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Tax Bulletin Issue 86

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HM Revenue and Customs -Tax Authorities

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December 2006

Contents

Last issue of Tax Bulletin

From 1 Jan 2007 Tax Bulletin (former Inland Revenue publication) & Business Briefs (former Customs & Excise publication) will both be replaced by a unified on – line only free publication; HM Revenue & Customs Brief. This will be issued as and when the Department has news to give.

It can be found in the library section of the website and former direct taxes users will, in the near future be able to sign up to an RSS feed to be alerted of when new items come up – through this you will be able to pick and choose which taxes or areas of taxes you are interested in.

The existing email alert system for indirect taxes will continue.

Tax Bulletin & Business Briefs were available on subscription or via our website. Tax Bulletin was issued bi – monthly and Business Briefs on an as - and - when basis. Both were used to publicise changes in policy and update on the progress of litigation.

Do not be taxed by the 31 January deadline

Your clients face a £100 penalty – and further penalties along with recovery action – if their self assessment tax returns and payments do not reach the Department in time.

If you haven’t already, why not register to use our Online services https://online.hmrc.gov.uk/login . There is also a link to our easy to follow online services demonstrator, which shows you how to use the various online services available on our website. It will guide you through the registration process and give you the opportunity to see for yourself the many benefits and features of our Self Assessment Online service.

SA Tax Returns - 2007 Filing

Wednesday 31 January

Tax Returns received up to midnight are on time. This includes Tax Returns received in Office letter boxes that are opened first thing on Thursday morning.

Thursday 1 February

Tax Returns received up to midnight are late but incur no late-filing penalty. This includes Tax Returns received in Office letter boxes that are opened first thing on Friday morning.

Friday 2 February

Tax Returns received from the morning post and onwards are late and incur a late-filing penalty.

Help us to Help You

To help us capture Tax Returns efficiently, please use these few tips:

  • File online: it’s quicker, more secure, you get an automatic receipt and, if your client is due a repayment, it’ll be done quicker than if you filed on paper.
  • Please do not use paperclips.
  • Please do not tag or staple several Tax Returns together. There is a risk that only the top Tax Return will be recorded as received.
  • Any correspondence that has no bearing on the Tax Return, such as claims or correspondence relating to another year or requests for reductions to Payments On Account (SA 303), should be sent separately from bulk Tax Returns. Please make sure that you use the correct postcode and reference on the correspondence. That way it will be dealt more quickly.
  • Please clearly mark any change of address on the front of the Tax Return.
  • If using a substitute Tax Return please enter the client’s name, address and UTR (Unique Tax Reference). Please mark the Tax Return clearly if it is a new self assessment customer and, if a new self-employment case, let us have the NINO.
    We recommend that you send the completed CWF1 to the National Insurance Contributions Office.
  • Always make sure you enter the exact UTR on the Tax Return. The UTR is unique to each individual.
    In particular, make sure that you enter both the partners’ and partnership UTR where appropriate when dealing with a partnership.
  • If a Tax Return contains a bar code, please do not use it for any client other than the one it was intended for. If you do, there is a risk that the Tax Return will be recorded on someone else’s record.
  • Send cheques separately from the Tax Return and write the UTR on the back. The cheque will be dealt with more quickly.

Developing a new management act

Consultation

Administrative law is the foundation for a stable tax system, setting out as it does the rights and obligations of taxpayers and HM Revenue & Customs. HMRC have embarked on an initiative to modernise the law governing the administration of the main taxes, and would like your views.

We are currently consulting on draft clauses rewriting the law telling taxpayers:

  • when they must notify chargeability to income tax, capital gains tax and corporation tax and when they must register for VAT;
  • how to make the appropriate returns and what those returns must include;
  • how HMRC makes assessments of liability to VAT, income tax, capital gains tax and corporation tax.

The draft clauses were published with a commentary and partial Regulatory Impact Assessment on 28 November 2006 and can be found at http://www.hmrc.gov.uk/nma/index.htm.

The consultation period runs to 20 February 2007

Background

In his 2005 Pre Budget Report the Chancellor of the Exchequer announced that HMRC would review its administrative rules and would develop and consult on new legislation bringing together the rules for the main taxes.

Much of our current administrative legislation is old, complex and inconsistent. Two existing management acts, now 25 to 30 years old have been inherited from the two former revenue departments and other provisions are scattered across a number of other taxes acts.

.
We are looking at five main taxes:

  • Value Added Tax
  • Income Tax Self Assessment (including capital gains tax)
  • Corporation Tax Self Assessment
  • Pay As You Earn and National Insurance Contributions as operated by employers
  • National Insurance Contributions paid by the self-employed (Class 2 and 4 contributions)

These five core schemes cover more than 11 million taxpayers, the majority of whom are businesses. They offer the greatest opportunity for improvement as many have multiple contact with HMRC – for example a company may pay CT and VAT and may also be responsible for operating PAYE. That is not to say that it will always be possible to bring everything together. Each scheme is distinct, and we are adopting a pragmatic approach and exploring what works well, and what does not.
The legislation will be rewritten in a modern style – a task familiar to direct tax practitioners through the work of the Tax Law Rewrite. We aim to use straightforward language, structure the provisions in the most appropriate way and make full use of good signposting.

What happens next?

These first draft clauses modernise the administrative provisions for notification and registration, returns and assessments. They simplify and clarify current legislation, and align administrative provisions across the different taxes where this is possible. We have focussed on ITSA, CTSA & VAT – later consultations will contain more material relating to PAYE & NICS, and will cover claims, payment and repayment of tax, appeals, and other administrative matters. They will also consult on more substantive proposals for improving tax administration.

Our aim is to have a bill ready to be introduced to Parliament in the 2007-08 session.

We are interested in receiving views on the draft clauses. But that is only part of what we are looking for. Taxpayers, practitioners and HMRC all have a common interest in making the administration of the tax system as simple, modern and efficient as possible. Law which is easier to understand is easier for taxpayers to comply with and for HMRC to administer. So if you have further suggestions for improvements to administrative law, this is your opportunity.

Comments to

Maria Richards
Room 1C/20
1st Floor,
100 Parliament Street
London
SW1A 2BQ
Fax: 020 7147 3223

European Savings Directive Reporting

From the 1 January 2007 the European Union is set to expand further. From that date Bulgaria and Romania will become Member States of the European Union. This note explains how this will affect persons in the United Kingdom who have to report certain payments of interest under the UK Regulations that implement the savings Directive in this country.

When Bulgaria and Romania become Member States of the European Union the Regulations that implement the Savings Directive in the United Kingdom will automatically apply to paying agents making payments of savings income to individual customers (beneficial owners) in those countries from the 1 January in the same way as they apply in relation to payments to individual customers who live in other Member States.

The effect is that paying/receiving agents will have to report payments of savings income which they make to residents of those countries on or after the 1 January. The information to be reported will be the same as it is for individuals living in other Member States. It will not be necessary to report any payments made before the date of accession.

This means that for paying agents making a return of payments for the year ended 5 April 2007 they will have to include for the first time payments made to individuals whose country of residence is Bulgaria or Romania. But only payments made on or after 1 January.

Full guidance on who has to make a return as a paying or receiving agent, when a return has to be made and what is
to be reported can be found in detailed guidance notes published on the HMRC website. Information and links to the guidance can be found at http://www.hmrc.gov.uk/esd-guidance

Further help and advice on reporting can be obtained by contacting

HM Revenue & Customs,
Audit Unit (Information Returns),
St Johns House,
Merton Road, Bootle,
Merseyside
L69 9BB.
Tel: 0151 472 6136 or 6129
Fax: 0151 472 6124.

Miscellaneous

Press Releases

Closure of Dundee Small Company Enterprise Centre (SCEC)

The Dundee SCEC closed at the beginning of November. It handled the tax affairs of all companies using the venture capital schemes (EIS, VCTs and CVS) or the Enterprise Incentive Initiatives (EMI) in Scotland, Northern Ireland, Manchester and Sheffield plus a proportion of such companies in the London area.

From that date, new cases and enquiries have been directed to the other two SCECs in Cardiff and Maidstone. All existing cases are being transferred to those two offices. Agents will be receiving details of the new office and reference number. Broadly, most cases which were dealt with by Dundee will be transferred to Cardiff, except where the company (or at least its Registered Office) is located in the Sheffield, Manchester or South London areas. Those cases are being transferred to Maidstone.

Dundee also dealt with the tax affairs of about half of the Venture Capital Trusts. These are all being transferred to Cardiff, which already deals with the other half.

Since the SCECs were formed in 2000, concentrating work that was previously done across the network, practitioners and professional bodies have told HMRC how happy they are with the improved standard of service. Sending Dundee’s work to the other two SCECS – which are getting extra resources to handle the work – will mean that standard will be maintained

The content of Tax Bulletin gives the views of our technical specialists on particular issues. The information published is reported because it may be of interest to tax practitioners. Publication will be six times a year, and include a cumulative index issued on an annual basis.

This appeared on the HMRC website under ‘Stop Press’ on 15 November 2006.

The High Court decision (Commissioners for HMRC V Thorn Baker Limited and others)

(“Thorn Baker”) means that SSP is not payable to Agency workers whose contract with the agency is for a specified period of 3 months or less.

However, agencies should note that their workers can become entitled to Statutory Sick Pay if in a single contract:
1 They work longer than the original period specified and the total period actually worked exceeds three months, OR
2 The contract is extended for more than three months.

Agency workers whose contracts are for three months or less can also become entitled to SSP if two or more such contracts with the same agency are separated by eight weeks or less, (56 days) and 1 The total length of the contracts is more than 13 weeks

2 The total period actually worked becomes more than 13 weeks or

3 The contracts are extended so that together they can run for more than 13 weeks.

“HMRC acknowledge that current guidance in help books E14 & E14 Supplement on treatment of Agency Workers is inconsistent with the High court decision in Thorn Baker. No changes will be made to this guidance following the granting of permission to HMRC to appeal to the Court of Appeal – pending the decision of the Court of Appeal Employers should however follow the guidance above in dealing with these cases.

Please also note that the High Court ruling applies to agency workers only. Other short-term contract workers are unaffected and remain entitled to SSP.

Further information will be published on these pages following the outcome of the appeal and you should continue to check the “What’s New” and “Stop Press” web pages for updates.”

News Release 69/06 published 16 November 2006.

HM Revenue & Customs announces consultation programme on the way forward

HM Revenue & Customs (HMRC) is to begin a programme of consultation in order to deliver a more effective service to local businesses and individuals. The series of consultations on the future shape and direction of the department will begin in December.

HMRC was created in April 2005 following the merger of the former Inland Revenue and HM Customs & Excise,
providing the opportunity to create a modern, effective revenue collection and enforcement department. These consultations are designed to progress the consolidation of the HMRC estate and the co-location of staff nationwide following the merger.
Paul Gray, Acting Chairman of HMRC said:

“Today’s announcement sets out the modernisation and transformation that HMRC wants to undertake over the next five years to put our taxpayers, claimants and other customers at the heart of everything we do, thereby improving efficiency and effectiveness.

“The creation of HMRC, where Customs and Excise and the Inland Revenue were integrated, means the new organisation now has more space than it needs. We are taking the opportunity to save taxpayers’ money by operating with fewer buildings in a more co-ordinated cost efficient way. We are inviting all staff to comment on our proposals and to fully participate in our programme of change.”

HMRC has a government target of 12,500 net staff savings by April 2008, which it is on its way to meet and is working towards a target to reduce annual estates costs by £30 million by then. The merger has provided the opportunities to achieve these targets. The department now has more buildings than it needs, and co-locating staff makes good business sense whilst providing the opportunity to streamline processes and eliminate duplication.

News Release 71/06 published 17 November 2006.

Varney Review means greater tax certainty for Business

The Chancellor today announced that he will implement in full the recommendations of the Review of Links with Large Business, published by HM Revenue & Customs (HMRC) today. The Review, led by Sir David Varney, recommends HMRC provides big businesses with increased and quicker assurance on the tax treatment of their activities and business transactions.
Gordon Brown, Chancellor of the Exchequer, speaking at today’s Business Advisory Summit, said:

“This review sets out how we will continue to build a modern relationship between business and HMRC for tax administration - one that gives companies greater tax certainty, quicker decisions and fewer investigations.”

The Review of Links with Large Business, proposes a series of commitments for HMRC, to be introduced over a timeframe up to the end of 2007, designed to provide business with greater certainty about the tax treatment of transactions more quickly; more efficient resolution of tax issues; and a more cost effective approach to administering tax affairs based on an efficient risk-based audit approach.

Sir David Varney, Chairman of the Review, said:

“The Review sets out to address the concerns of business about the nature of the relationship with HMRC. I am confident that the proposals put forward, while challenging, meet these concerns and will fundamentally transform the relationship.”
The Review was conducted via a series of meetings between HMRC and leading figures from the UK business community, plus trade associations and representative bodies

News Release 76/06 published 29 November 2006.

Quicker and simpler tax system for small businesses

HM Revenue & Customs (HMRC) has launched plans to help small businesses settle their tax affairs more quickly and simply. The new HMRC publication, ‘Delivering a new relationship with business’, details a package of reforms designed to transform its relationship with business, including measures to allow businesses to settle their tax affairs sooner, to reduce the burden of forms and inspections and to develop a single customer record.

By 2010-11, HMRC will have implemented a clear delivery plan that:

  • aligns the enquiry window with the submission of the tax return, enabling businesses to settle their tax affairs sooner;
  • significantly reduces the administrative burden in dealing with tax obligations;
  • develops a single customer record, a vital step towards having a single business customer account that shows all of a company’s dealings with HMRC in one place; and
  • streamlines the HMRC online filing system and improves further the services that it provides for agents and tax advisers.

Launching the report at the CBI Conference 2006, Financial Secretary to the Treasury, John Healey MP, said:

“Small and medium sized businesses are vital to the success of our economy and today’s announcement shows the commitment of HM Revenue and Customs to provide them with a system that is efficient and tailored to meet their needs. The clear and ambitious four-year plan promises to deliver a real change from which small businesses should feel real benefits.”

The report also details a series of initiatives HMRC has implemented over the past 18 months to help small businesses, including:

  • shortened four-page tax return for the smallest businesses;
  • removing from 300,000 employers the responsibility for paying tax credits to their employees;
  • reducing the number of forms to fill in - the withdrawal of Form 42 alone saving employers £200 a time; and
  • better tax code information ensuring that a million more employees a registered under the correct tax code from the outset;
    Paul Gray, acting Chairman of HMRC, said:

“We have made real progress in reducing the burdens on SMEs but I recognise we still have a lot to do to deliver the sort of step-change in customer experience that businesses are looking for. Today’s paper details what we aim to achieve over the next four years to make the new relationship with business a reality.”

HMRC are also undertaking a consultation exercise on their work in creating a new management act that will modernise and simplify the legislative framework for the administration of taxes.

Taxpayer’s and tax professional’s views are being sought on the act’s first draft clauses, proposed changes to the law and information on costs and benefits.

Once formulated the act will make it easier for taxpayers to understand and comply with their obligations and for HMRC to conduct its operations.

Content

The content of Tax Bulletin gives the views of our technical specialists on particular issues. The information published is reported because it may be of interest to tax practitioners. Publication will be six times a year, and include a cumulative index issued on an annual basis.

  • You can expect that interpretations of the law contained in the Bulletin will normally be applied in relevant cases, but this is subject to a number of qualifications.
  • Particular cases may turn on their own facts, or context, and because every possible situation cannot be covered, there may be circumstances in which the interpretation given here will not apply.
  • There may also be circumstances in which the Board would find it necessary to argue for a different interpretation in appeal proceedings.
  • The Bulletin does not replace formal Statements of Practice.
  • The Board’s view of the law may change in the future. Readers will be notified of any changes in future editions.
  • All the names used in examples and illustrations are imaginary and have no relation to real persons, living or dead, except
    by coincidence

Nothing in this Bulletin affects a taxpayer’s right of appeal on any point.


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 2007-01-14 20:20:41 in Tax Articles

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