens when we get your Return?

You will get an e-mail message, from the UK Government Gateway if you have registered an address with them, saying that we have received your submission. The message will say 'The submission for reference < Employer's PAYE Reference > was successfully received on <date> and is being processed'. This message is NOT confirmation that your Return is correct, it is issued to confirm that we have received your submission.

If your Return is rejected by the Gateway, you will get the following message 'The submission for reference < Employer's PAYE Reference > was received on <date>. Unfortunately it could not be accepted as it failed Inland Revenue data checks. To correct this please use the help provided within the software you used to complete your form and send it again'.

We will check whole Returns (that is all the P14s and the P35 sent at the same time) against our Quality Standard when they are received, and will send an on-screen message to say if we have accepted or rejected the Return. In most cases we will send that message within a minute, although it will be longer for larger Returns (up to 5 minutes). Please do not attempt to re-send a Return while you are waiting for an acceptance message.

If the Return does not meet the Quality Standard, we will send you a message to tell you that the Return has been rejected, and why. You must put right any errors and re-send the Return by 19 May to avoid a late filing penalty.

250 tax-free!

Employers who had fewer than 50 employees when we wrote to them in November 2004 will get a tax-free payment of 250 if their 2005-06 Return is sent online. They will get that even if an agent files online for them.
After we have received the Return we will process it. If the Return passes our quality checks we will send an 'online' letter telling you that 250 has been credited to the employer's PAYE payment record. We expect to start sending the 'letters' out from June.

Tax-free payment 'letters'

If the employer has given us authority to send information to an agent online, the online 'letter' will go to the agent. Otherwise it will go to the employer.
We will only send a letter on paper if the employer:

  • has not registered for PAYE Online for Employers Internet, or
  • has de-activated PAYE Online for Employers - Internet ,or
  • has not authorised the agent to get information on his behalf.

How to get the 250

The quickest and easiest way that most employers can get the tax-free payment is to 'self-serve' by deducting 250 from their next PAYE payment(s) to us for 2006-07. They must wait for the online 'letter' before 'self-serving'. The letters will start going out from June.

The online 'letter' will explain how to get a cheque payment from the Accounts Office if the employer cannot 'self-serve' the tax-free payment. Please do not contact the Accounts Office until the letter is received.

Report recommends investment and expansion in online services

The Government has announced that it is accepting the recommendations of Lord Carter's Review of HM Revenue & Customs' Online Services, published on 22 March 2006.
Lord Carter recommended that the Government respond to the needs of business with a package of robust, high-capacity online filing services. He also recommended an expansion in online filing of Returns, which will benefit businesses and taxpayers.

Lord Carter also recommended:

  • that large and medium-sized employers (50 or more employees) should be required to file their PAYE in-year forms online from April 2008,
  • that small employers (fewer than 50 employees) should be required to file their PAYE in-year forms online from 2010.

These recommendations build on the measures from his previous Review of Payroll Services which will require all employers to file their Employer's Annual Returns online
by 2010.

HM Revenue & Customs will work closely with others - including employers, agents and software developers - on the implementation of the new measures. And, in line with Lord Carter's recommendations, will only implement the new measures when the IT systems that will allow efficient online filing are in place and are fully tested

interpretation

Giving effect to deficiency relief under section 539 ITTOIA 2005 (formerly section 549 ICTA 1988 - corresponding deficiency relief)

An individual is entitled to deficiency relief (DR) under the chargeable event regime that applies to gains on life policies, life annuity contracts and capital redemption policies if:

  • the final calculation of the chargeable event gain (when the policy or contract comes to an end on maturity, full surrender or death) shows a negative amount (or 'deficiency'), and
  • one or more gains on the policy or contract arose in earlier tax years, following part surrenders or part assignments, on which the individual was liable to tax, and
  • the individual is the liable person, that is, he or she would have been taxed on a gain on the final event had a gain arisen instead of a deficiency.

The amount of the deficiency available for DR is restricted to a maximum of the total of the earlier gains from the same policy on which the individual was liable. The legislation was amended with effect from 3 March 2004 and the remainder of this article applies equally to valid claims under the law as it stood previously.

DR is given by way of a computational adjustment that reduces the amount of income tax chargeable for the tax year in which the deficiency arises. Its practical effect is to reduce, by an amount equal to the DR due, the level of income charged at the higher rate (or the dividend upper rate) of income tax and instead charge that same income at the basic, lower or dividend ordinary rates as appropriate, depending on the nature of the income. Consequently, DR can only be of benefit to a taxpayer liable at the higher rate (or the dividend upper rate).

We have recently received a small number of appeals against 2003-04 self-assessment tax computations featuring DR, stating that insufficient relief has been given. We are prepared to accept this view of the law can, where an individual has a certain combination of income sources forming his total income, result in DR being allocated, by virtue of Section 835 ICTA 1988, in a way different from our self-assessment tax calculation. This can result in further tax saving. The amount of the saving is not uniform as it depends on the various sources of income an individual has chargeable. No two individual cases are alike.

Under this alternative view, we now accept that the most tax effective approach would be to relieve DR by allocating the relief against dividends or other savings income in priority to non-savings sources of income (for example employment income). The additional tax saving can be up to 4.5% of the DR claimed. In practice this saving is likely to be much smaller. DR, if given first against dividends, reduces the effective rate of tax from the dividend upper rate of 32.5% to the dividend ordinary rate of 10%. The tax saving is thus 22.5% of the income. Our tax calculation currently allocates DR against non-savings income first reducing the tax rate from 40% to 22% giving a tax saving of 18% of the income; hence the 4.5% (22.5% minus 18%) difference. An example is contained at the end of this article.

In accepting this alternative view we have amended our tax calculation for tax year 2005-06 and started using this from 6 April 2006. We have also identified all tax returns from 1999-2000 that contain a DR entry in box 12.12 (in tax years after 1999-2000, box 12.9). We will now review returns from 2000-01, without further claim, to identify those where an alternative allocation of DR against disclosed income sources results in further relief. Claimants benefiting from a reallocation of DR for tax year 1999-2000 were notified of their additional income tax relief by 31 January 2006.

In tax year 2003-04 approximately 0.05% of all SA returns contained an entry in box 12.9 and this figure was significantly smaller in 1999-2000. Of these cases we believe the number affected will be tiny, but we will undertake to review all cases and take any overpaid tax into account in re-working subsequent years' liabilities or repay those benefiting.

Example (PDF 22K)

miscellaneous

Pension Schemes

From the 6 April 2006, the taxation of registered pension schemes will change (Pensions Tax Simplification). The various regimes in operation until then will be swept away in order to make way for a single set of rules governing pension provision, based on legislation rather than on a discretionary regime operated by HMRC.
Finance Act 2004 (sections 149-284 and schedules 28-36) contains the main legislation. In addition, there are a number of statutory instruments and also legislation in Finance Act 2005 (section 101 and schedule 10)
Comprehensive guidance on the new tax rules for registered pension schemes can be found on the HMRC Website and in particular in the Registered Pension Schemes Manual.

The new legislation and Guidance sets out the tax consequences of any action that a registered pension scheme may wish to take. Schemes and scheme practitioners will therefore now be able to "self serve" from 6 April 2006. In other words, practitioners can consider and establish what the particular tax consequences will be by consulting the legislation and the Guidance rather than having to ask HMRC. In the normal way, practitioners will be able to use Code of Practice 10 for issues that are either not clear or are not dealt with by the legislation or Guidance.

Inland Revenue Statements of Practice and Extra-Statutory Concessions issued between 01/2/2006 to 28/2/2006.

Extra Statutory Concessions

There have been no Extra Statutory Concessions for this period

Statements of Practice

SP 01/06 Self Assessment: Finality & Discovery 19/1/06

You can get the latest copies of SPs and ESCs by telephoning on 020 7147 2363.


About the Author

© Crown Copyright 2006.

A Licence is need to reproduce this article and has been republished for educational/ informational purposes only. Article reproduced by permission of HM Revenue & Customs under the terms of a Click-Use Licence. Tax bulletins are updated regularly and may be out of date at time of reading.


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Article Published/Sorted/Amended on Scopulus 2006-11-02 17:35:15 in Tax Articles

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