input VAT - Tax Adviser Magazine

BEPSJoy Svas -Salee contemplates a period of unprecedented change for interna onal corporate tax law

Legislation Back to basics:input VATNatasha Siddiqi considers the challenges of input VAT recovery

20 30 36

www.tax.org.uk www.a .org.uk

Patrick King examines how advisers can cope with the complex mountain that is the UK tax code

Excellence in Taxation March 2016www.taxadvisermagazine.com

PLUS Tax policy – Tax at university – Cross-border VAT – STBV – Trust income – Inducement payments

Harriet Brown considers the uncertain es that an HMRC discovery assessment can cause, page 22

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CONTENTS

Welcome3 Editor’s Welcome

Surprise discoveryChris Ma os

4 President’s pageIn praise of technical offi cers and the technical steering groupMichael Steed

5 CIOT Vice-President’s page More educa on in tax?John Preston

6 ATT WelcomeIn pensions we trustRalph Pe engell

Briefi ngsFrom Ar llery House

8 Spotlight on branches – European

9 CIOT President’s Luncheon

10 ATT appoints new execu ve director

Recruitment 56 Looking at the best

industry jobs

Technical From the Technical team

40 Exclusion of some companies from NIC employment allowance

45 Disclosures and HMRC’s KYC ini a ve

46 Re-launch of the CCCTB

47 Engagement with poli cians and parliament

48 Higgs case and s 34(1) me limits – an update

49 Compliance Reform Forum

50 Changes to class 2 NIC

51 Recent submissions

Features

14 Tax policyNo vote? No tax! Helen Thornley refl ects on the extremes that taxpayers went through to try to change tax policyGENERAL FEATURE I

16 Tax at UniversityMastering tax Andy Lymer explains why universi es play an important role in the development of tax professionalsGENERAL FEATURE I

20 Legisla onThe tax mountain Patrick King considers how to cope with the abundance of the UK tax codeGENERAL FEATURE I

22 Discovery assessmentsSurprise discovery Harriet Brown considers the uncertain es that an HMRC discovery assessment can causeMANAGEMENT OF TAXES

25 BEPS – EU digital taskforceVirtual compliance Bill Dodwell looks at the dilemma faced by the new EU digital taskforce in discerning digital services compliance in a global marketplace

INTERNATIONAL TAX

26 Cross-border VATPublished diff erences Chris Lallemand and John Voyez consider cross-border compliance for VAT

INDIRECT TAX

28 Interna onally mobile employeesRelaxed workers Stephanie Symonds-Dye considers a welcome update on short term business visitors

EMPLOYMENT TAX

30 BEPSAround the world in 13 reports Joy Svas -Salee contemplates a period of unprecedented change for interna onal corporate tax law

LARGE CORPORATE TAX OMB

34 Back to basics: trust incomeHandbag secrets Fiona Walker explains the income tax posi on for se lors and benefi ciaries of trusts

INHERITANCE TAX

36 Back to basics: input VAT recoveryVAT’s your purpose? Natasha Siddiqi considers the challenges of input VAT recovery

INDIRECT TAX

38 Inducement paymentsSmiley’s People Keith Gordon discusses the Upper Tribunal’s decision in HMRC v Smith & Williamson Corporate Services Ltd and HMRC v Patrick SmileyEMPLOYMENT TAX

Branch events 54 Dates for your diary

Disciplinary 55 Findings and orders of the

Disciplinary Tribunal

www.taxadvisermagazine.com | March 2016 1

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Welcome from the [email protected], Tax Adviser

Details of the editorial advisory board can be found at www.taxadvisermagazine.com/editorialadvisoryboard

Chris Ma osEditor, Tax Adviser

Tax has become too

complex an area for any single individual tax adviser or general practitioner to know it all

Surprise discovery

Recent cases indicate that the discovery provisions do not give HMRC carte blanche to make an assessment and advisers must

consider whether one has been validly made. Harriet Brown considers the uncertain es that an HMRC discovery assessment can cause on page 22.

The tax mountainTax has become too complex an area for any individual adviser or general prac oner to know it all. It is essen al to engage tax specialists and ensure your CPD keeps up with the demands of your clients. Patrick King considers how to cope with the abundance of the UK tax code on page 20.

Mastering taxAs legisla on con nues to change the tax landscape, substan al numbers obtaining a university educa on in taxa on will be key to the evolu on of the tax profession. What can you expect of a university graduate in 2016? Andy Lymer explains on page 16 why universi es play an important role in the development of tax professionals.

VAT’s your purpose?CIOT prize winner Natasha Siddiqi is an example of a university postgraduate who has been a racted to a career in taxa on a er a brief introduc on in the poli cs degree she studied at Cardiff University. On page 36, Natasha provides a back to basics guide to input VAT recovery. She highlights how the process is not always clear cut for any business, large or small.

Around the world in 13 reportsRecommenda ons made in the G20/OECD BEPS project have been ra fi ed, approved and adopted. Most changes will apply regardless of a group’s

size, although the focus (and debate) so far has been on the larger mul na onals. Joy Svas -Salee contemplates a period of unprecedented change for interna onal corporate tax law on page 30.

Smiley’s PeopleKeith Gordon discusses the Upper Tribunal’s decision on the tax treatment of an incen ve payment made to a group of employees on page 38. HMRC considered a goodwill payment to a ract a team of investment managers as cons tu ng employment income. The case confi rms that client rela onships and connec ons are not themselves assets, even if they might in some circumstances be turned to account.

Technical teams: Newsdesk and Tax VoiceThe ATT, CIOT and LITRG technical teams have been busy commen ng on the many dra Finance Bill clauses. You can read all about these responses on page 40. The technical team is an important part of the ins tute’s and associa on’s engagement with parliament and policy-makers and also supports the technical commi ees and sub-commi ees. This month we are promo ng the Tax Voice supplement from our sub-commi ees. Each month features a diff erent area of tax. Issues so far include: Management of Taxes Voice, Indirect Tax Voice, and Property Tax Voice. You can fi nd out more from the adver sement on page 13.

Journal of The Chartered Ins tute of Taxa on and The Associa on of Taxa on TechniciansAr llery House, 11-19 Ar llery Row, London, SW1P 1RT. tel: 020 7340 0550The CIOT is a registered charity – No. 1037771; The ATT is a registered charity – No. 803480

EDITORIALEditor Chris Ma osDeputy Editor Stefan BlackPublisher Chris Jones

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ISSN NO: 1472-4502

This, to my eye, is one

of the central tie-beams of the process. Our members operate in practice, largely in the OMB space and experience of that sphere is vital. We need to refl ect what our members do and support them and represent them technically. Our technical offi cers and members of the TSG do this ably

I never cease to be amazed by our technical offi cers. There are only two of them – Will Silsby and Alison Ward – yet they manage a

prodigious output. Over my presiden al year and especially the past few months, I have had many dealings with them.

I was bred and bu ered in technical tax during my training with Coopers & Lybrand (now PwC). It’s an area that I enjoy, so I understand and respect what Alison and Will do.

Their job is to provide the ATT with a solid tax technical base that we can use as an educa onal charity and a members’ organisa on. They carry on a fi ne tradi on that was started when one of our former presidents, John Kimmer, was appointed as the ATT’s fi rst technical offi cer in 2010. It had become clear that the volume of work was too great to be carried by volunteer members alone.

They a end mee ngs – lots of them, mostly with HMRC and also with our own technical steering group (TSG), where they act as co-ordinators.

They reply to consulta ons and not just a few – there was a blizzard of them in 2015 (with two Finance Acts) and the pace has not dropped this year. They sort them, rank them and reply to those that are relevant to our members.

The way this happens is as follows: a consulta on or dra Finance Bill clause will be issued by HMRC and our brave techies will decide whether it is of interest to us and select it accordingly. They will then ask for input from the TSG whose members will contribute to the response. Since 2013, we have expanded the consulta on process to include contributors – mainly ATT members who have expressed an interest in adding their input in par cular areas.

The TSG is an important beast at the ATT. It comprises members (and a few non-members) with good technical experience, who have a sense of public duty and who meet four mes a year in Ar llery House. Their only reward is coff ee and biscuits! They come from all over the realm. The TSG also counts some council members and other former ATT presidents such as Peter Gravestock and Yve e Nunn among its number. We have benefi ted greatly from their experience and knowledge.

This, to my eye, is one of the central e-beams of the process. Our members operate in prac ce, largely in the OMB space and experience of that sphere is vital. We need to refl ect what our members do and support them and represent them technically. Our technical

offi cers and members of the TSG do this ably.Either Alison or Will will dra a response and

members of the TSG will add their views. The duo will peer review each other’s work.

Then comes the ‘three eyes review’. The dra response will go to the TSG chairman for a fi nal review, so three people will have seen it before it goes out of the door (reputa onal ma ers will also be run past the president).

For years, Paul Hill has undertaken the fi nal review but, with his re rement, we have had to deal with this diff erently. So now, the TSG is co-chaired by Yve e and me and we review the technical output between us. Actually, we rather enjoy it! During January (yes, January!) we saw lots of technical consulta ons and dra FB16 clause comments out of the door and much midnight oil was burned with Yve e and I dividing the load. But I return to the central point: we all have extensive OMB experience and it helps us. But it would not be possible without our TSG members and especially our two technical offi cers (who also had to buy in extra supplies of midnight oil).

As a group, we also see press releases out of the door and these go through the same review process before being handed over to the PR and press team at Ar llery House for their comment and review.

There’s another thing. In 2014, I persuaded the techies to a end our ATT members’ conferences and joint tax skills courses with the AAT. This was a bit of a masterstroke; they have been a huge source of extra comment and the members have enjoyed talking to them and listening to them. Long may it last.

One fi nal note: I would encourage members to come onto TSG if they have an interest in technical tax (I mean who wouldn’t?). They can be ‘virtual members’ or contributors if they wish so they don’t have to a end mee ngs in London, so if that grabs you, please talk to Alison or Will.

In praise of technical offi cers and the technical steering group

Michael SteedPresident, ATTpresident@a .org.uk

[email protected] Fairpo

President’s [email protected] Steed

4 March 2016 | www.taxadvisermagazine.com

This lack of understanding

of tax has signifi cant implications

The fi rst me I wrote this column I expected to be drowned in hate mail but now that I am down to just one sack of the stuff a

day I am being let loose again. This me I expect that everyone reading it will simply want to pat me on the head in sympathy for my naivety but here goes!

Unless anyone reading this has been living under a rock for a while, they will agree that tax as a subject currently occupies more topical debate – and certainly more media coverage – than at any me since I’ve been prac sing (which my children assure me must surely predate the Boer war)!

And yet the quality of that debate is appallingly low.

I’m not talking here about the debate on tax avoidance, although that is clearly one part of it: I’m referring to the en re subject. Indeed, a principal reason why it is so diffi cult to have an intelligent debate about tax avoidance is that the level of knowledge and understanding of tax in general is so low. Although one could argue that the level of public debate about many issues is poor, I am focusing on tax since that is the area where we can have the greatest impact.

The CIOT is, of course, an educa onal charity and we do a great deal of work in trying to inform the tax debate (at all levels including working with schools) but perhaps all of us might think what more we can do?

This general lack of understanding on tax has signifi cant implica ons for our society. Some would argue that successive chancellors of all poli cal par es have faced less scru ny over some of their less straigh orward proposals than might have been jus fi ed because most of the electorate didn’t understand the implica ons. Gordon Brown’s aboli on of advance corpora on tax might be the most drama c example but we can all think of others.

At the same me, chancellors have been unable even to raise the possibility of some reforms because they know the resul ng headlines would be of the ‘scandal’ variety. Take VAT.

One way in which its regressive nature has been addressed is by zero-ra ng of par cular items. However, zero-ra ng also gives tax breaks to people who don’t need them. When my kids were growing up I benefi ted from their clothes being zero-rated even though I was fortunate enough to have aff orded the tax. An approach adopted by some countries is to standard-rate everything and address the impact on those on lower incomes through the benefi t system. This would raise an enormous amount of money and could be seen as a ‘fairer system’. I emphasise I am not necessarily advoca ng this approach. I

am merely saying it’s an example of a poten ally interes ng reform that could never be seriously debated because few would be able to look past their knee-jerk reac ons.

I recognise that most eyes glaze over as soon as tax is men oned and only headlines that can be portrayed as a scandal a ract a en on. But there is evidence that, whenever the proverbial person on the Clapham omnibus does spend the me to understand the issues, they see things diff erently. Our president, Chris Jones, gave a great example last month in his ar cle about how he was proud to be a tax adviser. The sub-text was he avoided ge ng beaten up by helping a member of the public understand the complexity of the tax issues involved. So perhaps we all need to do more to educate the public about tax as a form of self-preserva on in more ways than one.

A review of our examsOn the subject of educa on, it is essen al that our exams con nue to meet the needs of all our stakeholders while maintaining the high standards of which we are all so proud. Accordingly, a working party, chaired by former president John Bea e, will be reviewing our exam system, which was introduced in 2009. Any changes will not be introduced before 2018 (and probably not un l 2019).

With very best wishes to all.

More education in tax?

John PrestonVice-President, [email protected]

[email protected] Fairpo

CIOT Vice-President’s page


ATT [email protected] Pettengell

I hope George Osborne doesn’t change the pensions tax rules in his Budget speech. There are many rumours in the press sugges ng

that tax reliefs will be reduced but I feel any change would have a nega ve impact on a fragile pensions industry.

The demographic me bomb, fi rst predicted back in the 1980s, is now on our doorstep and it’s important that the public have as much confi dence as possible in the pensions industry so that they will be encouraged to save for their future and avoid the fi nancial burden being placed on our children.

I have found that the public’s confi dence in pensions has increased since the introduc on of the freedoms and fl exibility set out in the Taxa on of Pensions Act 2014, so fi ngers crossed this confi dence will con nue a er the Budget.

In November, the Finance (No 2) Act 2015 received royal assent and clarifi ed the taxa on of money purchase pensions (defi ned contribu on pensions) le to a trust when the stakeholder dies.

For most money purchase pensions it is now possible to have a choice on death: to leave the pension to a trust, pay out directly to your benefi ciaries, or to cascade the pension down to family or friends, free of inheritance tax, within the framework of the pension scheme wrapper, known as Flexi Access.

For most money purchase pensions, if the stakeholder dies before they turn 75 the payment to a trust is tax-free. This provides the opportunity for succession planning and controlling the value of the assets a er death. The other choices are that the fund can be paid directly to the deceased’s benefi ciaries tax-free, or cascaded down to children, grandchildren, widow or friends free of inheritance tax in most situa ons. The recipients of a fl exi-access pension, known as nominees, can con nue drawing tax-free income and capital out of a tax-privileged regime, where all growth and most of the income generated from investments is also tax-free within the wrapper for the rest of their lives.

Developing a strategy becomes more complicated if a client dies a er the age of 75, but at least Finance (No 2) Act 2015 gives us clarity. I s ll believe that, for clients who want to leave their pension funds on death to a spouse, children, grandchildren or friends, a combina on of bequeathing the death benefi ts to a discre onary trust plus using fl exi-access rules to nominate a range of benefi ciaries within the pension scheme is the best pre-death strategy. However, it is essen al to document clearly what the client’s wishes are in a formal le er of wishes.

The payment to a trust if the client dies a er they have turned 75 is taxed at 45%. But there is an

income tax credit for the benefi ciary, so it may not be as bleak as this may ini ally sound. For example:

Clive dies aged 79. The value of his money purchase pension is £300,000. The pension administrator pays a lump sum to a trust and pays a tax bill of £135,000 (45% of £300,000), leaving £165,000 to be held by the trustees. In the next year, with the fund s ll worth £165,000, the trustees decide to distribute £20,000 to Clive’s son, Chris.

Chris will be treated for tax purposes as receiving £36,363 (£36,363 x 45% = £16,363; £36,363 - £16,363 would leave a net sum of £20,000). Chris will be assessed on £36,363 as income in the year of receipt. However, Chris is a basic rate tax payer and his liability on £36,363 would be £7,272. Since he has a tax credit of £16,363, represen ng the a ributed por on of the 45% paid by the pension administrator on the ini al payment to the trust, not only can he off set this credit against the liability of £7,272 (so he pays no tax on the £20,000 he has received) but he can also receive a further tax credit of £9,090 to set against other income.

If the benefi ts are not paid to a trust if death is a er age 75, the taxa on is straigh orward in that the benefi ciaries are taxed at their marginal rate on receipt of them.

The alterna ve, if the appropriate paperwork is in place before death, is that the pension fund can be passed down to children or grandchildren without a tax charge. But when the benefi ciaries take funds from their new fl exi-access pension, the withdrawals will be taxed on them as income.

The importance of a client planning a strategy during their life me, with their advisers’ help around the new rules, is fundamental to realising the best outcome for their client and their family.

The importance

of a client planning a strategy during their lifetime, with their advisers’ help around the new rules, is absolutely fundamental to getting the best outcome for their client and their family in the event of their death

In pensions we trust

Ralph Pe engellDeputy President, ATTpage@a .org.uk


@ourATT on

+BETTER TOGETHER

OVER 2,000 CIOT MEMBERS HAVE ALREADY CHOSEN TO BECOME JOINT MEMBERS OF THE ATT.

WWW.ATT.ORG.UK/JOINT

BRIEFINGS


Chairman: Anne FairpoContact details: [email protected] Branch website: www.tax.org.uk/European CIOT and ATT members and students connected to this branch: 461

FURTHER INFORMATION

The European Branch was founded in 1995 to provide a forum for Chartered Tax Advisers dealing with cross-border issues in Europe.

Regular conferences are held in several in capital ci es to update members and non-members on the interna onal tax developments in the UK and other EU member states –

Forthcoming conferences:

Friday 11 MarchParis ConferenceCMS Bureau Francis Lefevrewww.tax.org.uk/parisconference2016

Friday 23 September 9th Young Interna onal Corporate Tax Prac oners’ ConferenceLondon

Friday (14 or 21) October Milan Conference

Friday 20 November20th Cross-Atlan c & European Tax SymposiumLondon

CIOT/ATT

as well as those involving the OECD and other interna onal organisa ons.

Cases in the Court of Jus ce of the EU and tax ini a ves of the EU Commission are regularly examined at joint conferences in English with corresponding tax professional organisa ons such as the Interna onal Fiscal Associa on and other CFE affi liates facilitates. This

Spotlight on branches – European

BRANCHES gives members and non-members great networking opportuni es with UK and foreign tax prac oners in a s mula ng professional se ng.

Our Cross-Atlantic Symposium held with the International Fiscal Association, British branch, which is now in its 20th year, is a highlight of the international tax calendar in London and reflects our commitment to remaining at the cutting edge of cross-border taxation.

The Young International Corporate Tax Practitioners’ Conference is another successful initiative to enable practitioners in the early years of practice to engage with this challenging area of taxation and we recently held our sixth Indirect Tax Conference – VAT being, of course, the quintessentially European tax.

We look forward to welcoming CIOT and ATT members and students to our conferences, and also ADIT affiliates and students.

CIOT

EVENT

Fellows’ dinnerThe seventh Fellows’ dinner will take place at Haberdashers’ Hall on 13 July 2016. See www.tax.org.uk/fellowsdinner2016 or email Lisa Drakley at [email protected] to sign up for this popular and pres gious event.

Anne Fairpo

CIOT President’s Luncheon

EVENT

Former Chancellor Ken Clarke has become the 27th recipient of a CIOT honorary fellowship. The award was made at the ins tute’s annual President’s Luncheon at the elegant Drapers’ Hall in the City of London.

Making the award, CIOT president Chris Jones described Mr Clarke as one of the foremost poli cal fi gures of the past 30 years. He said the award recognised the structural and long-las ng changes to the tax system made during his four years as chancellor. These included the introduc on of insurance premium tax, airline passenger duty and landfi ll tax. He noted that, refl ec ng more recently on his me as chancellor, Mr Clarke had said: ‘Poli cs was diff erent then – people did not expect budgets always to be popular. They did expect budgets to have things they did not like in them.’

Accep ng the award, Mr

Clarke cheerily observed that the ins tute had ‘taken some me deciding’ to honour him,

given that it was 20 years ago since he had been at the Treasury. He said that being chancellor was the job he had enjoyed most in government, although he had had no exper se in taxa on and so had to draw on the knowledge of his adviser on this area, one Edward Troup, now HMRC’s tax assurance commissioner. He expressed his gra tude to the ins tute for honouring him.

The event was a ended by many leading fi gures from the world of tax, including Troup himself, shadow fi nancial secretary Rob Marris MP, and members of the public accounts commi ee and Treasury commi ee of the House of Commons.

Chris Jones again took the opportunity to promote the Bridge the Gap campaign, encouraging the profession to support the work of the tax advice chari es.

BRIEFINGS


CIOT

More than 250 guests a ended the President’s Luncheon at Drapers’ Hall

CIOT

CIOT AGM

Members may remember that at last year’s annual mee ng a resolu on was passed to make a change to the Ins tute’s royal charter. The change enabled electronic vo ng and it is hoped that this will increase Members’ par cipa on in the AGM.

CIOT is delighted to confi rm that we are working with Electoral Reform Services (ERS) to deliver this.

The April edi on of Tax Adviser will provide informa on for members to vote by proxy electronically.

There will be an individual two-part code on the reverse of the address wrapper enabling members to vote easily on a CIOT pla orm on the ERS website. In addi on, members will receive an email from the ERS (and a reminder email) with

the required codes. Votes may also be cast through a link on that email.

If members prefer to vote by post using a paper proxy vo ng form, as previously, they will s ll be able to do this.The reverse side of the April Tax Adviser wrapper will also act as a paper proxy vo ng form. The only change will be that members are asked to return this to the ERS address shown on the form rather than to the CIOT.

If members have any queries on the vo ng process for 2016 email the secretary, Rosalind Baxter, at [email protected].

Members may vote in the AGM only if they have paid their subscrip on for 2016.

Rt Hon Kenneth Clarke CH QC MP receiving his honorary fellowship cer fi cate from CIOT President Chris Jones

Electronic proxy voting information

BRIEFINGS


COUNCIL

The CIOT’s council approved a new team of offi cers at its January mee ng. They will begin their new roles on 10 May and hold them for a year.

Bill Dodwell, Deloi e’s head of tax policy, will be the ins tute’s new president. He is currently deputy president and chairs the technical commi ee. Mr Dodwell said: ‘It will be a privilege to succeed Chris Jones as president in May. The CIOT’s role has never been more important in working to

CIOT announces offi cers for 2016–17CIOT

improve public understanding of the tax system and I look forward to con nuing to work with the CIOT offi cers and council in 2016–17.’ Mr Jones remains president un l May.

Vice-president John Preston will advance to deputy president in May. He is a former member of PwC’s global tax leadership team, responsible for external rela ons, regula on and policy. He is current chairman of the ins tute’s examina on commi ee.

He said: ‘Tax has never been more topical an issue than over

the past few years and the CIOT has been a key voice in the na onal debate. I look forward to working with my fellow offi cers in con nuing this.’

Ray McCann, a partner at New Quadrant Partners, will be the new vice-president. A former senior HMRC inspector, Mr McCann is also a former chairman of the joint CIOT/Associa on of Taxa on Technicians professional standards commi ee.

He said: ‘As the fi rst former member of HMRC to hold one of the senior offi cer roles in

the CIOT, I hope to con nue to build on the strong rela onship between the CIOT and HMRC as well as encourage more HMRC people to become chartered tax advisers (CTAs).’

It was also confi rmed that Glyn Fullelove will succeed Mr Dodwell as chairman of the CIOT’s technical commi ee. Mr Fullelove is group tax director at Informa plc and chairs the ins tute’s interna onal taxes sub-commi ee, one of the 11 that report to the technical commi ee.

John Preston Ray McCannBill Dodwell

Glyn Fullelove

APPOINTMENT

Jane Ashton, who became a member of the ATT in 1993, has had a career in tax that has spanned more than 30 years. She has served on the ATT council for ten years, the member steering group (previously known as the member and student services commi ee) for more than 18 years, and is a former chairman of its business development steering group.

Jane has had a role in signifi cant change projects, including the introduc on of the fi rst online services for self-assessment and corpora on tax. More recently she was a senior leader in the strategic

design authority team at HMRC.As well as a Fellow of

ATT, she is a member of the Associa on of Project Managers (APM) and an associate member of the Bri sh Computer Society (BCS).

Jane started as execu ve director on 1 March, replacing Andrew Pickering, who re red a er more than 22 years with the ATT. The execu ve director is the senior member of staff , overseeing the associa on’s work and providing strategic guidance to the leadership team.

Jane said: ‘I am looking forward to helping to lead the ATT through the next few years when we will see unprecedented change in the

tax world.‘I will be working with the

president and the council to make sure that we con nue to provide fi rst-class qualifi ca ons for our students and support for our members to enable them to thrive in this me of change.

‘I will be looking for ways in which we can improve knowledge of, and debate about, the tax system so that the ATT con nues to be the leading professional body for those providing UK tax compliance services.’

ATT president Michael Steed said: ‘Jane brings a wealth of relevant experience and understands our organisa on, its aims and its values.

‘I would also like to pay

tribute to Andrew Pickering. The ATT has changed enormously during Andy’s me at the helm – we have fi ve mes as many members as when he arrived and our technical and other ac vity has grown massively.

‘Andy’s steady hand and wise counsel have been real assets guiding us through this me of transforma on. In many

ways he was the ATT and I hope h e can now re re happily, knowing that our organisa on is in such safe hands.’

ATT appoints Jane Ashton as new executive director

Jane Ashton

ATT

ADVANCED DIPLOMA IN INTERNATIONAL TAXATION

Results and prizes December 2015

The Chartered Ins tute of Taxa on (CIOT), the principal body in the United Kingdom concerned solely

with taxa on, announced on 4 February the results of its ADIT (Advanced Diploma in Interna onal Taxa on) examina ons held on 8, 9 and 10 December 2015. There were 237 candidates in total. Candidates sat exams in 36 diff erent countries and territories, using the on-screen method.

169 students passed at least one ADIT exam in December 2015. A total of 42 students (including four with dis nc on) have completed ADIT in the last six months, and can now add the post-nominals ‘ADIT’ a er their name, including the fi rst students to achieve ADIT from

Tanzania and Uganda.The Institute President, Chris Jones,

commenting on the results said:‘I congratulate all candidates who

passed ADIT examinations in December. Achieving ADIT is a challenge, and demonstrates a high standard of knowledge and expertise in the theory and practice of international tax. Candidates who have passed one or more of the exams should feel very proud of their achievement.

‘When combined with the June 2015 exam results, the success of ADIT students si ng in December means that, for the fi rst me, more than 100 students have completed ADIT in the last twelve months.

The success of ADIT students around the world is an extremely posi ve development for the interna onal tax community, as more prac oners than ever before can now put the ‘ADIT’ le ers a er their name and apply the skills learned over the course of their ADIT studies in their day-to-day work.

‘It shows the growing awareness of the qualifi ca on in the business world and the success of innova ons such as on-screen tes ng.

‘We hope that those who have achieved the qualifi ca on will, if they are not already Chartered Tax Advisers (CTAs), choose to become Interna onal Tax Affi liates and thereby con nue their rela onship with the CIOT.’

Awards

The Heather Self Medal for the highest marks in Paper 1 – Principles of Interna onal Taxa onThe medal has been jointly awarded to Anne Margaret Gormley of Dublin, Ireland, who is employed by the Offi ce of the Revenue Commissioners, and Yulia Logunova of Luxembourg, who is employed by Rakuten Europe.

The Raymond Kelly Medal for the highest marks in Paper 2 – Advanced Interna onal Taxa on (Jurisdic on): United Kingdom op onThe medal has been awarded to Robert Bruce Mitchell Black of Cardiff , United Kingdom, who is employed by HMRC in Warrington.

The Worshipful Company of Tax Advisers Medal for the highest marks in Paper 3 – Advanced Interna onal Taxa on (Thema c)The medal has been awarded to Charlo e Bea e of London, United Kingdom, who is employed by Deloi e and sat Paper 3.01: EU Direct Tax op on.

The Wolters Kluwer Prize for the highest marks in Paper 3 – Advanced Interna onal Taxa on (Thema c): Transfer Pricing op onThe prize has been awarded to Yulia Logunova of Luxembourg, who is employed by Rakuten Europe.

Individual paper passes are as follows (for details of awards, distinctions and overall passes, please see the Awards, Distinctions and Overall Passes List, available at www.adit.org.uk/results):

Paper 1 – Principles of International Taxation

Ahabwe, A (Kampala, Uganda)

Ahamed, M F (Leicester, United Kingdom)

Akinola, D (London, United Kingdom)

Ali, I (Bradford, United Kingdom)

Aquilina, A (Gharghur, Malta)

Averyanova, V (Moscow, Russian Federa on)

Aziz, T M (Bangalore, India)

+ = Award Winner* = Dis nc on for overall performance in three examina on papers or two examina on papers and a thesis

Berberausaite, G (Adliswil, Switzerland)

Bha , F (Mumbai, India)

Brown, M B (Slough, United Kingdom)

Cerfontaine, F B J (London, United Kingdom)

Chakraborty, S (Navi Mumbai, India)

Chong, J C J (Uxbridge, United Kingdom)

Ciantar, D (Zebbug, Malta)

Ciurez, L A (Bucharest, Romania)

Clemente Lorente, E (London, United Kingdom)

Comia, V M D (Doha, Qatar)

Delivan, I (Bucharest, Romania)

Dhameja, S (Midrand, South Africa)

Dietz, N J (London, United Kingdom)

Dossani, A A (Karachi, Pakistan)

Drumgoole, H (Dublin, Ireland)

Evans, J P (London, United Kingdom)

Gibbons, E (Dublin, Ireland)

Gilmar n, E (Carlow, Ireland)

Gormley, A M (Dublin, Ireland) +

Hargreaves, V (Twickenham, United Kingdom)

Hibbombo, H (Kampala, Uganda)

Ho, C Y C (Kowloon, Hong Kong)

Hughes, K (Horley, United Kingdom)

Ikpaisong, I J (Abuja, Nigeria)

Ilin, A (Jeleznodorozny City, Russian Federa on)

Jain, T K (Delhi, India)

Kalogirou, Z (Nicosia, Cyprus)

Killilea, S (Clarenbridge, Ireland)


Koteiche, S (Beirut, Lebanon)

Lakshmi Narasimhan, N (Chennai, India)

Lampiris, N (Paris, France)

Lees, F J (Enfi eld, United Kingdom)

Logunova, Y (Senningerberg, Luxembourg) +

Luvuuma, R (Kampala, Uganda)

MacLeod, S (London, United Kingdom) *

Maliko, W H (Maisons-Laffi e, France)

Mar Beso, I (Maidenhead, United Kingdom)

Masoud Ibrahim Mina, W (Cairo, Egypt)

Michaelides, A M (Nicosia, Cyprus)

Nath Varma, P (Vacoas, Mauri us)

Nitoiu, A (Bucharest, Romania)

O’Brien, D (Sheffi eld, United Kingdom)

Orr, J (Glasgow, United Kingdom)

Pavlou, M (Nicosia, Cyprus)

Raman, A K (New Delhi, India)

Romanovs, V (London, United Kingdom)

Ryan, S (Dublin, Ireland)

Scicluna, A (Zabbar, Malta)

Shah, T (Ahmedabad, India)

Simionescu, C (Sfantu Gheorghe, Romania)

Solayen, L (Rose Hill, Mauri us)

Stec, P (Warsaw, Poland)

Storr, A (London, United Kingdom)

Sykes, R (Congleton, United Kingdom)

Timohin, D (Toronto, Canada)

Ti er, P (Balrothery, Ireland)

Tusiime, M (Kampala, Uganda)

Udeci, N (Bucharest, Romania)

Van Lare, M E (London, United Kingdom)

Vongayi, F (Harare, Zimbabwe)

Walters, A I (Salford, United Kingdom)

Wray, M (Purley, United Kingdom)

Yong, N (Hartlebury, United Kingdom)

Zinovyeva, Y (Moscow, Russian Federa on)

Zysk, K (Warsaw, Poland)

Paper 2.09 – Advanced International Taxation (Jurisdiction): United Kingdom option

Baldwin, A L (Christchurch, United Kingdom)

Black, R B M (Cardiff , United Kingdom) + *

Brooks, T D (Warrington, United Kingdom)

Chau, G (London, United Kingdom)

Donaldson, A S (Beckenham, United Kingdom)

Han, P S S (London, United Kingdom)

Lanzoni, C (Onchan, Isle of Man)


Magee, C L (Leeds, United Kingdom)

Pickering, D M (Birmingham, United Kingdom)

Paper 3.01 – Advanced International Taxation (Thematic): EU Direct Tax option

Bea e, C (London, United Kingdom) + *

Eaton Richards, A (Qormi, Malta)

Giusto, A (Mosta, Malta)

Grehan, J P (Windsor, United Kingdom)

Jouini, T (Croydon, United Kingdom)

Stanica, A (Bucharest, Romania)

Sykes, R (Congleton, United Kingdom)

Paper 3.03 – Advanced International Taxation (Thematic): Transfer Pricing option

Abazadze, K (Tbilisi, Georgia)

Agnew, M (Dublin, Ireland)

Ahtchieva, G V (Sofi a, Bulgaria)

Akiwumi, A L (Bromley, United Kingdom)

Ali, Y A (London, United Kingdom)

Azzopardi, A (Msida, Malta) *

Bajaj, M (Bangalore, India)

Barbu, M I (Birmingham, United Kingdom)

Basikoro, K (Birmingham, United Kingdom)

Berg, T (Sea le, United States of America)

Bhardwaj, N (London, United Kingdom)

Borg Sant, N (Mosta, Malta)

Bostrenghi, P (Galway, Ireland)

Butnaru, I (Bucharest, Romania)

Cahalane, N (Lucan, Ireland)

Campbell, G J (Aberdeen, United Kingdom)

Casey, N (Roundwood, Ireland)

Ceroni, M (Dublin, Ireland)

Chan, S Y (Singapore, Singapore)

Coughlan, D (Cork, Ireland)

De Alba, G (Madrid, Spain)

De Biasio, R (Lausanne, Switzerland)

Dus, Z (Poznan, Poland)

Ene, C (Bucharest, Romania)

Etheridge, J (London, United Kingdom)

Fernandez Guerra Fletes, A (Kingston upon Thames, United Kingdom)

Grennan, D (Dublin, Ireland)

Guthrie, C A (Kingston, Jamaica)

Hawkins, T W (Copenhagen, Denmark)

Invernizzi, B (Cremeno, Italy)

Ion, A A (Bucharest, Romania)

Ionescu, A D (Boulder, United States of America)

Jain, S (Jaipur, India)

Jain, T K (Delhi, India)

Jebena, A B (Addis Ababa, Ethiopia)

Kale, S (Amsterdam, Netherlands)

Karameta, A (London, United Kingdom)

Kaushal, H (Khanna, India)

Kikhonia Febby, C (Jakarta, Indonesia)

Korobova, I (St. Petersburg, Russian Federa on)

Kotwal, A (Houston, United States of America)

Kumar, M (Bangalore, India)

Le Page, M (St. Sampsons, Channel Islands)

Lewis, B R (Plymouth, United Kingdom)

L’Héri er, A (St-Aubin-Sauges, Switzerland)

Logunova, Y (Senningerberg, Luxembourg) +


Maloney, L (Hyde, United Kingdom)

Milojevic, M (Belgrade, Serbia)

Muraka, G (Kampala, Uganda)

Nagarka , N (Bedford, United Kingdom)

Ngo, M B (Ho Chi Minh City, Vietnam)

Nicholson, E M (Hong Kong, Hong Kong SAR)

Oikonomou, K (Athens, Greece)

Okolonji, P (London, United Kingdom)

O’Toole, P A (Greystones, Ireland)

Parsad, J P D (Curepipe, Mauri us)

Pho ou, A S (Larnaca, Cyprus)

Power, D (Naas, Ireland)

Radi, C (Valcea, Romania)

Rainsford, A (Tunbridge Wells, United Kingdom)

Ramos Floering Junior, E (Cologne, Germany)

Ramtohul, A (Bon Accueil, Mauri us)

Rapo, M P (Helsinki, Finland)

Ricke s, K J (London, United Kingdom)

Scerri, A (Fgura, Malta)

Schubert, A (London, United Kingdom)

Scicluna, L (Sliema, Malta)

Sco , J B (Oxford, United Kingdom)

Seja , U (Jakarta, Indonesia)

Semikore, J (Johannesburg, South Africa)

Smythe, G (Croydon, United Kingdom)

EXAM RESULTS


Tax Voice is a new supplement from our

sub-committees brought to you by the

Tax Adviser Online team. Recent issues

include; Management of Taxes Voice,

Indirect Tax Voice and Property Tax Voice.

Find out more at www.taxadvisermagazine.com

SPECIALISMFOR YOUREXPERTISETECHNICAL

For informa on:Our goal is to make ADIT a truly interna onal qualifi ca on. As this vision is realised, interna onal tax prac oners moving from one country to another will share an interna onally recognised qualifi ca on that sets a global benchmark in interna onal tax exper se. The ADIT standard is supervised by an Academic Board of dis nguished and highly respected interna onal tax professionals.

ADIT is a modular qualifi ca on with three examina ons, of which Paper 2 or Paper 3 may be subs tuted by a thesis. Those who have completed all the elements to be awarded the qualifi ca on may use the designatory le ers ‘ADIT’. ADIT is a free-standing qualifi ca on which will not give the right to membership of the Chartered Ins tute of Taxa on. However, ADIT holders may apply to become an ‘Interna onal Tax

Affi liate of the Chartered Ins tute of Taxa on’. This ongoing link with the CIOT will en tle the individual to receive a number of benefi ts.

Email: [email protected].

Enquiries regarding these results should be directed to:Rory Clarke (ADIT Examina ons Manager Email: [email protected].

Soberanis Mota, R (San ago, Chile)

Solanki, K (Mumbai, India)

Storr, A (London, United Kingdom)

Stuart, A (Hong Kong, Hong Kong SAR)

Takuro, T (Lagos, Nigeria)

Thomas, B (Dubai, United Arab Emirates)

Tornea, I (Bucharest, Romania)

Travers, M (Dublin, Ireland)

Tucungwirwe, D (Kampala, Uganda)

Tusabe, J J (Kampala, Uganda)

Varfolomeeva, E (Nicosia, Cyprus)

Vartak, S U (Mumbai, India)

Wray, M (Purley, United Kingdom)

Zhang, N (Ashburn, United States of America)

Zuberi, S E (Karachi, Pakistan)

EXAM RESULTS


TAX POLICY

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Name Helen ThornleyPosition Senior Tax ConsultantCompany Armstrong WatsonEmail [email protected] le Helen Thornley MA (Cantab) FCA CTA TEP is based in Cumbria and specialises in private client work. She writes, blogs and tweets

on the interes ng aspects of old and new taxes.

PROFILE


If you want to make your voice heard on the subject of tax these days, there are plenty of ways to go about it. Indeed,

part of the role of the CIOT and ATT is to ensure members’ voices are heard at a na onal level, responding to consulta ons, and providing educated comment on our tax system.

Although we may not always get what we want, we do have the opportunity to make representa on.

But at the start of the 20th century, women had no such opportunity. Subjected to tax on their income, but with no vote and therefore no say over the government that taxed them, some suff ragists resorted to dras c ac on – tax resistance.

One such campaigner was Dora Montefi ore. She fi rst refused to pay her taxes during the Boer War. However, she gained li le a en on. For the issue of female suff rage, she decided to make a more public stand.

On 24 May 1906, having failed to pay the income tax demanded of her, Dora barricaded herself into her home in Hammersmith, west London, accompanied by her maid. Refusing to let in the Revenue bailiff s, a siege began.

Following rules that are not dissimilar today, the bailiff s could not enter by force, during the hours of darkness, nor through anything other than the door. It was six weeks before court permission was granted for a forced entry. During that me Dora kept the gates barred, passed the weekly wash over the back wall and spoke daily to crowds of people from her terrace at the front.

The publicity was huge. In the fi rst full day of the siege, more than 20 reporters arrived to interview Dora and her supporters. They even staged photos showing food being handed over the high walls that surrounded her house. Dora hung a red banner across the front of her home and news of her ac ons spread across the world.

The Women’s Tax Resistance League itself was formally created in 1909 under the mantra ‘No vote, no tax’. They drew inspira on from historical tax resisters such as John Hampden. Using an image of a ship in full sail they were referencing the ‘ship money’ case taken by Hampden against Charles I in 1637. ‘Ship money’

Helen Thornley refl ects on the extremes that taxpayers went through to try to change tax policy

was a tax imposed by Charles without parliamentary approval, which Hampden considered uncons tu onal. Hampden lost his case, but the defeat was so narrow that it encouraged wider resistance and, eventually, the tax was abandoned.

League members who refused to pay o en had their goods seized and sold at public auc on. These sales were used as an opportunity to promote the suff rage cause. In 1913 a scuffl e at one in London was even reported in the New York Times. During the incident, a suff ragist called Beatrice Harraden was hurt. As an author she was liable to income tax on the profi ts of her wri ng. She explained her refusal to pay by saying: ‘It is a culmina on of the government’s injus ce and stupidity to ask that we pay an income tax on income earned by brains, when they are refusing to consider us eligible to vote.’

While suff rage es like Emily Davison broke the windows of the chancellor of the exchequer’s house, tax resistance was generally considered a more ladylike method of direct ac on. In 1913 the then Duchess of Bedford refused to pay income tax and had a silver cup distrained. The daughter of the last, exiled, Maharaja of

the Sikh Empire, Princess Sophia Duleep Singh, was also a member of the tax resistance league. An ardent suff ragist, she lived in a grace-and-favour house of Queen Victoria. She resisted paying her dog, carriage and other licences.

The league had male supporters too, although some were more willing than others. Married women had been able to keep their income from their own work and investments since 1870, but their earnings were s ll added to their husband’s for income tax purposes. One schoolmaster in Clapton, east London, had li le op on over tax resistance when his wealthy wife refused to put him in a posi on to pay the liability generated by her income. He went to prison for her principles.

In 1914, the league members voted to pay their taxes on account of the war and the organisa on fi nally disbanded in 1918 when ini al electoral reforms were achieved.

These days, with HMRC’s new powers for direct recovery of debts, the modern day tax resister would probably struggle to mount such a public and sustained campaign as the league did. Engaging with consulta ons is a much safer op on.

No vote?

No tax!

BROADEN YOURHORIZONS

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TAX AT UNIVERSITY


H istorically, tax has been one of the traditional graduate professions. However, as the

world is changing, is there still a role for universities to help develop the next generation of tax professionals? Will direct entry schemes provide the bulk of the cohort in the future? Will higher degrees and the probably forthcoming degree apprenticeships in accounting or law, or even tax itself, be key suppliers of future CIOT and ATT members?

I am perhaps not the right person to argue against the proposition that universities should continue to be a key provider of future tax professionals – I

Mastering taxAndy Lymer explains why universi es play an important role in the development of tax professionals

am hardly unbiased! So, assume what follows is the case for universities remaining a key supply channel, albeit changed in key areas.

Universities have been central in developing people who form the basis of most of the UK’s professions, and tax is no different. If we use CIOT and ATT membership pipelines as a proxy of the current trend of graduate mix within the tax profession, in the past six months at least 63% and 70% respectively of new student applicants have been graduates. Meanwhile, 4% of CIOT applications have higher degrees (master’s or PhDs). However, that clearly suggests around

What is the issue?Are universi es likely to con nue to play an important role in developing the next genera on of tax professionals? What does it mean to me?

With mul ple routes into the tax profession, I need to know what I can expect of a university graduate – it may not be what I brought when I joined from a university, if I went to one. Is what they are off ering now what we need? Could a master’s degree be something of value to me and my staff ? What can I take away?

Is there a role I can play in shaping the next genera on of tax professionals studying at a university? Can I off er advice and support to my local university, or one I have a par cular link to perhaps as an alumni? They will probably welcome my contact

KEY POINTS

TAX AT UNIVERSITY

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Other MSc courses with large tax elements are taught at: Bournemouth University (LLM interna onal tax law – linked to CIOT ADIT qualifi ca on): www. nyurl.com/gppdrvc. Bournemouth University (MSc/PGDip interna onal taxa on and fi nance – linked to CIOT ADIT qualifi ca on): www. nyurl.com/z67h23x. Manchester Metropolitan University (tax and fi scal policy): www. nyurl.com/h37egp3. Kings College London (interna onal tax law) (linked with ADIT): www. nyurl.com/h4e7hbf. LSE – (LLM in Tax): www. nyurl.com/gkrfl c6. University of Dundee (petroleum tax and fi nance): www. nyurl.com/hzp56kq. University of Oxford (MSc in taxa on) (specifi cally for those with experience in tax): www. nyurl.com/gr44soe. University of Exeter (MSc accoun ng and tax): www. nyurl.com/zjdu98k. This is suitable for those with some prior study experience of tax or those wishing to convert into tax or accoun ng a er comple ng an undergraduate course in a diff erent area. University of Birmingham (MSc by research (taxa on)) (linked with CIOT ‘fellowship by thesis’ route): www. nyurl.com/o27wogh. CIOT (Fellowship): www. nyurl.com/zchklwt.There are also opportuni es to study for a PhD at most universi es accommoda ng

tax academics.

TABLE – MSC COURSES

Name Andy LymerPosition Professor of Accoun ng and Taxa on, Deputy Dean: Birmingham Business SchoolOrganisation University of BirminghamTel 0121 414 8307Email [email protected] le Professor Lymer teaches and researches UK and interna onal

taxa on. He is co-author of Taxa on: Policy and Prac ce, the 22nd edi on of which was published in August 2015. He is Director of the Research Centre on Household Assets and Savings Management (CHASM) that produces research on the role of assets and their distribu on in people’s lives, from pensions to housing to fi nancial savings.

PROFILE


one-third of new entrants are looking to build careers in tax without having gone through university.

Universities, therefore, are far from providing the only entry route into this profession. There have always been other entry routes into a profession that rewards talent regardless of educational background. However, a university education, whether related to tax or on a different and unrelated subject, has been the main route in.

Universities provide a chance for personal and technical development in the chosen field of study. They allow students to leave home, often for the

first time, into a fairly controlled halfway house to the ‘real world’, to develop their intellectual skills to become freer thinkers, and to explore the theoretical as well as the practical elements of their chosen subject. Good university programmes should provide a foundation that does not merely deliver ‘off the shelf’ technical capability, but also provides breadth of understanding and a grounding in principles and theory that can be applied throughout a subsequent career.

That is the theory anyway. In practice universities do this to varying extents; people experience different mixes of the technical and theoretical elements of their subject based not only on the institution they study at, but also the individual lecturers they are exposed to. What specific mix prospective students can expect has been difficult to judge from the packaging since the convergence of the polytechnics, with their bias towards technical skill development, and universities, which accentuated theory and principles. These days, neither technical skill nor theory-based courses intrinsically offer ‘better’ employment prospects because

all higher education establishments, of whatever type, meticulously plan their programmes and linked activities to benefit their ‘customers’.

The new teaching excellence framework (TEF) assessment, coming to a university near you soon, may well bring institutions closer together yet further, because it will require more information on teaching activities to made available to the market, detailing what happens within any particular ‘ivory tower’.

Universities have had to face up to a changing world as students, being the direct purchasers of services and products the institutions are selling, become customers in the fullest sense of the word. They are now responsible for settling the fees for their courses, give or take their eligibility for government loans, or another lender like the ‘bank of mum and dad’. Since March 2015, according to the Competition and Markets Authority, universities have fallen under consumer rights legislation, giving the buyer of a degree the same rights as if they were sold any other product or service. This makes developing and evolving courses during that period’s study more difficult for

TAX AT UNIVERSITY


universities.Within this dynamic environment,

what is offered as tax education by UK universities at present? How are tax education offerings affected? Perhaps, a little oddly, there are only two undergraduate degrees containing a substantive amount of the subject to warrant using the ‘tax’ in their course titles. Both degrees are at the University of Bournemouth: BA (hons) accounting and taxation (www.tinyurl.com/hhed3ky); and LLB in law and taxation (www.tinyurl.com/jrpentc). Perhaps it is unrealistic to expect 17-year-olds to opt for a tax-focused degree in significant numbers to make it a more mainstream offering. Degree apprenticeships might change this, with universities eyeing up such an opportunity – more of which later.

Our profession benefits from attracting people who have studied degree courses that span a range of professional disciplines, such as business, law, economics, or even an unrelated degree, before recognising the particular attractions of a career in tax. Many accounting, law and economics degrees will have at least one tax course required of students, with some offering a second.

At my institution, for example, students are lucky enough to be given an introduction to income taxes (UK personal and corporate tax) and consumption taxes (VAT) in a compulsory course on our accounting degrees, and an optional final year in comparative and international tax (with wealth taxes thrown in for good measure). Law students can take a revenue law course and those taking economics-related degrees will have various macro and public economics courses that offer different perspectives on the need for, and role and use of, taxation. We have also taught tax to social policy and politics students. This is typical of many ‘research-led’ universities and others that would not class themselves that way. In many cases, syllabuses of professional accounting bodies are followed closely for bachelor degrees that provide significant exposure to tax for students on those programmes.

It could be argued that such courses provide only limited exposure to tax in the ‘real world’, however, so fail to adequately sell tax as a career of choice. Offers of experience and short-term internships help to address this by becoming common additions within degree courses.

Many undergraduate degrees offer a chance to extend business placements. At Bournemouth University there is a 40-week placement option.

These have not always been a formal feature of accounting, economics or law undergraduate degrees at ‘research-led’ universities, with the exception of Aston and Bath. They do, however, appear at Coventry, Derby, De Montfort, Hertfordshire, Leeds Beckett, Manchester Metropolitan, and Westminster to name a few. However, this is changing quickly with more universities embracing the value of extended periods of work combined as formal parts of their programme offerings.

New university-level programmes called degree apprenticeships are being promoted by the Department for Business, Innovation & Skills. These require universities and employers to work together to form undergraduate, and perhaps higher-level, programmes that will create a middle way between conventional three- or four-year degrees and direct entry into work. These schemes are part of the government’s apprenticeships programme overhaul and an extension to the new higher apprenticeships (level 4 and 5 – up to foundation degree level) that cover many business areas, including accountancy and law. The schemes received a significant financial increase after announcement in the autumn statement of the apprenticeship levy/payroll tax that will come in to effect from April 2017, promising ‘three million apprentices by 2020’. Although degree apprenticeships (level 6 and 7 – undergraduate and master’s degree levels) will form only part of this ambitious aim, they are likely to be rolled out in subjects now without them, including accountancy, law and, more specifically, tax. This may significantly affect the ‘sandwich course’ market.

Beyond undergraduate degrees, there is a limited number of taught master’s-level programmes specialising in tax in the UK. This contrasts with continental Europe, the US and Australia where such courses are commonly available.

The full detail of what is taught in undergraduate tax degree offerings has not been examined for more than 15 years and has never been examined at master’s level study. The last study was made by this author and John Craner of the University of Warwick (www.tinyurl.com/gmwxh3r).

As part of the same series of articles, Angharad Miller (Bournemouth University) and Christine Woods published what I believe was the last significant study of UK employer needs of graduates in tax (www.tinyurl.com/jve8stk). Perhaps it is time to revisit both these areas, given all the changes that

have occurred since?Universities are now more open than

ever to engage with employers to think about how, together, they can improve the offering to the next generation of students. The role to which degree apprenticeships may play in this field is yet to be explored. Research into how greater use of internships and longer placements in tax may be of use to all parties is under-developed, despite compelling evidence for their use in other professions.

It may be that a university education is of value to an aspiring tax professional or to one mid-career who is professionally qualified but wishes to study their subject more deeply. However, the evidence for this ought to be reviewed. Although some exciting new opportunities are becoming available, for example with new master’s-level courses coming to the market, further research would help clarify what the right link should be between universities and the tax profession across all levels of study. In the UK we remain some way behind the range and scale of offerings that those in the rest of Europe, in North America and in Australia benefit where better links are in place. This does suggest the UK is missing opportunities others are benefiting from.

UK universities are experiencing significant change and this requires the tax profession – and those advising the next generation of employees – to continually rethink the transition paths. Universities are re-examining their roles in this process and need help to balance the pressures they are under from other directions to develop their offerings. They are now more open to employer advice and suggestions than in the past as they look to reshape their programmes to keep what is good from historical approaches to educating students and develop what is needed for the future.

Read more about PhDs in tax at www. nyurl.com/z9gvod6

FURTHER INFORMATION


Robert Maas will give a résumé of the main points of the budget speechRobert is one of an increasingly rare breed, namely a tax specialist who

Cost: Member – £75Non Member – £85

Thames Valley2016 Budget Conference

Book online at:www.tax.org.uk/thamesvalley

Saturday 9th April 2016

QUALIFIES FOR

CPE/CPDPOINTS

£75for members

Half-Day post-budget conference at:Windsor Racecourse, Maidenhead Road, Windsor SL4 5JJ9:00am for 9:30am start, 12:30 finish

Friday 18 – Sunday 20 March 2016Queens’ College, University of Cambridge

Book online at: www.tax.org.uk/src2016

Conference fee: £695

Spring Residential Conference 2016

Programme topics will include:

The new dividend allowance and dividend tax – is it the end of the world as we know it?

CTA BA (Hons) ACA, RSM

What’s new in IHT? Chris Whitehouse MA BCL CTA (Fellow) TEP Barrister, 5 Stone Buildings

BSc (Hons) MPhil (Oxon) ARICS ATT,

FCA CTA (Fellow) ADIT, Gabelle LLP

MA (Oxon) CTA (Fellow) Solicitor,

Burges Salmon LLP

BA CTA (Fellow) ATT, Tolley

Ask the experts

MA FCA CTA, Thexton Training

Pete Miller CTA (Fellow), The Miller Partnership

DISCOUNTfor three or more from the same

OPENto non

members

LEGISLATION


Front linesThere have been earlier eff orts to make the tax system easier. In the mid-1990s, poli cians thought the answer lay in the way legisla on was wri en, which gave birth to the Tax Law Rewrite Project. Perhaps, though, a emp ng to clarify the tax code was always doomed to failure. Even Kenneth Clarke, then chancellor, said the work was ‘as ambi ous as transla ng the whole of War and Peace into lucid Swahili’.

Time was called on the project’s work in 2010 when it became clear to many that the intellectual front line should shi to simplifi ca on rather than redra ing parliamentary legalese.

That brought about the founding of the Offi ce of Tax Simplifi ca on (OTS) – to do just that, simplify tax.

The OTS has been illumina ng, especially when trying to clarify the state of the code.

A survey found that since 2009 the code has gone from 11,520 pages (then claimed to be the longest in the world) to 17,795 today. Further digging produced a count of 1,156 tax reliefs. As the OTS wrote, ‘…how can any single taxpayer know them all and so decide which one(s) to go for?’.

The ever-growing size of successive fi nance bills is the killer element. Finance Bill 1965 was about 250 pages long; in 2004 the bill ran to almost 650 pages. Now it averages about 400.

But this is not the whole story for the code. If you take out duplicated and repealed legisla on, according to the OTS, it reduces to 6,960 pages. Smaller, though s ll a daun ng read. The OTS concludes that complexity is not a good thing, but the length of the code is not necessarily the sole measure of complexity. In any case, it rightly says that what advisers seek is clarity.

Whole storySome comfort can be drawn from the OTS’s focus on understanding the scale and composi on of the code, but the truth for advisers is not so simple. Indeed, the

As an entry in the record books Britain’s tax code is not, perhaps, the outstanding achievement we

might want to claim. At an exaspera ng 18,000 pages, the tax code is claimed to be the longest in the world, whereas, say, Hong Kong’s tax compendium is, by comparison, the embodiment of brevity at just under 300 pages.

Indeed, even the mainstream press has taken no ce. Last year, Guardian columnist Marina Hyde wrote: ‘We can crap out tax legisla on like no other na on on earth.’ Not the most elegant appraisal, but no less true for being blunt.

With a code requiring the endurance of a trained athlete to master, advisers are presented with a document that is enormously challenging, if not in mida ng, to work with. Trainee tax advisers might wonder whether they have chosen the right profession. Clients would be forgiven for being reduced to tears.

This does not mean the code is insurmountable. But it does mean, as professionals, that we have to take a ra onal approach; acknowledging the implica ons it has for the way we deliver tax advice, the way we manage our prac ces, and how we tackle the documents themselves.

The tax mountainPatrick King considers how to cope with the abundance of the UK tax code

quan ty of pages is only the star ng point for a tax adviser.

Not only will advisers need to refer to the tax code, but also the statutory instruments, guidance from HMRC and independent providers and case law. A full understanding of a client’s needs involves a poten ally large research eff ort, linking these elements together as well as perhaps more than one act of parliament.

There is no single way of beginning to research a client’s tax ma er. For many, the places to begin are the online sources off ered by LexisNexis and CCH.

These enable one to read around the subject, cross-referencing to guidance and the legisla on. For advisers of a certain genera on (me included) books on the shelf will be the fi rst port of call, but the new genera on of digitally profi cient advisers will feel more at home with online sources.

Whatever the medium, the key to successful research is never to accept the fi rst answer. It will seldom be en rely right and can o en be wrong.

Practicalities of volumeFor those managing prac ces as well as advising clients there is an inevitable

What is the issue?Tax is too complex an area for any single individual tax adviser or general prac oner to know it all What does it mean to me?

You will need to know when to engage tax specialists and ensure your CPD keeps up with the demands of your clients What can I take away?

To paraphrase Donald Rumsfeld, it is important to know what you don’t know. So seek specialist advice if in doubt and make sure you have the appropriate level of CPD for your client base

KEY POINTS

LEGISLATION

Name Patrick KingPosition Partner, Head of TaxCompany MHA MacIntyre Hudson LLPEmail [email protected] le As a member of MacIntyre Hudson’s management board, Patrick is chairman of the fi rm’s tax strategy group, leading a team of

specialists who ensure clients have access to the best tax compliance services and tax mi ga on solu ons. Patrick’s own specialisms are capital tax planning for individuals, corporate restructuring and remunera on planning. He also advises clients on the tax implica ons of buying and selling their business.

PROFILE

A few years ago, MHA MacIntyre Hudson worked on an issue involving a non-UK domiciled individual who was claiming the remi ance basis. It proved an exhaus ng research eff ort to bring together all the elements needed to provide the client with the correct outcome.

The remi ance basis is a known area of complexity, but the client paid tax in the UK only on foreign income that was brought to the UK (remi ed here). The income was from a business source so it was not simply a case of declaring interest from a bank. What we needed to do was determine how much was regarded as remi ed and how much was taxable.

Surely that couldn’t be too hard?We started at the relevant parts of the Income Tax Act 2007 (ITA 2007). This directed

us to a part of the Income tax (Trading and Other Income) Act 2005 (ITTOIA 2005). Having moved between various parts of this, we were directed back to ITA 2007 which then directed us to the Taxa on (Interna onal and other Provisions) Act 2010 (TIOPA 2010).

Each stage was necessary to iden fy each required part in the process to determine the answer. The only problem was that the Revenue manual then contradicted it.

While the above is a complex area, it is not unusual to fi nd it necessary to move between several parts of an Act, and some mes more than one Act, to answer rela vely simple ques ons about tax ma ers. This is before looking into guidance and interpreta on that can o en change the apparent meaning from an ini al read. Cool heads are essen al.

CASE STUDY


conclusion to be drawn from the volume of material to be mastered: no single adviser can keep up to date with every piece of tax law. This leads to sobering conclusions that take us away from the reference materials to the way we manage our prac ces.

Put simply, a substan al prac ce needs specialists. Even though there remain successful generalists in prac ce, the expert eye of specialists, who spend all their me in a par cular key area of tax, is now a necessity.

Where you appoint those specialists depends on where you want your prac ce to concentrate, which is a func on of your business model. This does not, however, preclude small prac oners, or generalists, func oning in the modern era of tax complexity. They must, however, take great care about how they approach a client’s needs. Small and sole prac oners may be competent in some areas, but they will also need a professional’s acute awareness of what they do not know.

Former US defense secretary Donald Rumsfeld’s comment about ‘known unknowns’ rings as true for tax advisers as it did in 2002 for na onal security policy makers.

This is such a cri cal element of the professional tax adviser’s working life and such a refl ec on of the increasing complexity of the tax code, one professional I know refers to it as being ‘knowingly incompetent’. You simply have to know when to seek advice elsewhere. Hurlingham Estates Ltd v Wilde & Partners [1997] STC 627 best illustrates this problem. In his ruling, the judge concluded that solicitors fi rm Wilde & Partners had been negligent because of its failure to advise that the tax liability in a property transac on could have been reduced.

In an age in which tax avoidance regularly makes newspaper headlines, Hurlingham ironically brings home the risks of failing to help clients reduce a tax bill, but it also painfully illustrates the implica ons of an adviser failing to spot their own knowledge gap. It is the stuff of professional indemnity nightmares.

Coping with knowledge gaps places a premium on training and ensuring that con nuing professional development (CPD) is well targeted and focused on the needs of individual tax advisers. Good CPD is as much about bringing home the lessons of knowing what you do not know as it is about exper se in any par cular fi eld. A thorough general background in tax will support this.

Value of generalistsWhich brings us back to the well-informed generalist. Well-informed, astute prac oners who maintain their CPD assiduously will always be valuable as level-headed advisers, able to iden fy when a specialist is needed for a client.

An adviser with an acute awareness of what they do not know will build networks to ensure they can tap into exper se when they need it.

But their role is not just about referring clients to another adviser. Clients who have already put faith in their rela onship in a generalist accountant will be reassured by having their adviser on hand to help understand the expert’s advice. That makes the generalist a key intermediary aiding with communica on skills.

Explana ons are a key part of the client rela onship. This is where the generalist can make a diff erence – by taking a complex explana on from an expert and turning it into accessible language for the client.

That leaves us with the need to know what you do not know. And keep up the training regularly. Build those elements into the fi bre of your prac ce and they will become the bedrock to a successful business.

DISCOVERY ASSESSMENTS

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Harriet Brown considers the uncertain es that an HMRC discovery assessment can cause

What is the issue?Is there anything a taxpayer can do in the face of a discovery assessment and what recent cases tell us about that What does it mean to me?

How to approach dealing with a discovery and how this diff ers from that to take in an enquiry What can I take away?

Some posi ve points about prospects of successfully challenging an HMRC discovery assessment

KEY POINTS

the mescale in which an enquiry can be brought. This reduces the certainty for a taxpayer who cannot, on the ending of the period in which an enquiry can be made, rely on their tax return being fi nal.

Interpretation of s 29The discovery provisions have, and con nue to be, the subject of much case law. The fi rst important point to make is that the courts have interpreted discovery widely. In Cenlon Finance Co Ltd v Ellwood [1962] AC 782 at 796–797 Lord Simonds said:

‘I can see no reason for saying that a discovery of undercharge can only arise where a new fact has been discovered. The words are apt to include any case in which for any reason it newly appears that the taxpayer has been undercharged and the context supports rather than detracts from this interpreta on.’

This makes it diffi cult, although not

impossible, for taxpayers to argue that there has been no discovery. In Charlton v R & C Commrs [2013] STC 866 the court explained that no new informa on, of fact or law, was required for there to be a discovery. The only requirement was that it had ‘newly appeared’ to an offi cer, ac ng honestly and reasonably, that there was an insuffi ciency in an assessment.

This could be for any reason, including a change of view, change of opinion, or correc on of an oversight. The requirement for newness did not relate to the reason for the conclusion reached by the offi cer, but to the conclusion itself.

This illustrates the breadth of the provisions, poten ally giving HMRC far-reaching powers to recoup tax losses. Such a view of the provisions being almost undefeatable was widely adopted a er the 2004 case of Langham v Veltema 76 TC 259.

This case was yet another example of HMRC’s discovery assessment being upheld, when the court considered two issues

Discovery assessments – under s 29 of the Taxes Management Act 1970 (TMA 1970) – are a perennial

concern for tax advisers and taxpayers alike. HMRC has two primary ways to challenge a taxpayer’s return. First, it can enquire into an individual taxpayer’s return under s 9A TMA 1970. They may do so only ‘up to the end of the period of 12 months a er the day on which the return was delivered’, assuming it arrived on me. Thus, the period for an enquiry to be opened is quite short.

The other op on is a discovery assessment. The period in which this can be made is much longer. The limits for making an assessment are set out in s 34 and s 36 TMA 1970. In the fi rst instance, this is four years a er the end of the year of assessment to which it relates; in the second it is six years a er the end of the year of assessment if careless behaviour caused the tax loss and 20 years a er the end of the year of assessment if deliberate behaviour caused it. Thus discovery assessment vastly extends

Nowhere to hide?

While being an administra ve provision, which ideally should be fairly straigh orward, s 29 TMA 1970 is dra ed in a complex way with subsequent case law not always clarifying the meaning.

Sec on 29 includes ten subsec ons, which, with the excep on of s 29(7A), broadly do one of three things:bring par cular assessments within the

discovery provisions;bring assessments otherwise within the

discovery provisions back out of them. These are known as ‘saving’ provisions; and

explain the meaning of terms in other provisions. These are known as ‘reference’ provisions.The main terms of s 29 are:

(1) discovery assessment can be made if HMRC discovers there is an insuffi ciency of tax;

(2) discovery assessment cannot be

made if the insuffi ciency was caused by a return made in accordance with prac ce prevailing at the me;

(3)–(5) discovery assessment cannot be made where neither of two condi ons is met:

the insuffi ciency was brought about carelessly or deliberately by the taxpayer or a person ac ng on his behalf; and

HMRC could not have been reasonably expected, on the basis of the informa on made available, to be aware of the insuffi ciency,

(6) informa on is ‘made available’ if it is in: the relevant return, or any claim made, or in any accounts, statements or

documents accompanying any such claim or return,

or par culars produced or furnished by the taxpayer in response to an enquiry and it is informa on the existence of which, and the relevance of which as regards the insuffi ciency HMRC could reasonably be expected to have inferred from the informa on provided, or

had been no fi ed to HMRC by the taxpayer;

(7) restricts the returns that can be taken into account in determining whether informa on has been made available to any return of the taxpayers for either of the two immediately preceding chargeable periods; and

(8) challenge of a discovery assessment on the basis that neither of the condi ons set out in s 29(7) are met must be made by way of appeal.

THE TERMS OF S 29 TMA 1970


Name Harriet BrownPosition Barrister and Jersey AdvocateCompany Tax Chambers, 15 Old SquareEmail [email protected] le Harriet Brown MA (Cantab) is recommended as a leading junior tax barrister in the current edi on of the Legal 500 (Private

client: personal tax). She is co-author of the Interac on of the EU Treaty and UK Tax Code and author of the Jersey Law of Trusts. She advises on tax ma ers, par cularly in the context of disputes with HMRC, and li gates tax disputes and ma ers with a tax element on behalf of lay clients, accountants and solicitors.

PROFILE


described by Auld LJ as:‘The fi rst issue is whether awareness or inference of actual insuffi ciency is required to nega ve the condi on, or would awareness that it was ques onable do? The second issue is, what is the relevant informa on before the inspector on the basis of which he could be said to have been reasonably expected to be aware of an insuffi ciency?’

Veltema addressed two issues with interpreta on of s 29: the level of certainty of awareness of an insuffi ciency required and the extent to which informa on outside s 29(6) can be taken into account. On the fi rst, Auld LJ said:

‘It is plain from the wording of the statutory test in s 29(5) that it is concerned, not with what an inspector could reasonably have been expected to do, but with what he could have been reasonably expected to be aware of. It speaks of an inspector’s objec ve awareness, from the informa on made available to him by the taxpayer, of ‘the situa on’ men oned in s 29(1), namely an actual insuffi ciency in the assessment. If he is uneasy about the suffi ciency of the assessment, he can exercise his power of enquiry under s 9A and is given plenty of me in which to complete it before the discovery provisions of s 29 take eff ect.’

On to the second issue, Auld LJ said:‘The inspector is to be shut out from making a discovery assessment under the sec on only when the taxpayer or his representa ves, in making an honest and accurate return or in

responding to a s 9A enquiry, have clearly alerted him to the insuffi ciency of the assessment, not where the inspector may have some other informa on, not normally part of his checks, that may put the suffi ciency of the assessment in ques on. If that other informa on when seen by the inspector does cause him to ques on the assessment, he has the op on of making a s 9A enquiry before the discovery provisions of s 29(5) come into play. That scheme is clearly supported by the express iden fi ca on in s 29(6) only of categories of informa on emana ng.’

It is from the Veltema case that we have the concept of a hypothe cal offi cer (as in the reference in subsec on (5) to an offi cer) Auld LJ described the relevant issue as being:

‘Whether, as the Inspector contends, only awareness or an inference by him of an actual insuffi ciency in the self-assessment, though not necessarily its precise extent, would have disen tled him from making a discovery assessment under sec on 29(5), or whether, as Mr Veltema contends,

an awareness or inference by the Inspector of circumstances sugges ng a possible insuffi ciency and the need for some basic check did so.’

The Court held that it was the former. Thus Veltema, not to men on numerous other cases in which HMRC has successfully defended a discovery assessment, gives the impression that the Revenue’s powers when embarking on one are almost unlimited. This is not the case and off ers an important lesson in what should be included in a white space disclosure and the grounds on which a discovery assessment can be challenged.

Recent cases: what we can learnFreeman v HMRC [2013] UKFTT 496 (TC) concerned the proper applica on of ss 29(2) and (5) TMA 1970. The facts were: the taxpayer swapped shares in a

company for loan notes under a reorganisa on; the exchange was disclosed to HMRC in

a white space disclosure on the 1997–98 tax return; loan notes subsequently redeemed in

2002–03 were en tled to taper relief as long as they were not, as the taxpayer



believed, qualifying corporate bonds (QCBs); the 1997–98 return was enquired into in

2000. The taxpayer’s advisors told HMRC that the taxpayer’s view was that these were non-QCBs, which HMRC agreed was likely to be the case; the loan notes were not non-QCBs, and so

were not en tled to relief; and an assessment was issued in 2007.

The First- er Tribunal (FTT) held: the term ‘discovery’ means coming to a

conclusion, or having reason to believe, which in turn gives rise to an assessment of tax; in Charlton, the FTT introduced the

addi onal requirement of newness, which includes a situa on where the original inspector changed their mind or a new inspector took a diff erent view; also in Charlton, the Upper Tribunal

confi rmed all that is required: ‘…is that it has newly appeared to an offi cer, ac ng honestly and reasonably, that there is an insuffi ciency in an assessment.’ This could be for any reason, including a change of view, change of opinion, or correc on of an oversight; in rela on to what might reasonably be

expected of an HMRC offi cer, complex cases will require a diff erent standard of the hypothe cal offi cer. In par cularly complex cases, the taxpayer may disclose factual informa on, but an offi cer may not reasonably be expected to be aware of an insuffi ciency of tax due to the complexity of the relevant law; and there is no single benchmark of

the knowledge and experience the hypothe cal offi cer should expect to possess. The offi cer cannot be taken to know every fact known to HMRC, nor are they expected to carry the en re corpus of knowledge relevant to their job in their head. An offi cer in a specialist unit would inevitably have more specialist knowledge.

The FTT held that the disclosure on the 2002–03 return did make clear to any hypothe cal offi cer that the loan notes were acquired in exchange for shares and not subscribed de novo for cash. To that extent, the offi cer should have been on no ce that issues rela ng to capital gains tax taper relief might be relevant. However, the disclosure on the return was not suffi ciently complete and comprehensive.

What saved the taxpayer in Freeman from being a straigh orward case within s 29 was the informa on provided to HMRC on the enquiry and the interac on with the defi ning terms of s 29(6). The court held: enclosing the loan notes under cover of a

le er in the earlier enquiry sa sfi ed all the requirements of s 29(6)(d)(ii), other than

the no fi ca on of its relevance to the insuffi ciency for the tax year in ques on, that is, 2002–03; there is no me requirement for

no fi ca on in wri ng in s 29(6)(d)(ii); and since subsec on (d)(ii) has no temporal

restric on, the loan note instrument that was supplied in 2000 would have alerted an offi cer, that its terms would have aff ected liability in 2002–03 because that was the year of the fi nal redemp on. the taxpayer had provided enough

informa on through an earlier year enquiry – more than two years before the year of assessment to which the discovery assessment related – to show that neither of the condi ons in s 29(3) was met.

Another example of the successful defence of a discovery assessment was in Fisher and others v R & C Commrs [2014] SFTD 1341. The facts in this case were: the appellants had fi led tax returns and, at

the mes they were submi ed, enquiries had been opened into the returns for each of the four previous years; in the enquiries for the earlier years, the

no ces expressly stated that the earlier enquiries would form part of the ongoing enquiries; and no no ce of enquiry was given for either

2005–06 or 2006–07, but discovery assessments were issued in 2009 for both years.

On these facts it was held that the hypothe cal offi cer – by the me the enquiry windows closed – would have been aware of s 739 being in conten on, and the taxpayers succeeded in overturning the discovery assessments.

These cases give important indica ons as to how the scope of the discovery provisions is circumscribed. Some key points are: The scope of the informa on that must

be taken into account under s 29(6) in determining whether informa on has been ‘made available’ is wider than HMRC has previously contended. Only the returns and claims (and documents provided with them) are restricted to the two immediately preceding chargeable periods – informa on provided in an enquiry, for an example, can be provided at any me. It appears that there will be considera on

given to the context in which informa on is provided to HMRC – as in Fisher, where the context of the exis ng enquiries was highly per nent to what the hypothe cal inspector could reasonably have been expected to infer. It is rare, although not impossible, for a

taxpayer to win on the basis that there has been no discovery, since the Veltema approach has been widely adopted in cases since 2004.

There is, however, a requirement for newness as shown in Charlton. This relates not to the reason for the conclusion reached by the offi cer, but to the conclusion itself. So it is necessary to carefully examine the circumstances of any discovery assessment made by HMRC. Care should be taken a er the recent Court of Appeal decision in Sanderson v R & C Commrs [2016] EWCA Civ 19. Even if the actual offi cer involved in the case has the knowledge they require to raise an enquiry, it is not his knowledge that is relevant, but that of a hypothe cal offi cer. Therefore, it is possible that such actual knowledge would not assist, since it is the ‘reasonable’ offi cer that must be considered.

ConclusionsThere are two possible ways to put into eff ect the knowledge of the opera on of s 29 gleaned from the con nuing body of case law. First, in what informa on is provided to HMRC, both on returns and in response to enquiries. Note that, in Freeman, it was the response to an earlier enquiry that saved the taxpayer. Second, how to deal with a discovery assessment and when the correct approach will be to challenge such assessment by way of appeal.

In rela on to the former, it is not enough to simply consider the informa on being provided to HMRC in terms of volume – the key point is whether the Revenue could have reasonably been expected to be aware of the insuffi ciency on the basis of that informa on. If you are aware of more than one possible interpreta on thought could be given to simply no ng the discrepancy in any white space disclosure, although this might simply draw an enquiry down upon your client. This is an area where much thought should be given and the possibility of taking further advice on the dra ing of white space disclosures.

Challenging a discovery assessment must be done through an appeal to the FTT. It should not be assumed that every discovery assessment will stand up. Careful considera on should be given to the circumstances and, in par cular, any informa on provided with returns or claims for the two years preceding the year to which the assessment relates and any informa on provided in response to an enquiry. It will also be necessary to keep considering the rapidly developing body of case law.

However, recent cases indicate that the discovery provisions do not give HMRC carte blanche to make an assessment and advisers must consider whether such assessment has been validly made, notwithstanding the complex terms defi ning HMRC’s power considered here.

One of the current hot topics is the taxa on of digital services. This has been the subject of detailed

considera on by the European Commission and by the digital task force established as part of the G20/OECD BEPS project.

In the end, neither the EU group nor the task force was minded to recommend a separate tax system for digital ac vi es. They also noted that for most businesses digital is embedded in the business model as a whole.

It is easy to see that ordering goods online is simply the modern equivalent of catalogue shopping. For some businesses the online ordering system serves mul ple countries, but in all cases the business requires access to warehouses full of goods and a logis cs system to deliver to customers. A similar approach applies to, say, fl ight bookings, which can be made online or through a smartphone app rather a phone call or a visit to a travel agent as would have been the case 20 or 30 years ago. Yet the service – the fl ight – remains the same.

Ever since corporate tax (or income tax on companies) was invented, it has been based on the ac vity that takes place in a par cular country. ‘Ac vity’ means looking at what the company does based on its people, property and equipment. Today, despite the advancement and reach of machines, the ul mate designer and controlling mind remains human.

The ac vity-based system has always made sense because the tax authority can visit the business to see what takes place there. As the BEPS project has noted, it was also based on the assump on that none of the ac vi es escaped taxa on.

What BEPS does – and the UK’s diverted profi ts tax encourages before it is fully in place – is driven by the recogni on that profi ts need to be aligned with the value-added ac vi es in each country. Legal

The approach from the G20, OECD and the EU has been to apply the exis ng rules to these new businesses. The changes to the permanent establishment rules and transfer pricing for intellectual property will have an impact on some types of digital services. It is clear, for example, that it will no longer be possible to receive substan al income in a country simply because of legal ownership.

The new approaches to transfer pricing will seek to a ribute that income to the people-based ac vi es. The changes to the taxable presence rules (permanent establishment) will render irrelevant the place of contract – which might be a simple mouse click – if there is substan al marke ng ac vity involving physical presence in another country.

However, these changes will not aff ect all providers of digital services – and it will con nue to be possible to locate physical ac vi es in a small number of countries with low tax rates. It is part of the global philosophy that sovereign countries should be able to compete (fairly) for ac vi es.

Perhaps the reasons why some countries have not been able to agree on a separate regime are: Purely digital ac vi es are a small part

of global trade and all have a physical component that is taxed somewhere. The digital market is developing fast

and there is no desire to choke off development, which is of broader economic benefi t than corporate taxa on. Many digital companies are small or are making low profi ts or even losses. There are no agreed methods of assessing

and alloca ng value (France has explored a variety of ideas but has yet to fi nd anything suitable). Countries with substan al ac vi es

in technology, such as, but not limited to, the US, are most unlikely to give up exis ng income streams for others to tax. There is currently no realis c possibility of

conduc ng compliance ac vi es.

The G20/OECD digital taskforce will con nue to work on the area un l 2020 and it is possible that new proposals could emerge. It is, however, unrealis c for individual countries to ‘go it alone’ due to the signifi cant interac ons (and binding legal trea es) with other countries.

points, such as legal ownership of assets or the place where the contract is made, will no longer be relevant to where the profi ts or losses should be recorded. BEPS is already star ng to be implemented through adop on of new approaches to transfer pricing. Some of the changes will require modifi ca ons to double tax trea es and will not be implemented before 2017 (or later, depending on individual countries).

Interes ngly, the fi rst post-BEPS treaty has just been signed between Australia and Germany and awaits ra fi ca on. The UK is in the vanguard of domes c law implementa on and, no doubt, will ra fy the mul lateral instrument once dra ed.

The ques on of digital services remains open, though. Of course, any digital service provider has physical presence. Many need to develop technology and some will own substan al datacentres. Yet even the biggest providers can deliver their services around the world from a limited number of physical loca ons. The picture becomes even more complex when the providers use the infrastructure of others – and deliver their service from machines remotely managed from another country.

The revenue models of some of these new businesses may also be diff erent. Many services – from email to music to search – are distributed free. In some cases, adver sing fi nances them; in other cases, gathering data may provide something of value to the provider.

Name Bill DodwellPosition Leader of Deloi e’s Tax Policy GroupCompany Deloi e LLPTel 020 7007 0848Email bdodwell@deloi e.co.ukProfi le Bill Dodwell leads Deloi e’s Tax Policy group, which is

responsible for knowledge, training and representa ons to HM Treasury and HMRC. He is Chair of the Technical Commi ee and the Tax Adviser sub-commi ee.

PROFILE

BEPS EU DIGITAL TASKFORCE

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Virtual complianceBill Dodwell looks at the dilemma faced by the new EU digital taskforce in discerning digital services compliance in a global marketplace

The con nual growth of internet shopping was evidenced in the US on 30 November 2015, known as Cyber

Monday, when online sales soared above $3bn, breaking the record set only three days earlier on Black Friday. Moreover, the UK and other parts of Europe seem to be following the US template.

How much of this ac vity represents cross-border transac ons is unknown, but digital opera ons have opened up the global marketplace. Businesses seeking to grow have generally embraced this selling medium, and will inevitably fi nd themselves selling to customers worldwide. At the same me governments have refocused their

revenue collec on ac vi es away from direct to indirect taxes while the complexity of the VAT rules remain unabated. This is despite a empts by the EU to review, simplify and reduce the problems many businesses have to grapple with in their own country and in overseas jurisdic ons.

Two recent ar cles in Tax Adviser, ‘Risk and reward’, June 2015 and ‘Digitalis ng VAT’, October 2015, explored some of the

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Chris Lallemand and John Voyez consider cross-border compliance for VAT


diffi cult issues to be faced by businesses selling cross-border in the EU. Some of these include: Collec ng evidence of the loca on and VAT status of the customer. Ensuring each country’s ‘call off ’ or consignment stock arrangements are correctly dealt with. Iden fying chain transac ons and triangula on arrangements correctly. Limita ons of the current VAT administra on system, including diff erent distance selling thresholds, and MOSS rules which now apply to broadcas ng, electronic and telephone services.

Any VAT adviser will know that diff erent countries administer similar VAT rules in diff erent ways, so it is not possible to assume that the treatment applied to transac ons in the UK will be replicated elsewhere. Examples of cases illustra ng diff erences in the past include RBS Deutschland (CJEU Case C-277/09) on the leasing of cars from Germany to the UK and a mismatch between the way each

country analysed the supply, resul ng in no VAT being paid at all. In another [IDT Card Services Ireland Ltd [2006] EWCA Civ 29] the cross-border sale of mobile phone me between Ireland and the UK was

scru nised. Due to the diff erent VAT rules, it was contended that no output VAT was due in either Ireland or the UK. However, the court considered on a purposive basis that there was a liability to UK VAT. Anomalies such as these con nue to crop up.

Published differences in VAT treatment across the EUThe EU has published a list of country-by-country diff erences in the VAT treatment of electronic broadcas ng and telecoms (EBT) services to assist those dealing with their VAT obliga ons for cross-border and intra-EU supplies (www. nyurl.com/jwnmadv). In the UK the ‘use and enjoyment rules’ for supplies of telecoms and broadcas ng services to non VAT-registered customers, where the place of supply is the UK but the services are enjoyed outside it, are not subject to UK VAT. An example might be

What is the issue?Cross-border transac ons have for some me been an important part of business life, but with this comes a need to focus on the VAT rules in various jurisdic ons and the status of the customer – business or non-business What does it mean to me?

VAT or GST is a truly global tax with over 160 countries having some form of turn over tax. Although in principle the rules may be similar, especially within the EU, in prac ce they may be applied diff erently, resul ng in a wide range of issues to be considered by an indirect tax adviser who is to look a er cross-border business clients What can I take away?

A en on to the scope of engagement le ers and communica on of the boundaries of the adviser’s ability to advise on indirect taxes in another country should help to minimise misunderstandings with clients

KEY POINTS

engagement; if he does exceed the scope he should agree revised terms with his client and check that his professional indemnity insurance covers the enhanced work.”

The extent to which some forms of tax advisory services can be provided cross-border is being tested before the Court of Jus ce of the European Union (X-Steuerberatungsgesellscha v Finanzamt Hannover-Nord C-342/14). It concerns the provision of tax services by a UK company opera ng from the Netherlands to a German client. Tax advisory services are regulated in Germany. The problem in this case was that this ability to assess competence via the qualifi ca ons or experience of individuals did not extend to the individuals actually providing the tax services. This discriminated against tax advisory companies established outside Germany. The court held on 17 December 2015 that the German rules are incompa ble with the freedom to provide services within the member states guaranteed under ar cle 56 of the Treaty on the Func oning of the EU (TFEU). It should be noted that Germany and some other countries regulate the tax profession, unlike the present posi on in the UK.

An example of the need to properly interpret the contractual terms between the par es to determine whether to register for VAT in another country or rely on the VAT principles applicable to chain transac ons was highlighted in Indirect Tax Voice of August 2015. Although a UK adviser may feel confi dent in advising on how HMRC would approach a par cular set of cross-border circumstances, there are examples where diff erent revenue authori es would have a diff erent interpreta on. This is the case in land-related services where the UK and Germany have diff ering views.

Without detailed knowledge of prac ces and interpreta ons applied in foreign jurisdic ons, advising will always be full of poten al pi alls.

In today’s business environment, tax advisers will need to think carefully to what extent they are qualifi ed to assist their clients with cross-border, intra-EU VAT compliance and advisory work. This will require a en on to the scope of engagement le ers and the way clients are alerted to their VAT responsibili es. With the introduc on of MOSS and its probable expansion to a wider range of business ac vi es, the ability to fi le a return in one country covering supplies in many others and the request for advice on VAT issues in other jurisdic ons are likely to be far more frequent demands on the tax adviser than before.

Although the diffi culty of dealing with another revenue authority may be resolved if responsibility for reviewing MOSS returns is devolved to the jurisdic on in which the return is fi led, one presumes a suffi cient level of knowledge of the VAT requirements of the customer’s opera onal jurisdic ons will be required in order to fi le an accurate return. It is impera ve that tax advisers ensure their engagement le er is clear on the scope of the services they are providing.

Read ‘Risk and reward’ at www.taxadvisermagazine.com/ar cle/risk-and-reward and ‘Digitalising VAT’ at www.taxadvisermagazine.com/ar cle/digitalising-vat

Read the August 2015 issue of Indirect Tax Voice at www.taxadvisermagazine.com/sites/default/fi les/ITV_august2015.pdf

FURTHER INFORMATION

CROSS BORDER VAT

Name Chris LallemandPosition Na onal Tax ConsultantCompany Smith & WilliamsonEmail [email protected] le Chris Lallemand is a na onal tax consultant with Smith & Williamson, a Council member of the CIOT and vice chair of the

CIOT Commerce and Industry Group. His prac ce area covers business, corporate and indirect taxes and his work experience encompasses both prac ce and industry.

PROFILE

Name John VoyezPosition VAT partnerCompany Smith & WilliamsonEmail [email protected] le John’s main VAT advisory areas are on cross-border transac ons and property, including European and inbound from the US businesses.

He is a regular speaker at conferences and is a Council member of the Chartered Ins tute of Taxa on; being part of its VAT and indirect taxes sub-commi ee. He also represents the CIOT in Brussels at mee ngs with the Confédéra on Fiscale Européenne as well as chairing the Nexia indirect taxes commi ee.

PROFILE


a mobile phone service supplied to a UK customer who is on holiday in the US when making or receiving calls. In contrast, France has no such use and enjoyment rules. Thus a similar supply to a non VAT-registered French customer on holiday in the US would be subject to French VAT.

Subject to any commercial issues, the UK VAT rules allow a presump on that the supply is made in the country where the SIM card is issued (see www. nyurl.com/nh2q7ga). Neither the UK nor France obliges a VAT-registered supplier to issue a VAT invoice for EBT services to a non VAT-registered customer. Contrast this to Spain where there is an obliga on on a supplier subject to Spanish VAT, albeit a simplifi ed invoice may be issued for values up to €400.

The use of MOSSThe facility to use MOSS to enable businesses to meet their cross-border EU VAT fi ling obliga ons for EBT services has helped what would otherwise have been a nightmare scenario for businesses. However, some of the record-keeping requirements placed on EBT businesses – such as the need to obtain and keep two pieces of informa on to prove where a consumer lives – are onerous. There are some relaxa ons for VAT-registered UK micro-businesses using payment providers, and for non VAT-registered UK micro-businesses, where customer loca on decisions can be determined based on informa on provided to them by their payment provider. But the rules remain complex and a possible disincen ve for small business, which the EU is keen to avoid.

Proposals are expected this year for extending MOSS to cross-border sales of tangible goods. The EC VAT commi ee has already considered strategies used by businesses to exploit the distance-selling rules to avoid VAT registra on in another EU country (see working paper 885 of the EC VAT Commi ee dated 5 May 2015). It seems likely that the distance-selling thresholds will be reformed, and the variety of VAT-registra on thresholds in diff erent EU countries may be simplifi ed. These and other changes may be a long way over the horizon, but they will need to be considered when pu ng systems in place to deal with cross-border VAT obliga ons.

Implications of cross-border VAT work for the tax adviserThe recently re-issued guidelines for professional conduct in rela on to tax have the following requirement at paragraph 2.7: “A member has a professional duty to carry out his work within the scope of his engagement and with the requisite skill and care. A member should take care not to stray beyond the agreed terms of the

For many years UK employers have been using HMRC’s Appendix 4 agreement on short term business visitors (STBV).

It allows a relaxa on of the PAYE withholding requirements associated with par cular short term business visitors working in this country for UK en es. For host employers, it is a more pragma c solu on when making Real Time Informa on (RTI) submissions to HMRC.

As Steph Carr explained in ‘Just visi ng’, Tax Adviser, September 2015, the Appendix 4 agreement is strict in its applica on. The condi ons state that the employee in ques on must be present in the UK for no more than 183 days in any 12-month period, must come from a country with which the UK holds a double taxa on agreement (DTA) and also that the employment income ar cle of that DTA is expected to apply to the employee’s remunera on. The agreement therefore does not cover employees visi ng the UK from countries with which the UK does not have a DTA. Nor does it normally apply to those who are engaged by an overseas branch of a UK company because they are employed ul mately by a UK en ty,

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Relaxed workersStephanie Symonds-Dye considers a welcome update on short term business visitorss


legally and usually economically too.As a result, for individuals who are not

covered by an Appendix 4 agreement, HMRC expects employers to withhold PAYE on a real- me basis for any remunera on on any workdays performed in the UK. The only excep on is if the individuals are employed by non-UK en es but, despite working in this country, they are not ‘working for’ any UK host employer. In prac ce, most UK en es that are aware of business visitors to the UK from companies in the same group will not a empt to dis nguish employees in

this category in case HMRC later disagrees.

Practical considerationsEmployers are faced with a deluge of prac cal issues when managing their short term business visitor popula ons.

First, simply iden fying visitors working in the UK on a real- me basis is in itself a challenge. I have seldom seen this done successfully without the support of business traveller technology; o en, companies will iden fy these individuals by accident or, at tax year end when general travel and

What is the issue?Short term business visitors from overseas branches of a UK company or from non double-taxa on treaty countries are not eligible for the PAYE relaxa on provided for under the Appendix 4 (STBV) agreement What does it mean to me?

Employers must withhold PAYE on a real- me basis for employees performing substan ve work in the UK who are not covered under an Appendix 4 agreement. HMRC has released a new special PAYE arrangement, which relates specifi cally to individuals unable to meet the condi ons of the Appendix 4 agreement What can I take away?

Employers with short term business visitors mee ng the special arrangement criteria should apply for the new arrangement with HMRC as soon as possible. Although calcula ons and returns need not be submi ed un l 19 April a er the end of the tax year to which the agreement relates, the signed agreement needs to be in place by 5 April 2016 for any employer wishing to use the arrangement for the 2015/16 tax year. Employers would be well advised to allow a reasonable me for HMRC to process any applica on

KEY POINTS

WorkdaysEmployees who visit the UK from a non-DTA country must perform ‘substan ve’ rather than ‘incidental’ work for the benefi t of the UK company to a ract a UK PAYE withholding requirement. We saw in Carr’s ar cle that ‘incidental work’ would not a ract a PAYE withholding requirement. Employers should bear in mind that the defi ni on of incidental du es in case law is extremely narrow, and is interpreted and applied equally narrowly by HMRC in prac ce. Proving a er the event that the du es undertaken were preparatory in nature, of lesser importance than day-to-day du es and served no independent purpose is enough of a challenge to provide a powerful disincen ve.

HMRC appears to be taking a stricter approach in rela on to incidental du es and it may request business calendars, email records and conference materials to test the exact nature of the work performed. With mobile phones and tablets allowing employees to work remotely and fl exibly, it is becoming easier for employees to perform substan ve work away from their home offi ce and almost without apprecia ng they are ac vely working.

For employees who visit the UK from branches of a UK company, employers do not need to establish whether the work is for the benefi t of the UK enterprise, given the ul mate employer is based here. However, the same considera ons for incidental versus substan ve work would s ll apply.

The benefi tsThe new arrangement relaxes the employer’s requirement to withhold PAYE on a monthly basis and submit RTI returns. Instead, it allows them to defer the repor ng and withholding required for the business visitor un l the tax year end. This removes much of the administra ve burden and off ers a more generous window in most cases for employers to calculate the fi nal tax liability for the tax year in ques on.

It also gives the employer me to prepare payroll and HR personnel for such a me-consuming process. Finally, it allows employers more me to manage and accrue for the costs associated with any tax liabili es ahead of these being incurred, which is o en an area of internal fric on and can aff ect

profi tability.Unless the employee is tax equalised,

I understand HMRC does not seek a tax gross-up on withholdings under the special arrangement (other than on benefi ts in kind), even if these are not recovered from the individual business visitor. This again reduces complexity and provides employers with more scope to manage this process correctly without excessive costs.

Self-assessment compliance obligationsHMRC has indicated that tax return fi lings will not typically be required for these business visitors, assuming the amounts paid at year end are accurate. Although this li s a layer of self-assessment administra on, it may pose addi onal challenges for the taxpayer when considering poten al foreign tax credit claims in their home country. This is because some countries may request sight of a UK tax return as evidence of the UK tax payment rather than accept payroll withholding records. If the UK tax involved is more signifi cant, employers may wish to support their employees to undertake a cost benefi t analysis to determine the best course of ac on in terms of any addi onal repor ng needed.

SummaryShort term business visitors con nue to be a signifi cant area of interest to HMRC. With employee movement fundamental to any successful mul na onal, the monitoring and administra on required to ensure compliance for short term business travellers is ever-increasing. HMRC’s new special PAYE arrangement is welcome. It off ers a prac cal solu on to non-DTA business visitors and it provides employers with a realis c solu on to ensure compliance.

The special arrangement can be agreed with HMRC for the 2015/16 tax year onwards, so employers should seek approval from HMRC before 5 April 2016.

INTERNATIONALLY MOBILE EMPLOYEES

Name Stephanie Symonds-DyePosition Manager, People Advisory ServicesCompany Ernst & Young LLPEmail [email protected] 0118 928 1135Profi le Stephanie specialises in personal expatriate tax and she

works with both large and small mul na onal corporates. She has a degree in Law with Poli cs from the University of Exeter and qualifi ed as a Chartered Tax Adviser last year. She was awarded the Avery Jones CTA Medal for her performance in the Applica on and Interac on paper.

PROFILE

Read Steph Carr’s ar cle ‘Just visi ng’ at www.taxadvisermagazine.com/ar cle/just-visi ng

FURTHER INFORMATION


expense data is reviewed. Many of these visitors will not enter the UK on a formal assignment so will not typically even be visible to the employer’s global mobility func on. Consequently, employers o en have to formally disclose them to HMRC a er the tax year has ended. This approach can invite signifi cant payroll penal es and can damage the employer’s risk profi le and rela onship with HMRC.

Second, when a business traveller is iden fi ed, the employer must quickly determine their taxable income. The diffi cul es in this process should not be underes mated, and employers can fi nd it diffi cult to collate global payroll data at tax year end, not to men on on a real- me basis. Dealing with diff erent payroll systems, languages and me zones can turn this task into a signifi cant project. It can also be especially problema c when dealing with countries for which the concept of ‘personal’ income tax is unfamiliar, as will be the case for many non-DTA jurisdic ons such as UAE and Brazil.

Finally, employers must then set up these visitors on their payrolls and complete the forms and submissions for each of them. O en the HR data required for this is not readily available because they are not UK employees with UK HR records, delaying ma ers further. Employers can bypass this issue to an extent by using an Appendix 6 Modifi ed Payroll agreement. This is available only if the business visitor is ‘tax equalised’ which in itself requires careful considera on because the associated gross-ups are likely to increase the tax costs.

The new special arrangementIn October 2015 HMRC released a new special PAYE arrangement, which relates specifi cally to individuals unable to meet the condi ons of the Appendix 4 agreement. It is a welcome addi on to the suite of ‘relaxa ons’ HMRC off ers employers for short term business visitors and expats more generally.

The rulesThe special arrangement specifi cally covers business visitors from non-DTA countries and those working for overseas branches of UK companies. Since the expecta on is that remunera on from UK workdays will be taxable, interes ngly the new arrangement focuses on workdays rather than days of presence as would be required under the Appendix 4 agreement, which is considering a DTA-based test. The special arrangement can be used for visitors who spend 30 workdays or fewer in the UK each tax year. As with the Appendix 4 agreement, non-resident directors of a UK en ty are excluded from the arrangement, and would therefore be subject to the normal PAYE withholding requirements.

BEPS


much discussion and, while important, are men oned only briefl y given that groups should know whether they are aff ected and should be considering their posi on. The report on ‘transfer pricing documenta on and country-by-country repor ng’ (CBCR), ac on 13, introduces a new fi ling requirement for mul na onal enterprises with annual consolidated group revenue of more than €750m for fi scal years beginning on, or a er, 1 January 2016. This requires informa on on income, taxes paid, and economic ac vity by country, and will generally be fi led in the parent company jurisdic on and made available to other jurisdic ons under exchange of informa on procedures. The report on ‘neutralising the eff ects of hybrid mismatch arrangements’, ac on 2, which recommends that countries introduce primary and defensive rules to target arrangements that exploit diff erences in the tax treatment of an en ty (one country regards it as ‘opaque’, the other as ‘see through’), or an instrument (one country regards a payment as interest, the other as a dividend).

Actions requiring implementation in domestic lawIt is unsurprising that several countries agreed that BEPS counter measures require countries to make changes to their domes c tax laws because it is these diff erences that give rise to planning opportuni es. Two signifi cant recommenda ons fall into this category.

Limi ng base erosion involving interest deduc ons (ac on 4)The G20/OECD recommends that an en ty’s net deduc on for interest (and

In November 2015 the G20 ra fi ed, approved and adopted recommenda ons made in 13

reports produced by the OECD to counter Base Erosion and Profi t Shi ing (BEPS) – summarised in the Table. The recommenda ons take the form of new minimum standards, common approaches and guidance.

The original tax policy concerns were that ‘due to gaps in the interac on of diff erent tax systems, and in some cases because of the applica on of bilateral tax trea es, income from cross-border ac vi es may go untaxed anywhere, or be only unduly lowly taxed’. The OECD es mates the global revenue loss at $100bn–240bn (ac on 11 report) and will be monitoring the success of the project.

Ini ally, a signifi cant focus was on the digital economy, and this generated the longest report. This sensibly concluded that ‘it would be diffi cult, if not impossible, to ring-fence the digital economy from the rest of the economy’, but developments would be monitored and a further report produced by 2020.

Two reports have been the subject of

Around the world in 13 reportsJoy Svas -Salee contemplates a period of unprecedented change for interna onal corporate tax law

economically equivalent payments) should be limited to a percentage of its earnings before interest, taxes, deprecia on and amor sa on (EBITDA) within a corridor of possible ra os of 10%–30%. An op onal group ra o rule, enabling an en ty to deduct addi onal interest up to the level of the net interest/EBITDA ra o of its worldwide group, or by reference to the equity and assets of an en ty or a group, is also proposed. This could be accompanied by an upli of up to 10% in the group’s net third party interest expense.

Reliefs are accepted if there is less risk of BEPS and include: a de minimis threshold; an exclusion for interest on third-party loans used to fund public-benefi t projects; and the carry forward of disallowed interest expense or unused interest capacity for use in future years. This is intended to

What is the issue?Recommenda ons made in the G20/OECD BEPS project have been ra fi ed, approved and adopted. The project is now moving to the implementa on phase and to a period of unprecedented change for corporates What does it mean to me?

Most changes will apply regardless of a group’s size, although the focus (and debate) so far has been on the larger mul na onals What can I take away?

An awareness of the key issues to consider and monitor

KEY POINTS

BEPS

Name Joy Svas -SaleePosition Professorial fellow at the Centre for Commercial Law Studies, Queen Mary University of LondonEmail j.e.svas [email protected] le Joy is an interna onal tax law specialist. A er a career in prac ce in three of the big six accountancy fi rms, she now leads the

teaching of this subject at LLM level.

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reduce the impact of earnings vola lity and assist long-term investments that generate income in later years.

In addi on, the posi on of the fi nancial sector will be considered this year.

This is an important issue for most taxpayers. Some groups will not obtain a tax deduc on for all their third-party interest expense. It is par cularly important in the UK, which has rela vely generous rules, albeit with a worldwide debt cap provision. A consulta on is under way. It can only be hoped that countries implement these recommenda ons so that domes c groups can obtain full deduc on for their third-party interest expense.

All groups claiming a deduc on for interest expense ought to assess their global posi ons and track domes c changes in this area.

Countering harmful tax prac ces more eff ec vely (ac on 5)All countries compete to a ract

investment and the topic of harmful tax compe on

has been on the OECD’s agenda for years. The

current focus is on preferen al regimes, with the ini al spotlight on 16 intellectual property regimes, including the UK’s patent box arrangement, and on substan al ac vi es (the 12th factor in the OECD’s 1998 report has become the key factor today), riding on the back of work done by the EU. The recommenda on is that there should be a nexus between the income-receiving benefi ts and the expenditure contribu ng to that income, with the spend on developing or improving intellectual property being a proxy for substan al ac vi es. Other preferen al regimes will be revisited in the light of this focus on substan al ac vi es.

The UK is amending its patent box regime and groups benefi ng from this will be aware of the posi on. More generally, groups benefi ng from other preferen al arrangements must consider the new focus on substan al ac vi es and consider their future posi on.

The recommenda ons also focus on the lack of transparency in rela on to largely unilateral rulings given to taxpayers on: preferen al regimes; cross-border pricing arrangements; downwards adjustment to profi ts; permanent establishments; and conduit arrangements.

Exchange of informa on of such rulings will take place from 1 April, with some past rulings being exchanged by 31 December. Taxpayers need to take this into account in reques ng unilateral rulings.

Ac ons to help countries introduce domes c lawsTwo reports provide guidance to countries seeking to introduce domes c laws that have already been adopted by some other states, including the UK: The fi rst relates to controlled foreign company (CFC) rules, ac on 3, that the OECD con nues to recommend because they respond to the risk that income can be shi ed to another country or by engaging a third country. The

report suggests that credit countries give relief for CFC tax paid, but there is no discussion on how such double (or mul ple) taxa on could be resolved under trea es themselves. The second relates to mandatory tax disclosure rules, ac on 12, that is intended to provide early informa on about tax avoidance schemes and to act as a deterrent. It suggests that these rules are also designed to capture interna onal tax schemes.

Actions changing the transfer pricing guidelinesWork in this area heralds a signifi cant change in emphasis in the OECD transfer pricing guidelines and will be adopted quickly. This is because changes to the guidelines do not necessarily require amending either domes c law or tax trea es.

The report brings together work on intangibles, the contractual alloca on of risks and other high-risk areas, ac ons 8–10. It expresses concern that the current transfer pricing emphasis on the contractual alloca on of func ons, assets and risks is vulnerable to manipula on and can lead to outcomes not aligned with value crea on.

The revised guidance requires careful ‘delinea on’ of actual transac ons between associated enterprises by considering both the contractual posi on and the conduct of the par es. If contracts are incomplete or not supported by the conduct of the par es, the conduct will supplement or replace the contractual arrangements. In essence, this is about arriving at what is considered to be the ‘real deal’ and not the ‘paper deal’ which is then priced. If an arrangement lacks commercial ra onale it can be disregarded. Examples include: risks contractually assumed by a party that neither exercises control over them nor has the fi nancial capacity to assume them should be allocated to the party that does; legal ownership of intangibles alone does not necessarily generate a right to all, or indeed any, of the return that is generated by their exploita on; discounts generated by the volume of goods ordered by several group companies should be allocated to

BEPS


those group companies, not to the purchasing company; and profi ts of a cash box should be equivalent to no more than a risk-free return.

Further work will be undertaken on profi t splits and fi nancial transac ons.

Transfer pricing is a diffi cult science because it requires connected par es to transact in a similar manner to third par es in circumstances where those par es do not transact with each other consistently. A signifi cant concern with these recommenda ons is the move away from the legal posi on, which is o en the only constant factor in an arrangement that con nues over several years, towards conduct that can change over me. It remains to be seen how this materialises in prac ce and when interest rates eventually rise.

Actions requiring treaty changeTwo signifi cant reports require changes to be made to tax trea es.

Preven ng the ar fi cial avoidance of permanent establishment status (ac on 7)This report recommends the lowering

of the threshold at which a company is regarded as having a taxable presence or permanent establishment (PE) in another territory and will need to be considered carefully by all taxpayers doing business abroad. A PE is likely to exist in future when: sales contracts are substan ally nego ated in one country and fi nalised or authorised in another, or where ‘commissionaire arrangements’ exist; a ‘closely related’ enterprise acts as a sales agent for the taxpayer in another country; the taxpayer carries on specifi ed ac vi es, which have been regarded historically as preparatory or auxiliary and not giving rise to a PE, but which are his core business ac vi es; a group fragments a cohesive opera ng business into several small opera ons, each of which is engaged in preparatory or auxiliary ac vi es; and a group splits up contracts between closely related enterprises to benefi t from the minimum period excep on for construc on sites.

This is bound to lead to more groups having more PEs and ‘accidental PEs’.

Groups will need to monitor the posi on of each en ty yearly. Follow-up work on the a ribu on of profi ts to PEs is planned with a view to providing guidance before the end of 2016. It must be hoped that this will reconsider the posi on that a PE may be treated as making a taxable profi t when the en ty of which it is a part makes a loss.

Preven ng the gran ng of treaty benefi ts in inappropriate circumstances (ac on 6)This report relates to treaty abuse and treaty shopping, which is iden fi ed as one of the most important sources of BEPS concerns. Countries have agreed to: change the treaty tle and preamble to clarify that states entering into tax trea es intend to avoid crea ng opportuni es for non-taxa on or reduced taxa on through evasion or avoidance (including treaty shopping); and include in their trea es:a limita on-on-benefi ts (LOB)

rule – a US approach that limits the availability of treaty benefi ts to en es that meet par cular condi ons – and a principal purposes test (PPT) – a UK

Ac ons Comments UK posi on Mul lateral instrument

1 Addressing the tax challenges of the digital economy

No specifi c changes and further report by 2020

2 Neutralising the eff ects of hybrid mismatch arrangements

Changes to domes c laws and trea es

Exis ng legisla on and dra legisla on

Yes

3 Designing eff ec ve controlled foreign company rules

Country toolkit Exis ng legisla on

4Limi ng base erosion involving interest deduc ons and other fi nancial payments

Changes to domes c laws Consulta on in progress

5Countering harmful tax prac ces more eff ec vely, taking into account transparency and substance

Triggers changes to domes c laws and increases exchange of informa on

UK amending patent box legisla on

6 Preven ng the gran ng of treaty benefi ts in inappropriate circumstances

Changes to trea es UK also has GAAR Yes

7 Preven ng the ar fi cial avoidance of permanent establishment status

Changes to trea es UK also has diverted profi ts tax

Yes

8–10Aligning transfer pricing outcomes with value crea on

Changes to transfer pricing guidelines and further work on permanent establishment profi ts in 2016

UK supports

11 Measuring and monitoring BEPS Produc on of sta s cs

12 Mandatory disclosure rules Country toolkit Exis ng legisla on

13 Transfer pricing documenta on and country-by-country repor ng

Applies today and will be reassessed by 2020

Implemented

14 Making dispute resolu on mechanisms more eff ec ve

A minimum standard and aim to se le disputes within 24 months

UK also agrees to arbitra on Yes

15 Developing a mul lateral instrument to modify bilateral tax trea es

Aim to open this for signature by 31 December 2016

UK suppor ng

TABLE – BEPS ACTION PLANS

BEPS


approach under which treaty benefi ts are denied if one of the principal purposes of the arrangements was to obtain them,

the PPT alone, orthe LOB rule supplemented by an

an -conduit fi nancing rule.This is about helping countries to

introduce provisions in their trea es which the US and the UK already have. Include targeted rules to address specifi c situa ons where:dividends are transferred to

reduce withholding taxes,a source state cannot tax a

gain on disposal of shares in a company deriving its value from immovable property due to ‘aggressive planning’,

an en ty is resident in two states, and

assets are transferred to a PE in a country that does not tax the income arising (or off ers preferen al treatment) by a company that exempts PE income.

We will have to wait to see what this means in prac ce and how the term ‘avoidance’ (rather than ‘abuse’) is interpreted. Groups that rely on

treaty provisions, perhaps to benefi t from reduc ons in the o en high rates of withholding tax on the payment of interest, dividends and royal es, will need to consider whether they qualify for treaty benefi ts and whether the transac on itself qualifi es.

Making dispute resolu ons mechanisms more eff ec ve (ac on 14)This is a welcome recommenda on given that disputes are likely to increase as a result of BEPS counter-measures. The mutual agreement procedure (MAP) already provides a mechanism for doing this and countries have now agreed to a minimum standard, complemented by a set of best prac ces, to ensure that: treaty MAP obliga ons are fully implemented in good faith and disputes are resolved within 24 months; administra ve processes are implemented to promote this; and eligible taxpayers can access MAP.

Several countries, including the UK, have also commi ed to provide mandatory binding MAP arbitra on. Although a major step forward, taxpayers can only hope the list of countries signing up will increase.

A multilateral instrumentThe challenge for governments is to

amend the exis ng 3,000-plus bilateral tax trea es in a synchronised way, quickly. Agreement has been reached that a multilateral instrument is a desirable and feasible means of achieving this. It is expected that it would coexist with bilateral tax treaties and be negotiated through an international conference (chaired by a UK official). The aim is to open this instrument for signature by 31 December 2016.

For taxpayers, a multilateral instrument should allow treaty changes to be made quickly and with an element of consistency. In the long term, a coexisting multilateral treaty, with its proposed explanatory report and examples to provide guidance, will add a layer of complexity to bilateral tax treaties while not dealing with the underlying issue that business operates globally, not bilaterally.

Looking forwardThe impact of the G20/OECD project will depend on whether, when and to what extent countries implement the recommendations and indeed what happens if some do not.

Taxpayers are faced with a period of unprecedented change in domestic laws and bilateral tax treaties and will need to monitor global changes carefully.

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SEVEN LOCATIONSAcrossthe UK

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Month Date Day City Venue

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BACK TO BASICS: TRUST INCOME

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What is the issue?Understanding how trust income is taxable on benefi ciaries and se lors What does it mean to me?

A guide to help recognise the types of trust and the tax treatment to expect for each What can I take away?

Increased confi dence in dealing with R185s

KEY POINTS

I can picture the scene – it is November and there is a pile of tax returns on my desk. I have just taken my CTA awareness exam

and ordered the advisory study materials for ‘inheritance tax trusts and estates’ that I am awai ng with bated breath.

In the pile are numerous le ers from clients who men on that there is something about a trust from a generous rela ve in their documents that they are unsure about, but they have every confi dence that I will deal with it.

To paraphrase A Streetcar Named Desire, in these circumstances a CTA student must always depend on the kindness of colleagues.

But there are key areas of which professionals need to be aware when dealing with trust income for clients who are the benefi ciaries or se lors of trusts.

What is a trust?At the simplest level, a trust is created when you ask a friend to hold on to your handbag, complete with all the secrets the accessory holds. A trust is established if a person (the ‘se lor’) gives property (cash, a handbag or any asset) to someone they trust (the ‘trustee’). The trustees can only hand out assets and any income generated to par cular people (the ‘benefi ciaries’). If substan al assets are involved, these are recorded in a document known as the ‘trust deed’ – a rulebook for the trust.

Many trusts (also called ‘se lements’) involve people wearing diff erent hats. It is common for the se lor to be a trustee; and there is nothing to prevent the se lor being a benefi ciary.

Why set up a trust?There are many reasons to use trusts, including: To protect assets – you want to give away

an asset now, but the recipient may be incapacitated, under 18 or a spendaholic and is unable to look a er it. Trusts may also protect assets against divorce or bankruptcy. To keep assets in the family – you

may want to give your son your prized collec on of mint-in-box Star Wars fi gures but are worried he may sell them on eBay rather than pass them on to his children. For tax planning.

Handbag secretsFiona Walker explains the income tax posi on for se lors and benefi ciaries of trusts

BACK TO BASICS: TRUST INCOME

Name Fiona WalkerCompany PEMPosition Tax AdviserTel 01223 728222Email [email protected] le Before recently joining the private client team of PEM, an

independent accountancy fi rm in Cambridge, Fiona worked as a chartered accountant in general prac ce. She was awarded her CTA qualifi ca on in January 2016 and in the May 2015 si ng won the Spoff oth Medal for the highest mark for the advisory paper on inheritance tax, trusts and estates.

PROFILE


Trust deed fact-fi ndYour client may have provided form R185 giving details of the income and tax credits to put on their tax return. But without understanding the set-up of the trust it is diffi cult to be confi dent that you will enter the informa on correctly and explain to your client how the arrangement has aff ected their tax posi on.

It is useful if the client can provide you with a copy of the trust deed. Although students o en hope to absorb informa on by osmosis, it is important to read it. Reading legal documents can seem bewildering, but it gets easier with experience.

You need to know: Who is the se lor? The se lor for tax purposes may not be who it appears to be if the trust was made a er a ‘deed of varia on’ to a will. Let’s say a grandfather leaves assets in his will to his daughter. She does not need the money and would rather her young children benefi t and asks her lawyers to change the will (with a deed of varia on) so that the assets are held on trust for the children. The deed of varia on means that, legally, we pretend the grandfather had le the assets to the grandchildren in his will so you might think that the he was the se lor. However, a deed of varia on does not apply for income tax or capital gains tax (CGT) – this means that the daughter is the se lor (because she is the one who has given up her en tlement to the assets). Thus a ‘parental se lement’ is created (see later for what this means for her tax return). Who are the poten al benefi ciaries? How are the benefi ciaries related to the se lor? Are any of the benefi ciaries under 18 and unmarried in the tax year? Are the benefi ciaries en tled to any of the income or the assets or do the trustees have discre on over when and how to distribute the income and assets? Off shore trusts are complicated so, if the se lor or any of the trustees are not UK-based, consult an expert.

Settlor interested trustsAsk yourself: could the se lor, or their current spouse or civil partner, benefi t in any circumstances from the trust assets? If yes, you have a se lor interested trust. So what? The trustees will prepare their tax return as normal. All the trust’s income as it arises is also put on to the se lor’s self-assessment tax return. The income ‘retains its character’ on the se lor’s return. It is entered as non-savings income, savings income and dividend income. The non-savings income and savings

income will come with a 45% tax credit at current rates, and the dividend income 37.5% (the rates applicable to trusts). If the settlor is an additional rate taxpayer there will be no more tax to pay on the trust income. But if the settlor’s income is below the additional rate threshold the trust tax credits will either generate a tax refund or offset the tax due on their other taxable income. The settlor must repay this tax refund or the amount of reduction in their tax liability to the trustees because legally it belongs to the trust. If any of the trust income is paid to a beneficiary (other than the settlor) this will be non-savings income on their return with a ring-fenced 45% tax credit. There will be no further tax to pay on this income but the tax credit should not be offset against any other income or be refunded. Form R185 should be provided. These rules apply only while a settlor is alive even if the spouse or civil partner is still alive. Capital gains made by a UK resident trust are not reported on the settlor or beneficiary returns.

Parental settlementIf the trust is not settlor interested, the next question is whether the trust has been set up by a parent and the beneficiaries include their children who are unmarried under-18s. If the answer is yes you have a parental settlement. This does not apply if the settlor is any other relation to the children. So what? Any income paid to the child is entered on the tax return of the parent or settlor as non-savings income with a 45% tax credit. As already noted, there will be no further tax to pay, but any refund or offset benefit of this credit should be repaid to the trustees. There is a de minimis of £100 for each beneficiary, but if this is breached it is all assessed on the parent. Any income accumulated in the trust while the child is a minor is not taxed

on the parent at this stage but will be if it is later paid out.

Trusts that are not settlor interested or parental settlementsThere are three main types of trust tax treatment remaining:1. Interest in possession. The benefi ciary

has an en tlement to some or all of the income – the trustees have no discre on to accumulate this. Broadly, the trustees pay tax at basic rates. For the benefi ciary, the trust income will retain its character and come with a basic rate tax credit. The R185 will give you the amounts to include. The dividend tax credit will never be recoverable, but your client may be due a refund on the tax paid by the trustees on the non-savings income and savings income. Any refund does not need to be repaid to the trust. Higher rate and addi onal rate taxpayers may have further tax to pay on the trust income.

2. Discre onary interest. If the trustees can choose whether to distribute income to benefi ciaries and when to do it this makes the arrangement a discre onary trust. Broadly, the trustees pay tax at addi onal rates. The benefi ciary is taxed as the income is distributed to them. All of the distribu on is treated as non-savings income with a 45% tax credit. If they are an addi onal rate taxpayer, there is no further tax to pay, otherwise there will be a tax refund/off set of other tax due. The benefi ciary can keep this benefi t.

3. Bare trust. Your benefi ciary is already absolutely en tled to the income and assets of the trust (even though the trustees are the legal owners), or if they are a child they will become en tled at 18. Here all income will be reported directly on the benefi ciary’s tax return and will not be taxable on the trustees (and so there will be no trust tax credit).

I ‘trust’ the above is a useful introduc on. Good luck to all students star ng their studies for the May si ng.

BACK TO BASICS: INPUT VAT RECOVERY


have a direct and immediate link to a taxable transac on; and

7. input tax must have been correctly charged.

Most of these conditions are self-explanatory, although some are not as simple as they seem. However it is the third and sixth that seem to cause most problems for business given that they introduce a degree of subjectivity in deciding whether a claim can be made. It follows that there is an excess of case law on each.

Condition 3: business purposeThere is no absolute definition of what it means for a supply to have been made for the purpose of a business. This introduces an element of uncertainty, and is why many businesses fail this test. Clearly, as HMRC notes in its guidance, it would not be viable or sensible to produce a list of what does and what

Generally, fully taxable businesses are entitled to recover their input VAT. However, this right is

restricted for some businesses, including those that are partly or fully exempt. What is not always appreciated is that restrictions on VAT recovery extend to all businesses unless particular conditions are met.

There are seven basic conditions that must be satisfied for a business to reclaim their input tax:1. a supply of goods or services has been

made;2. the supply was made to a taxable

person;3. the supply must have been made for a

business purpose;4. the supply was made to the person

claiming the deduc on;5. the recipient intends to use the goods

or services for the purposes of their business;

6. the goods or services supplies must

does not qualify as being carried out for a business purpose.

To determine whether this test has been satisfied, businesses need to consider three distinct questions.

1. Are the supplies being made in the pursuit of a business purpose?This question is particularly relevant for businesses and charities that undertake multiple activities, with at least one considered as non-business.

Numerous cases have explored this, including C&E Commrs v Lord Fisher [1981] STC 238 , C&E Commrs v Morrison’s Academy Boarding Houses Association [1978] STC 1 and C&E Commrs v St Paul’s Community Project Ltd [2005] STC 95.

Although the court decided in favour of Morrison’s Academy, noting that the concept of business did not need to be restricted purely to a profit-making activity, it was different in St Paul’s Community Project and Lord Fisher.

What is the issue?Input VAT recovery is not always a clear-cut process for any business. Due to the subjec ve nature of VAT law, par cularly in rela on to input VAT deduc on, it is not always clear what is and what is not eligible for input tax deduc on What does it mean to me?

Every business has an interest in the recovery of input VAT. Care is required to ensure that input VAT is not recovered incorrectly, resul ng in either an under- or overpayment of VAT. It is also important that taxpayers are not paying VAT unnecessarily since this represents a cost to businesses What can I take away?

An understanding of the two most subjec ve condi ons in determining whether a claim for input VAT deduc on can be made, the ‘business purpose’ test and the concept of a ‘direct and immediate link’

KEY POINTS

VAT’s your purpose?Natasha Siddiqi considers the challenges of input VAT recovery

BACK TO BASICS: INPUT VAT RECOVERY

Name Natasha SiddiqiCompany EYPosition Assistant tax adviserTel 020 7760 9405Email [email protected] le Natasha is a member of the fi nancial services indirect tax team

at EY. She is currently studying for the ACA ICAEW chartered accountancy and CTA qualifi ca ons. Natasha won the Victor Durkacz Medal for the highest mark in the CTA advisory paper on VAT on UK domes c transac ons, IPT and SDLT, in the May 2015 si ng.

PROFILE

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Here the organisations were found to be predominately unconcerned with the making of taxable supplies for a consideration so input tax could not be reclaimed.

Therefore, it is important to consider the intrinsic nature of the enterprise and the overall purpose of the activity when determining whether this test has been met. For organisations that have failed this test, HMRC has noted the presence of factors such as a lack of commerciality or the intent of the activity being merely to cover costs.

2. What was the intention behind this purchase?A subjective test again, but a useful question for businesses to ask themselves to determine whether a purchase is for a business purpose.

Ian Flockton Developments v C&E Commrs [1987] STC 394 is the best known case in this area. Ian Flockton

Developments, a plastic storage tank supplier, incurred VAT on the upkeep of a racehorse, stating that the sole purpose of this expenditure was to promote the company. Although – in my mind at least – there is no obvious link here, input tax deduction was allowed.

Therefore, it is clear that the intention behind the purchase is an important consideration in determining whether it is for a business purpose.

3. Is there a clear connection between the use of supplies and the business activities?Businesses should consider whether there is an associa on or link between the expenditure and the purpose of the business. It is likely that the less obvious this link is, the more likely HMRC will ques on whether there is a business purpose. It is not enough to simply believe that the purchase was for a business purpose. To sa sfy this test, considera on should be given as to whether the purchases will be used within the company.

Condition 6: direct and immediate link to a taxable transactionTo satisfy this test, it has been argued that the purchase or expenditure for which VAT was incurred should be a cost component of that supply when it was made.

BLP Group plc v C&E Commrs [1995] STC 424 is key. The case confirmed that businesses cannot look through to the ultimate purpose of that business to illustrate a direct and immediate link between that purpose and input VAT incurred.

BLP, a taxable holding company, sold one of its subsidiaries to raise funds to stay in business. BLP incurred VAT on the costs of the sale. It argued that, since the purpose of the sale was to continue being able to supply taxable management services, there was a direct and immediate link between the costs and taxable transactions. However, there is no link to any particular transaction here and the case confirmed that the overall purpose of the business bears no relevance to input VAT recovery. To

satisfy this condition, it is necessary to focus on the link between particular transactions and input VAT incurred.

It is also useful to consider C&E Commrs v Midland Bank plc [2000] 1 WLR 2080, Case (C-98/98). The issue was whether it was possible to recover in full input VAT on legal expenses in defending the business in relation to implementing a taxable transaction before the expense was incurred. It was decided that, as a partly exempt business, Midland Bank was not entitled to a full recovery. Although there was no dispute that the expense was for a business purpose, it was clearly not a cost component of the supply made at that time. Therefore, we can establish that, to have a true direct and immediate link to a transaction, the purchase must have been made before the supply and it must be directly tied to a particular transaction.

Developments in this area include the release of Revenue & Customs Brief 43 (2014): VAT on pension fund management costs, which gives further guidance on the presence of a direct and immediate link in this context. The brief sets out HMRC’s position on the eligibility of pension schemes to recover input VAT and was published after the decisions in Fiscale Eenheid PPG Holdings BV cs te Hoogezand, Case (C-26/12) and ATP Pension Services, Case (C-464/12). VAT incurred on general management of an occupational pension scheme was allowed deduction, in line with normal rules, on the basis that the costs represented overheads of the business and there was a direct and immediate link to the business activities.

However, any VAT incurred on investment management costs of pension funds was considered by HMRC as related to the ac vi es of the pension fund rather than the business itself, so were therefore only deduc ble by the fund.

HMRC has now changed its position and accepted that there may be a direct and immediate link between management costs and businesses overheads, instead of transactions in the investments, as long as the supply is received and paid for by the business, not the fund.

?

Smiley’s PeopleKeith Gordon discusses the Upper Tribunal’s decision on the tax treatment of an incen ve payment made to a group of employees in HMRC v Smith & Williamson Corporate Services Ltd and HMRC v Patrick Smiley

What is the issue?HMRC considered a goodwill payment to attract a team of investment managers as constituting employment income What does it mean to me?

The case confirms that client relationships and connections are not themselves assets, even if they might in some circumstances be turned to account What can I take away?

The judge concluded that any goodwill belonged to the team’s former employers. What the team members held (being the personal relationships) could not be transferred

KEY POINTS

HMRC’s antipathy towards goodwill is renowned among advisers. There have been

frequent attempts to challenge taxpayers’ assertions that goodwill has been transferred, most famously in the case of Balloon Promotions Limited v HMRC (2006) SpC 524, a decision that marks its first decade this month. The apparent response by HMRC to its defeat in Balloon Promotions is not to appeal against the special commissioner’s decision, but to remain hostile to assertions of goodwill in other cases, as if the hearing had never happened.

Of course, if the statute is to give a better tax treatment were a payment categorised as goodwill, it is natural to assume that taxpayers will arrange their affairs to take advantage of this or argue that there has been a transfer of goodwill. The joined cases of HMRC

v Smith & Williamson Corporate Services and HMRC v Patrick Smiley [2015] UKUT 0666 (TCC) show how such an argument is deployed.

The facts of the caseAlthough the judgment is relatively long, the facts of the case can be quite simply stated. One arm of the Smith & Williamson Group undertook asset management. It sought to increase the funds under its management by attracting an existing team of investment managers, headed by Patrick Smiley. That team had worked together for various institutions, including latterly a private bank.

There was no dispute that the team members became employees of Smith & Williamson under contracts of employment. However, by a separate contract, Mr Smiley and his team co-members were entitled to what became known as a ‘goodwill payment’ to be shared among the team members. This was payable in consideration for the team delivering the client relationships from the private bank to Smith & Williamson: in other words, the agreement of the private bank clients to transfer the responsibility for managing their investments to Smith & Williamson. A separate company within Smith & Williamson made the goodwill payment.

Smith & Williamson and Mr

INDUCEMENT PAYMENTS


Smiley treated the goodwill payment as capital in nature. However, HMRC considered it to constitute employment income, from which income tax and National Insurance contributions (NICs) should have been deducted. The Revenue sought to revise Mr Smiley’s relevant tax returns and issued determinations against Smith & Williamson in relation to the amounts that should have been paid as PAYE and National Insurance.

The First-tier Tribunal (FTT) allowed the taxpayers’ appeals, but HMRC appealed against the decision to the Upper Tribunal.

The Upper Tribunal’s decisionThe judge, Mr Justice Warren, considered the principal issue to be whether the goodwill payment constituted earnings from an employment. It was accepted that the conclusion on this would determine the liability to NICs, if any.

Following the House of Lords’ decision in Shilton v Wilmshurst [1991] STC 88, Warren J noted that the charge to what was Schedule E embraced all emoluments from the employment, whether or not they were made by the employer, so that payments from third parties could also count.

In reaching their decision in Shilton, their lordships reviewed several other leading authorities. In particular, it was noted in Hochstrasser (HM Inspector of Taxes) v Mayes (1959) 38 TC 673 that to be employment income a payment had to have been caused by the fact of the employment. It was not sufficient for HMRC to show simply that the payment would not been made but for the employment; a closer causal link had to be established.

On the subject of goodwill, Warren J noted the non-tax case of Asprey & Garrard Ltd v WRA (Guns) Ltd [2001] EWCA Civ 1499. In that case, Mr William Asprey, a member of the Asprey family which had previously owned the shares in the claimant company, was a former employee of that company. As noted by Peter Gibson LJ in that case, any goodwill arising from Mr Asprey’s work for the claimant company belonged to it. The logical conclusion was that any new business conducted by Mr Asprey could not properly associate itself with that goodwill. It was considered that, bar any restrictive covenants, there was nothing to prevent Mr Asprey making use of any personal contacts that he had established during his previous employment. Warren J recognised that this clearly confirmed the distinction between goodwill and personal contacts.

A key observation made in the case

at the FTT was that Mr Smiley’s team did not own the client connections, either collectively or individually. Warren J considered that this confirmed his view that relationships were not in themselves assets, even if they might in some circumstances be turned to account. Warren J recognised that, had the team been carrying on a business rather than been employees of a trading company, those client relationships might have formed part of an asset – being the goodwill of that business.

Towards the end of a long judgment, Warren J considered that the FTT judge had made errors of approach. In par cular, he had been wrong to interpret the facts by reference to the par es’ (Smith & Williamson’s and the team members’) percep ons, rather than by considering them objec vely. These errors permi ed Warren J to remake the decision.

In doing so, the judge retraced his way through the case law he had already discussed, notably Shilton. In essence, he considered the payment to be given in return for a service provided – the procuring or assistance in the procuring of clients for Smith & Williamson. Further, the judge considered that the contracts providing for the goodwill payment could not be realistically severed from the employment contracts themselves.

Adop ng the approach taken in Asprey and in Kirby v Thorn EMI plc (1987) 60 TC 519, Warren J considered that what was provided to Smith & Williamson could not be equated with goodwill. In par cular, he noted that the goodwill, if any, belonged to the team’s former employers and what the team members held – being the personal rela onships – could not be transferred.

In conclusion, the judge held that the goodwill payment had arisen from the team members’ employments. Therefore, HMRC’s appeals were allowed.

CommentaryThe difficulty when reading any judgment is that it will usually explain the facts in a way that will support the judge’s eventual conclusion. Indeed,

Read Keith’s ar cle ‘Half-baked’ on the non-tax Sofra case at www.taxadvisermagazine.com/ar cle/half-baked

FURTHER INFORMATION

when reading Warren J’s decision notice, it seemed inconceivable to me that the goodwill payments could have been considered anything other than taxable as employment income. Reading this decision alone prompted the question as to why the contrary was ever argued.

In such cases, it is illustrative to refer to the original decision of the FTT. There, the tribunal was specifically, at the behest of counsel for Smith & Williamson, directed to the question as to whether the team had an asset to sell. Further, the FTT judge held that there was no such asset, for the reason that the team members could not sell the client connections. However, the FTT proceeded to treat the goodwill payment as capital in nature because it had concluded (wrongly) that it could be severed from the employment relationship.

One area where the question of goodwill has been hotly contested concerns the incorporation of businesses. HMRC’s latest tactic has been to revise the rules to make the goodwill argument less attractive. However, there are undoubtedly cases arising from earlier years that are likely to require resolution in due course.

The Smith & Williamson/Smiley case deals with a different issue and will not resolve all outstanding cases. However, it is likely to give succour to HMRC in its attempt to come in from the cold on goodwill.

INDUCEMENT PAYMENTS

Name Keith GordonPosition Barrister, Chartered Accountant and Tax AdviserCompany Temple Tax ChambersTel 020 7353 7884Email [email protected] le Keith M Gordon MA (Oxon), FCA CTA (Fellow) is a barrister,

chartered accountant and tax adviser and was the winner in the Chartered Tax Adviser of the Year category at the 2009 Taxa on awards. He was also awarded Tax Writer of the Year at the 2013 Taxa on awards. He provides li ga on support and advises on tax and related ma ers to accountants, tax advisers and lawyers.

PROFILE

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TECHNICAL

Exclusion of some companies from the National Insurance contributions employment allowanceEMPLOYMENT TAXES

On 26 November 2015 HMRC published a technical consulta on on dra regula ons to exclude limited companies where the director is the sole employee from claiming the NIC employment allowance from April 2016.

In response to the consulta on the CIOT noted that the dra regula ons did not appear to meet their objec ves because the exclusion may be avoided easily.

For example, any company that is a single director or employee business can avoid the exclusion for all payments made to the same employed earner in one of two ways: by engaging a spouse, civil partner or other family member on a token wage as an employee or director; or appoin ng such a person as the ‘sole’ director and engaging the exis ng employed earner as an employee rather than director. Further, the exclusion in respect of the employed earner being a director when each payment is made also appears to be avoidable by arranging for at least one payment of earnings to be made a er the director has resigned.

In essence, the CIOT believes that the regula ons, as dra ed, will be open to abuse and will simply have the eff ect of penalising those single director-employee limited companies that are unable to, or do not know that they could claim the allowance by appoin ng another person as director or employee.

The consulta on closed on 3 January 2016. Final regula ons are expected to be laid before parliament, and guidance issued by HMRC on eligibility criteria for the employment allowance, imminently.

Read the CIOT’s full response at www. nyurl.com/gtryr3u and the ATT’s at www. nyurl.com/glrnfey.

Ma hew Brownma [email protected]

Draft Finance Bill 2016: round-up of submissions on draft clausesGENERAL FEATURE

Introduction The dra Finance Bill clauses were, in the main, published on 9 December, and comments were invited un l 3 February. A full list of submissions made by the CIOT, ATT and LITRG is in the table at the end of the Technical sec on, but here we summarise most of the submissions made.

Unless stated otherwise, the changes take eff ect on 6 April 2016 (or 1 April 2016 for corporates).

Clauses 1 to 4: Personal savings allowance, and changes to dividend taxationDra clause 1 introduces a new nil rate of tax for savings income (such as interest) within a savings allowance for individuals. Every individual will have an annual savings allowance of £1,000 unless

x

Technical [email protected] Dalton, Technical Newsdesk Editor

ContentsIn this month’s Technical briefi ngs we summarise the comments we made on the many dra Finance Bill clauses. We con nue our engagement with parliament and policy-makers, and also provide a round-up of topical developments. A full list of submissions made is included at the end of the sec on.

[email protected] Dalton, Technical Newsdesk Editor

Newsdesk ar cles Author(s)

Exclusion of companies from the NIC employment allowance CIOT responds to the HMRC consulta on

Ma hew Brownp40

Dra Finance Bill 2016 clauses A round-up of our submissions on the dra clauses

Variousp40

Disclosures and HMRC’s KYC ini a ve CIOT update on ‘know your customer’ visits

Ma hew Brownp45

Withdrawal of ESCs CIOT and ATT respond to the call for evidence

Ma hew Brown/Alison Ward p45

Interest deduc bility CIOT comments on the HMT consulta on

Sacha Daltonp45

Re-launch of the CCCTB CIOT responds to the EU Commission consulta on

Sacha Daltonp46

VAT: medical exemp on legisla on needs change CIOT and LITRG con nue to raise concerns with HMRC

Maric Glaser/Robin Williamsonp46

CIOT/LITRG engagement with poli cians and parliament A summary of CIOT, ATT and LITRG recent ac vity

Variousp47

Higgs case and s 34(1) me limits Update

Margaret Curran p48

SDLT CIOT and ATT respond to the HMT consulta on

K Willis/A Ward/J Walker p48

Compliance Reform Forum We provide the slides from the recent CRF mee ng

Margaret Curranp49

VAT: op on to tax no fi ca ons Update Angela Fearnside p49

Scotland Update on LBTT supplement and SLfT forum

Joanne Walkerp49

Class 2 NIC LITRG comments on changes to Class 2 NI contribu ons.

Gillian Wrigleyp50

Review of VAT grouping CIOT and ATT request for input from members

Maric Glaserp50


TECHNICAL

they have any higher rate income for the year, in which case their allowance will be £500, or any addi onal rate income, in which case their allowance will be nil.

Clause 2 introduces an allowance for the fi rst £5,000 of dividend income. This will operate as a 0% tax rate inserted into the Income Tax Act 2007 (ITA 2007).

Clause 3 abolishes the dividend tax credit. Dra clause 4 and Schedule amend Part 15 of the Income Tax

Act 2007 (ITA) to remove the requirement on deposit takers, such as banks and building socie es, to deduct income tax from the interest or other returns they pay on par cular savings, investments and alterna ve fi nance arrangements.

The introduc on of the savings allowance, combined with the cessa on of the tax deduc on scheme for interest (TDSI), and the replacement of the dividend tax credit with the new dividend allowance will represent a small tax reduc on for most taxpayers with small amounts of investment income, and there will be a compliance saving for some, although there will be excep ons.

The CIOT and LITRG submissions to HMRC on the personal savings allowance clauses express concern that they will lead to unnecessary complexity and some ‘cliff -edge’ tax liabili es for taxpayers whose income falls just over the higher rate threshold.

Example: Becky has earned income and £1,000 of savings income. Her total income equals the basic rate limit, so she is en tled to a £1,000 savings allowance. Her savings income is taxed:

£1,000 x 0% = £0.00

Anne has earned income and £1,000 of savings income. However, her total income is £1 above the basic rate limit, so she is en tled to a £500 savings allowance. Her savings income is therefore taxed:

£500 x 0% = £0.00£499 x 20% = £99.80£1 x 40% = £0.40£100.20

For Anne, a £1 increase in income produces a drama c £100.20 tax charge, so Anne is in fact £99.20 worse off than Becky, which is plainly unfair.

The new allowances are also complex: There are two savings allowances depending on whether a

taxpayer pays tax at the basic rate or higher rate (or three if you include the fact that the allowance is not available to those on the addi onal rate). Despite their name, the savings allowance and dividend allowance

are not tax-free allowances; savings and dividend income that is within the ‘allowance’ will s ll count towards an individual’s basic and higher rate limits, and will therefore aff ect allowances and charges that depend on whether an individual’s income crosses a par cular threshold (for example, the high income child benefi t charge (£50,000)). The star ng tax rate for savings is retained and will operate

alongside the savings allowance. This is likely to be confusing for the 1.4 million taxpayers who will con nue to pay tax on their savings income a er the allowance is introduced. The dividend changes will also aff ect the level of savings allowance

en tlement. It is likely that this will be confusing for the two million taxpayers who will s ll be paying tax on their dividend income a er the measure is introduced. This fi gure includes the es mated 200,000 individuals who will pay tax on their dividend income for the fi rst me.

We asked that HMRC produce guidance and tools that provide clear explana ons and worked examples of how the savings allowance interacts with the dividend allowance, the various tax bands, and the star ng rate for savings. Taxpayers need to be able to understand it so

they can make informed decisions about their fi nancial aff airs. LITRG also called for a communica ons strategy to draw taxpayers’ a en on to the changes.

Trustees and personal representa ves will not receive either the dividend allowance or the savings allowance and will remain liable to the trustee or standard rates applicable in full on the relevant category of income. However, the aboli on of the dividend tax credit applies regardless of the status of the recipient. All trustees and personal representa ves will face an increased compliance burden if a return would not have been required previously because the 10% dividend tax credit sa sfi ed all liability on the dividend income. There is a strong argument for raising the fi gure for informal se lement to minimise compliance costs.

There will also be an impact on some individuals who make charitable dona ons because the removal of the dividend tax credit may mean that they no longer pay enough tax to cover that a ributable to their gi aid dona ons and would be liable for the shor all. This would be par cularly iniquitous to donors with small incomes. We asked whether it would be more reasonable for a no onal credit to be maintained in rela on to dona ons made by taxpayers whose income is insuffi cient to cover the tax reclaimable by chari es.

The ATT also submi ed comments on Clauses 1 and 2 to HMRC, raising several points similar to those made by the CIOT and LITRG.

Clause 8: Statutory exemption for trivial benefi ts in kindThe government is proposing to include in Finance Bill 2016 (having omi ed a similar dra clause published in December 2014 from the 2015 fi nance bills) a statutory exemp on to exempt trivial benefi ts in kind (BIKs) from income tax and NICs. The exemp on is subject to qualifying condi ons, including a £50 cap on individual BIKs to employees and an annual cap of £300 per employee if they are a director or other offi ce holder of a close company.

Although the CIOT believes that the dra legisla on is reasonably clear, we have asked HMRC for clarifi ca on on some parts. For example, whether a gi of chocolates and wine is a single ‘benefi t’ rather than two separate items, the cost of which is to be assessed separately. We also believe that greater clarifi ca on is needed on the diff erence between a reward for ‘par cular services’ (which the legisla on excludes from qualifying for the exemp on) and one for services.

Clause 9: Employment intermediaries and relief for travel and subsistenceThe government is introducing legisla on to prevent agency workers, umbrella company workers, and workers engaged by their own personal service company (PSC) (where IR35 applies) claiming a deduc on for home-to-work travel and subsistence costs if the workplace would not be regarded as a temporary one had the worker been engaged directly by the end client.

In its response, the CIOT has raised a concern that the legisla on in rela on to workers engaged through PSCs may not work as proposed. The government’s stated inten on is that the restric on on home-to-work travel and subsistence will apply only to PSCs if there is a ‘deemed employment rela onship’ under the IR35 rules. However, we think it is not clear in the legisla on that, if there is an IR35-type arrangement but no deemed employment contract exists a er applying the IR35 test, the supervision, direc on or control (SDC) test does not need to be considered.

We have also asked HMRC to confi rm whether exis ng provisions, which provide for the PAYE liability on general earnings to be transferred to the UK client or agency when there is an overseas intermediary or payer, will also transfer the obliga on to account for PAYE on the paid/reimbursed travel and subsistence expenses. This is not clear as these expenses will no longer meet the test for a corresponding income tax and NICs deduc on as a result of applying this new legisla on to agency workers.


TECHNICAL

Clause 11: Employee share schemes–simplifi cation of the rulesClause 11 amends the tax treatment of unapproved employee share schemes. The main eff ect is that restricted stock units (RSUs) awarded to interna onally mobile employees (IMEs) are taxed under the rules that deal specifi cally with employment related securi es (ERS) rather than those dealing with earnings generally.

The legisla on aims to clarify the tax treatment of RSUs provided to IMEs through unapproved share schemes. The proposed amendments will, for the most part, provide the clarity of treatment that the Offi ce of Tax Simplifi ca on (OTS) has previously recommended. However, the CIOT believes that confusion will remain on the defi ni on of a ‘right to acquire’ if the employer has the discre on to award either cash or shares. We therefore recommend that HMRC provides clear guidance for when a cash alterna ve exists.

Clause 12: Reduction of pensions lifetime allowanceClause 12 will reduce the pension life me allowance (LTA) for funds held in an approved pension scheme from £1.25m to £1m. It is also proposed that from April 2018 the LTA will increase in line with the consumer prices index (CPI).

As part of the reduc on to the LTA the government is also introducing two transi onal protec ons for individuals with combined pension funds in excess of the reduced LTA. These are in addi on to those provided each me the LTA has previously been reduced. The CIOT is concerned that the protec ons may not work as intended and has sought clarifi ca on on the use of the phrase ‘at any/the par cular me’ in the legisla on.

Clauses 16, 17, 18: Company distributionsClauses 16, 17 and 18 will amend the transac ons in securi es (TIS) rules in the Income Tax Act (ITA) 2007 Part 13 and the distribu ons rules in general.

The amendments proposed by dra clause 16 are intended to ra onalise the treatment of payments by companies to their members. Clause 17 proposes an enquiry-based procedure in place of the counterac on no ce procedure. And clause 18 is a targeted an -avoidance rule (TAAR) to apply when someone receives a distribu on from a members’ voluntary liquida on but then has some connec on with a same or similar trade ac vity within two years. This will treat the distribu on from a winding-up as if it were a distribu on chargeable to income tax, rather than as a capital receipt, if par cular condi ons are met.

In response, the CIOT’s overall concern is that the dra legisla on may go wider than intended, leading to more uncertainty for business and diffi culty in advising clients as to how HMRC or the courts would treat a transac on. The ATT ques oned the implica ons of bringing into account amounts that could have been paid to an associate of a person in determining what part of the relevant considera on could have been paid as a qualifying distribu on.

Since clause 16 (3) is clear that the transac ons in securi es legisla on will include ‘a distribu on in respect for securi es in a winding-up’, the CIOT queried whether it was necessary to introduce a TAAR as well.

On clause 17, the ATT iden fi ed the need for a proper inter-linking of the proposed enquiry-based procedure with the clearance procedure and seeks clarifi ca on on the me limit for raising a counterac ng assessment.

The ATT focused on the prac cal applica on of clause 18, and the CIOT was concerned that the TAAR would have some unwanted consequences. Both highlighted problems that might be created by the imprecision of the proposed provision (for example, the iden fi ca on of what is a same or similar trade), the complexity of the connec on test, and the inclusion of the rebu able presump on of a main purpose of tax avoidance, Much will depend on HMRC’s interpreta ons, so some clarifi ca on from HMRC will be essen al. The CIOT and ATT suggested that a clearance procedure was required.

Transi onal issuesDraft clause 16(10) provides that, if HMRC has issued a clearance notice under s 701 ITA 2007 before 6 April 2016 but the transaction occurs on or after 6 April 2016, the clearance will not be valid where the transaction can be counteracted because of the amendments made by this clause, but the counteraction can only be on the basis of the amendments made by this clause.

The CIOT asked HMRC to confirm its position on these transitional issues. HMRC responded in a letter dated 29 January 2016 (which it agreed we could publicise) as follows:

‘Firstly, I can confirm that the Clearance and Counteraction team are already using the following wording where they believe that a clearance given now might not be valid should the proposed changes be brought in on 6 April 2016:

‘The Board take the view that the notification given in this letter may become void with effect from 6 April if the proposed changes to the transactions in securities provisions which were published on 9 December 2015 come into effect as drafted.

‘I can also confirm that the team have also been providing a view on the matter where they have been specifically asked. Following your feedback, and representations received from various other parties, the Clearance and Counteraction [team] have agreed that it would be helpful to go further than this. Starting now, all clearances will contain either the wording quoted above, or the following wording (or variants thereof):

‘The Board consider that this clearance will not be affected by the proposed changes to the transactions in securities provisions which were published on 9 December 2015.

‘Assuming that the proposed legislation is passed by Parliament, there will be a slightly different issue from 6 April 2016 until Royal Assent is received. I can also confirm that during this period both clearance and refusal letters will contain similar wording to the above in order to provide the applicant with as much certainty as is possible. The precise wording is currently the subject of discussion with HMRC solicitors.’

Clause 33: Hybrid and other mismatchesThe CIOT commented on the dra examples that were published by HMRC on 22 December 2015 to support the proposed new rules to counteract tax avoidance through hybrid and other mismatch arrangements.

The dra legisla on largely refl ects the OECD model proposed in response to BEPS ac on 2 and we did not have any comments on its detail. We took the opportunity, however, to comment on the published examples and the further guidance on the applica on of the hybrid rules expected this year.

We noted that the legisla on has several requirements for judgments as to reasonableness in applying the rules, which results in an inherent uncertainty within its framework. We said this uncertainty made the role of guidance par cularly important in order to ensure that taxpayers can apply the rules with confi dence and have an adequate understanding of HMRC’s view of the provisions.

We also queried whether there was any policy ra onale or intent behind the selec on of the OECD examples by HMRC to be used as the basis for its own instances. The fact that a selec on had been made raised the ques on of why the par cular examples were chosen. For example, HMRC has not included any examples involving permanent establishments.

We asked for more examples in the complicated area of imported mismatches.

These provisions will be introduced on 1 January 2017.


TECHNICAL

Clause 37–39: Sporting testimonialsThe ATT and CIOT have responded to dra legisla on that provides that spor ng tes monial payments made to professional sportspeople, when there is no contractual right or usual custom to receive one, will be subject to PAYE. However, an exemp on of £50,000 will be available under new sec on 308(B) ITEPA 2003.

Tes monial payments made due to a contractual right or a customary expecta on will s ll be charged under s 62, ITEPA and the exemp on will not apply.

The ATT recommends a clear defi ni on in both the legisla on and the guidance as to what HMRC means by ‘professional sportsperson’. It appears that HMRC intends the legisla on to catch anyone employed under a contract of employment even if they play part- me and may consider themselves amateur. The ATT believes there could be confusion without this clarity.

The CIOT asked HMRC to clarify the interac on of the new legisla on with the exis ng legisla on in Pt 7A, ITEPA (‘disguised remunera on’) because the tes monial commi ee could be regarded as a third party and the spor ng tes monial exemp on applies only if income is not otherwise taxable as earnings.

The ATT did not agree that tes monial payments arising from events arranged as a mark of respect a er a sportsperson’s death should be subject to any charge under s 226(E). The CIOT recommended the government reconsider its decision not to implement a full exemp on for tes monials arising from a sportsman or sportswoman’s permanent termina on of their professional career through illness or injury.

Both the ATT and CIOT expressed concern about use of ‘customary’ in guidance to determine when the payment will not qualify for the £50,000 exemp on. It is understood that this is intended to refer to what is customary for the employer. However, we are both concerned that the term could be mistaken to apply to what is customary for a sport and could lead to the exemp on being incorrectly denied.

The changes are expected to have eff ect from 6 April 2017 for spor ng tes monials granted a er 25 November 2015. The prac ce contained in EIM64120 will con nue un l 5 April 2017 and for any tes monials a er 5 April 2017 agreed before 25 November 2015.

Clause 40: Property business deductionsThis provision introduces a deduc on for capital expenditure on replacing furnishings and appliances provided by a landlord of a dwelling-house for the use of a lessee. It also repeals the wear-and-tear allowance and the renewals allowance for property businesses. The ATT’s response poses various ques ons to bring greater clarity to the proposals, including: whether the term ‘lessee’ extends to licensees and tenants at will; how the provisions apply to items for the use of more than one tenant; whether the requirement for the items to be used ‘in the dwelling house’ exclude their use out of doors; whether the old item has to be removed from the house in order for it to have been replaced; how the ‘substan ally the same’ test will be applied; what evidence will be required to substan ate a deduc on for what would have been the cost of an item that was substan ally the same when the new item is diff erent from the old; and what, if any, adjustment will be required when a new item that qualified for deduction under the new legislation is then taken out of use in the property business and retained by the landlord.

Clause 43: IHT – domicileThis provision would treat an individual as UK domiciled for IHT purposes if they have been resident in the UK for at least 15 of the previous 20 tax years, rather than as now 17, ending with the tax year in ques on. It also proposes a rule to provide that

an individual born in the UK with a UK domicile of origin who has acquired a domicile of choice elsewhere will be treated as domiciled for IHT purposes if at any me they are resident in the UK and have been resident here in at least one of the two previous tax years. The dra clause does not take account of responses made to the September 2015 consulta on, so we await publica on of the revised version. Meanwhile, the CIOT repeated the comments we made last year, and highlighted the need for clarity in the commencement provisions.

The amendments will take eff ect in rela on to events a er 5 April 2017.

Clause 44: IHT increased nil-rate band on downsizingThis provision expands the inheritance tax (IHT) residence nil-rate band (RNRB) provisions to when an individual downsizes from a higher value to a lower value residence, or ceases to own one, and other assets are le on death to direct descendants. The associated schedule sets out the condi ons for en tlement to the addi onal amount (the downsizing addi on), the eff ect of the addi on, and how the amount of the residence nil-rate band that has been lost as a result of downsizing or disposal should be calculated.

This dra legisla on is complex, but its introduc on was necessary once it was accepted that a perverse incen ve not to downsize should not be created. We believe that the legisla on will work in prac ce only if HMRC makes available comprehensive (and comprehensible) guidance and online calculators.

We pointed out that the policy objec ve is not met when an individual has more than one interest in a property. This would be the case if the deceased held their own 50% interest and was also the benefi ciary of an immediate post-death interest from the estate of their spouse or civil partner. As dra ed, the legisla on permits only one interest to qualify for relief.

Dra s 8FE sets out how the value of the RNRB which has been lost as a result of downsizing or disposal of a residence (the ‘lost relievable amount’) should be calculated. Subsec on (3) freezes the value of the allowance at its value at the me of the downsizing. This is anomalous compared with the carry-forward mechanisms for the transferable nil-rate band (s 8A) and the basic brought-forward RNRB (s 8G). Those operate on the basis that the allowance on the survivor’s death is increased by the percentage that the original allowance was unused.

The change will apply for deaths on or a er 6 April 2017 and for downsizing moves or disposals on or a er 8 July 2015.

Clause 48: VAT: installation of energy-saving materials (ESMs)Clause 48 is intended to ensure that UK law on the VAT treatment of the installa on of ESMs is compliant with EU law. The European Court had previously ruled that the UK had failed to properly restrict the availability of the reduced-rate relief on the installa on of ESMs to defi ned categories of customer. The ATT ques ons the prac cality of expec ng an ESM installer to be able to establish whether their customer is a qualifying person.

The clause itself is silent on the procedure for establishing whether a customer is a qualifying person and en tled to the reduced rate of VAT. However, the parallel consulta on published by HMRC alongside the dra legisla on envisages the installer having an obliga on to obtain and retain documentary evidence of the customer’s status as a qualifying person.

The ATT notes that the European Court judgment did not prescribe the manner in which the UK should implement the changes or regulate compliance. We suggested that it would be be er for the customer to provide the installer with a form of self-cer fi ca on, thus relieving them of the burden of checking eligibility. Any greater burden on the installer risks defea ng the government’s stated objec ve of retaining as much of the exis ng relief as is possible. The amendments will take eff ect on supplies made from 1 August 2016.


TECHNICAL

Clause 60: General anti-abuse rule penalty The CIOT has wri en to HMRC about clause 60, which proposes a new automa c penalty under the general an -abuse rule (GAAR).

We feel this goes against the general direction of travel on penalties, which are generally becoming more mitigatable. We observed that, when the CIOT had discussions with Graham Aaronson QC about the GAAR he made it clear to us that his committee considered that penalties of the type being suggested were inappropriate. We told HMRC that we consider it inappropriate that the government was seeking to impose such penalties before there has been a single case brought under the GAAR.

We also consider that the proposed penalty is diffi cult to reconcile with ar cle 7 of the European Conven on on Human Rights, which require criminal penal es to comply with principles of legal certainty. Also, penal es have also been held to be contrary to the European Conven on when they are dispropor onate.

Finally we observed that the imposi on of such automa c draconian penal es may make the courts less recep ve to arguments that the GAAR applies because in marginal cases they may consider the imposi on of such penal es to be inappropriate. In which case the penal es could prove counterproduc ve.

The new penalty will apply to tax arrangements entered into on or a er royal assent.

Clause 63: Serial tax avoidanceThe CIOT has raised concerns with HMRC about clause 63, the introduc on of a special regime in rela on to ‘serial avoiders’.

We feel these proposals give rise to a double penalty: the penalty itself, and the denial of tax reliefs in the future, which is in eff ect a disguised penalty. Further, the eff ect of these provisions is to create an absolute off ence for tax purposes because there is no requirement of deliberate conduct or carelessness. We consider that the combined eff ect of these proposals could be to impose dispropor onate penal es.

In addi on, the transi onal rules render these provisions retroac ve because they can apply to planning that has already been undertaken if the taxpayer does not correct the return. Retroac ve legisla on is poten ally contrary to the conven on especially when it is of a criminal nature and there is no special jus fi ca on.

The regime comes into eff ect on 6 April 2017.

Clause 67: Civil penalties for enablers of offshore tax evasionThe CIOT has wri en to HMRC about the dra ing of clause 67, and in par cular paragraph 1 which introduces penal es for enablers of off shore tax evasion.

Our primary concern is that the legisla on applies to failure to take reasonable care as well as to tax evasion. During the consulta on last year, we thought it reasonably clear that the new civil penalty for enablers would apply in rela on to ‘tax evaders’ only. Indeed, paragraph 5.5 of the consulta on document, under the heading ‘Who should be liable to a penalty?’ specifi cally referred to the term ‘evader’.

The dra legisla on in eff ect replaces ‘evader’ with ‘Q’, so that there is no longer any requirement for the taxpayer to be a tax evader. Dra paragraph 1(4)(b) refers to another person (Q) carrying out ‘off shore tax evasion’ by engaging in behaviour that makes Q liable to a ‘relevant penalty’. ‘Relevant penalty’ is defi ned in paragraph 1(6) as including a penalty under paragraph 1 Sch 24 FA 2007 etc which covers penal es for both careless and deliberate errors.

In our view, it should be possible for the off ence of enabling to take place only when the taxpayer has acted deliberately to evade tax. This would s ll meet the policy objec ve.

We consider that including a failure to take reasonable care makes the legisla on unnecessarily complex. We ask HMRC to

provide a clear statement of how and in what circumstances it intends to use this legisla on.

The defi ni on of ‘enable’ in paragraph 1 (3) is ‘encouraging’ and ‘assis ng’ off shore tax evasion but also includes the term ‘otherwise facilita ng’ which seems vague, requiring no ac ve involvement and is poten ally very wide. We think the term ‘otherwise facilita ng’ should either be dropped completely (our preference) or defi ned specifi cally within the legisla on.

We also noted that the term ‘deliberate’ is not used in the legislation when referring to the enabler’s behaviour, despite the policy paper clearly stating that the penalty applies only if the enabler’s behaviour is deliberate. We stated that the legislation ought to be specifically targeting dishonest deliberate action. We also raised the possibility of these provisions being contrary to EU law.

It is not known when the changes will come into force as the draft legislation provides for them to be introduced on such day as the Treasury may appoint by regulations made by statutory instrument.

Clause 71: Simple assessmentThis clause and the accompanying schedule give HMRC the right to issue a simple assessment if a taxpayer has not been issued with a no ce to complete a tax return and has not fi led one. Broadly it is intended to be used when an end of year tax calcula on (form P800) has been issued showing tax underpaid, but the taxpayer has not made a voluntary payment of the outstanding tax. The assessment will create a legally enforceable debt without having to place the taxpayer in self-assessment, a route that is both me-consuming and costly for HMRC and the taxpayer. Of course, the taxpayer has the right to object to the assessment and apply to postpone some or all of the tax shown as payable.

In addi on, the proposals would enable HMRC to withdraw a no ce to complete a tax return from individuals before issuing such an assessment, thus streamlining administra on.

LITRG broadly supports this measure but requests guidance on when this power may be used. It also points out the unfairness in that, although taxpayers have a specifi ed me of 30 days to deal with such an assessment, HMRC has no limit for responding to objec ons.

This measure will have eff ect on and a er the date of royal assent to Finance Bill 2016.

Clause 83–88: Permanent establishment of the OTSThese clauses provide for the permanent establishment of the Offi ce of Tax Simplifi ca on in statute, set out its func ons and make provision for its governance and opera on.

The OTS was established in July 2010 to give independent advice to the government on simplifying the UK tax system and to reduce tax compliance burdens on businesses and individual taxpayers. The CIOT welcomed the measures to put the OTS on a statutory foo ng. To try to stem the ever-increasing quan ty and complexity of legisla on, we recommended that the measures went further than proposed, including: Measures to ensure that the OTS has enough resources to undertake the projects the Chancellor of the Exchequer instructs it to and also those it wishes to undertake proac vely. That the OTS should not only be required to report annually on its own performance, but that it should also report on the increases or decreases in the complexity of the tax system year-on-year to try to iden fy a ‘direc on of travel’ for it. That the OTS should scru nise proposed legisla on that it iden fi es for review. Historically most of the OTS’s work has been on legisla on already on the statute books, so publishing commentary on proposed legisla on from a complexity perspec ve will highlight the importance of simplifying new legisla on.


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We also recommended that the senior staff at the OTS, in particular the chair and tax director, are adequately remunerated for the time they spend undertaking their non-board duties as opposed to the relatively nominal sums they are paid now.

Disclosures and HMRC’s KYC initiativeEMPLOYMENT TAXES, CORPORATE TAX

Part of HMRC’s large business risk review process involves a ‘know your customer’ (KYC) visit to around 2,000 of the UK’s largest employers. Although the initial KYC letter makes it clear that the visit is not a compliance check, a point of concern has arisen as to whether any disclosures made to HMRC after receipt of the opening letter are prompted or unprompted.

HMRC use KYC to form a picture of how a business manages its employer compliance obligations. Although the initial purpose is to enable HMRC to understand the environment within which the business engages with its workforce, HMRC may use the information gathered when meeting the business as the basis for further enquiries and compliance checks.

The CIOT understands that HMRC’s view is that, although KYC is not a formal compliance check nor the start of one, any voluntary disclosure submitted after the business has been notified of an intention to hold a meeting will prima facie be considered as ‘prompted’ by HMRC. We do, however, also understand that HMRC is prepared to consider any evidence a business can provide to demonstrate that a disclosure was imminent and therefore should be treated as ‘unprompted’. However, each case depends entirely on its own circumstances.

HMRC’s advice is that a business that wishes the disclosure to be treated as ‘unprompted’ should contact its customer relationship manager (CRM) at HMRC as early as possible to notify that a disclosure may be in progress (even if further investigation could prove that no disclosure is required) rather than wait for all the work to be completed.

Ma hew Brownma [email protected]

Withdrawal of extra statutory concessions – CIOT commentsPERSONAL TAX, EMPLOYMENT TAXES

The ATT and CIOT have responded to a proposal, published on 4 November 2015, to withdraw a concessionary practice in BIM66301, under which sub-postmasters (SPM) remuneration can be treated as a trade receipt, with effect from April 2017. The concessionary treatment in BIM66301 has been an important way for SPM to deal efficiently with their tax affairs when a salary is received at the same time as a retail trade is carried on from the post office.

It is understood that the Post Office is rolling out new contracts to SPM under which the individual is self-employed and agrees to provide services to the Post Office. As a consequence the practice in BIM66301 will then become obsolete.

The roll-out of these new contracts is not complete and the

ATT and CIOT believe the practice in BIM66301 should not be withdrawn until after all these new self-employed contracts have been signed. Consequently, both recommended retaining the existing treatment until the end of the last tax, or financial, year in which remuneration is received under the ‘employment’ contract.

Read the full CIOT response at www.tinyurl.com/ht8mw27.Read the full ATT response at www.tinyurl.com/jgzbbqg.

Ma hew Brown Alison Wardma [email protected] award@a .org.uk

Interest deductibilityINTERNATIONAL TAX, LARGE CORPORATE TAX

On 22 October 2015, the Treasury published a consultation document, Tax Deductibility of Corporate Interest Expense. This consultation sought views on the proposals to tackle action 4 of the BEPS project, set out in the OECD report on Limiting Base Erosion Involving Interest Deductions and Other Financial Payments. The Treasury and HMRC held a consultation event on 14 December 2015 which CIOT attended. Our response to the consultation reflects the discussions on that day.

The proposals in the document are around a structural interest restriction, which would be a significant change for the UK’s corporate tax system.

We first questioned whether a structural interest restriction along the lines being considered is necessary at all in the UK, given that the concerns that led to this aspect of the BEPS action plan are either not relevant to the UK or have been addressed by other aspects of the BEPS action plan and/or existing UK tax rules. However, we can see some merit in having rules that are consistent with those of other countries, but this will arise if other countries do also implement similar rules.

We noted that the key feature for any such regime is that interest on third-party debt should not be restricted. We also advocated repealing some of the existing rules applying to interest, rather than simply adding new complex, but overlapping rules to the statute book. Primarily, the worldwide debt cap should be abolished.

We also strongly urged the government to delay any implementation of a structural interest regime from the proposed date of 1 April 2017 to ensure the end result reflects proper consideration all the issues and complexities. The aim must be to arrive at a regime that best achieves the stated policy objectives of tackling BEPS involving interest expense, while maintaining the competitiveness of the UK tax system, ensuring that there is certainty for businesses operating in the UK and giving greatest efficiency in terms of business compliance and government administration. An accelerated timetable of change which rushes in a regime that does not work well could be unhelpful to the UK’s competiveness.

Our response favoured a group ratio rule as well as the fixed ratio rule, and also suggested that a widely drafted public benefit project exclusion would be necessary to ensure that the regime did properly target only groups and businesses that were a high BEPS risk.

The government is to publish with the Budget an update of its thinking on these proposals as part of the Business Tax Roadmap.

Read the full CIOT response at www.tinyurl.com/zlqhmhs.

Sacha [email protected]


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EU Commission consultation on the relaunch of the Common Consolidated Corporate Tax Base (CCCTB) – CIOT responseINTERNATIONAL TAX

The CIOT has responded to the EU Commission’s consulta on on CCCTB. We do not believe that a new common tax base, either a 3CTB (common consolidated corporate tax base) or a 2CTB (common corporate tax base without consolida on), would be an eff ec ve tool against aggressive tax planning or be a rac ve to business. We set out the arguments as we see them against pursuing a policy of a new common tax base, par cularly at this me. Fundamentally it would represent a signifi cant centralisa on

of power. We observed that the strength of the opposi on already visible among some member states suggests this proposal is unlikely to be adopted, at least not across the whole of the EU. We also noted the global rejec on of the concept of a common tax base and appor onment as part of the BEPS debate.

We also commented that this is not the right me to be considering changes in the direc on of an EU common base given the interna onal agreement on the BEPS outcomes, which have addressed many of the issues iden fi ed as presen ng problems within the exis ng system. Time should be allowed for these to be implemented before considering again whether any form of common tax base in the EU is prac cal or desirable.

We suggested that, where appropriate, the EU Commission should follow the BEPS outcomes – for example on hybrids and interest deduc ons, rather than a emp ng to tackle this in a manner that is not compa ble with this and would not lead to common taxa on with non-EU countries.

Finally, we urged to Commission to work on clarifying where state aid rules apply.

A copy of the full submission can be found at www. nyurl.com/gtoywpm.

Sacha [email protected]

VAT medical exemption legislation needs changeINDIRECT TAXES

Tax Adviser readers will be familiar with the CIOT’s concerns arising from the Rapid Sequence case (see Richard Wild’s article, ‘When is the law not the tax’, Tax Adviser, p36, January 2014, as well as follow-up reports in February 2015 and also in ‘Indirect Tax Voice’, which can be found at www.www.taxadvisermagazine.com).

There has been further relevant case law so the CIOT has again written to HMRC about both a conforming approach to EU legislation and the medical exemption itself.

A conforming approachMuch of HMRC’s view is based on decisions of the UK courts that have typically taken what has been referred to as a ‘muscular’ approach to a conforming interpretation of EU law. In our original submission, we distinguished between

interpreting law in conformity with EU law. This was to ensure that a taxpayer could enforce their rights whether or not they are implemented in national law (the principle of direct effect) and interpreting national legislation in accordance with its purpose and wording to give effect to what was required by the particular directive. We noted that the Court of Justice had consistently pointed out that the principle of direct effect was a remedy in favour of the person, not the state.

In our later submission we drew attention to another EU case, Pupino, which elaborated on the principle. It concerned criminal charges brought against a teacher, Maria Pupino. The case was interesting in that it did not concern the rights of the state as such but a conflict between the rights of the alleged wrongdoer and those of her victims. In referring to the Articles 2, 3 and 8(4) of Council Framework Decision 2001/220/JHA, the court concluded:

‘The national court is required to take into consideration all the rules of national law and to interpret them, so far as possible, in the light of the wording and purpose of the framework decision.’

But in reaching that decision, the court commented:‘…the principle of interpretation in conformity

with Community law cannot serve as the basis for an interpretation of national law contra legem. That principle does, however, require that, where necessary, the national court consider the whole of national law in order to assess how far it can be applied in such a way as not to produce a result contrary to that envisaged by the framework decision.’

We remain therefore of the view that a conforming approach to EU law cannot be read as authorising the interpretation of national law in a manner that conflicts with the clear wording of the law.

Exemption for medical servicesIn our original submission, we pointed out that, since the services of Rapid Sequence comprised the supply of anaesthe sts to hospitals, the relevant EU legisla on was not ar cle 132(1)(c) of the Principal VAT Direc ve but ar cle 132(1)(b).

We subsequently pointed out that the First- er Tribunal in the later case of GSTS Pathology Services LLP also commented on the dis nc on between the two EU provisions. That diff erence is that ar cle 132(1)(b) covers not only the hospital’s medical services but also closely related ac vi es; whereas ar cle 132(1)(c) does not cover closely related ac vi es. Ar cle 132(1)(b) of the PVD refers to services undertaken in ‘hospitals, centres for medical treatment or diagnosis and other duly recognised establishments’.

Thus the scope of ar cle 132(1)(b) is rather wider than 132(1)(c) because of the inclusion of the term closely related ac vi es. We pointed out that: In GSTS, the tribunal commented that the purpose of the exemp on was to ensure that benefi ts fl owing from medical care were not hindered by the increased costs that would follow if it, or closely related ac vi es, were subject to VAT. It was diffi cult to conceive of many services that could be more closely related to a medical service than the employment of anaesthe sts necessary to conduct an opera on. The exemp on does not depend on who supplies the services – they can be supplied by someone other than the hospital performing the main services.

Other recent case law, such as ‘go Fair’, similarly suggests


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that a supply of staff can be a closely related service.

The way forwardWe have suggested that the solution does not lie in writing guidance on how to interpret UK law to comply with EU law, but to move rapidly to amend the legislation so that it complies with EU legislation. In particular, the legislation should distinguish between services provided in hospitals and other services.

In the meantime, we remain of the view that the decision in Rapid Sequence should not be applied.

Maric Glaser Robin [email protected] [email protected]

Engagement with politicians and parliamentGENERAL FEATURE

As a not-for-profi t organisa on, the CIOT’s primary purpose is to promote educa on in taxa on with a key aim of achieving a more effi cient and less complex tax system for all. LITRG is an ini a ve of the CIOT and works to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefi t of those on low incomes. The ATT’s primary charitable objec ve is to promote educa on and the study of tax administra on and prac ce. Key to achieving these aims is constant interac on with policy-makers and parliament, and we report on some of the recent ac vity below.

Meeting with David GaukeIn mid-January, representatives from the CIOT met David Gauke MP (financial secretary to the Treasury), John Mundy (private secretary to the financial secretary), Theresa Middleton (HMRC’s director of business customer and strategy), and Jeremy Tyler (HMRC’s deputy director of business and agent strategy).

The agenda included digitalisation and agent access, HMRC powers, glitches in new legislation, and benefits of tax roadmaps and consultation, and the scrutiny of tax reliefs.

Making Tax Digital for business – briefi ng for MPsThe CIOT and LITRG provided a briefing note to MPs on the Making Tax Digital project for the Westminster Hall debate on 25 January 2016 on e-petition 115895, relating to tax reporting for small businesses and the self-employed.

Both organisa ons were quoted directly a couple of mes during the debate. Read the full briefi ng at www. nyurl.com/zcjs9yu.

House of Lords Economic Affairs Committee Finance Bill submissionThe Finance Bill sub-committee’s (FBSC’s) inquiries focus on technical issues of tax administration, clarification and simplification. This year the FBSC is concentrating its inquiry on the extent to which the measures proposed in the draft Bill contribute to the simplification of the personal tax system and their impact on the compliance burdens of individual taxpayers. The FBSC invited evidence on these cross-cutting issues with particular reference to three topics:1. Proposed changes to the taxation of savings and dividends

(clauses 1 to 4);2. Simple assessments (clause 71); and

3. Office of Tax Simplification (clauses 83–88).The written submissions can be found on the CIOT, LITRG

and ATT websites and largely mirror the submissions made to HMRC in relation to those draft Finance Bill clauses. John Cullinane (tax policy director of CIOT) and Robin Williamson (technical director of LITRG) gave oral evidence on behalf of their organisations.

Contribution to APPG on BEPSThe CIOT responded to the consultation by the All-Party Parliamentary Group on responsible tax on the impact of the G20/OECD base erosion and profit-shifting (BEPS) proposals.

The CIOT continues to be broadly supportive of the BEPS. Noting the significant achievement of the OECD in pulling together the reports from the BEPS project, we said there is still much work to be done in implementing the BEPS outputs. There remain significant obstacles to reaching an international agreement for a set of rule changes that reduce unintended outcomes and increase the quality of information available to tax authorities without leading to excessive reporting requirements and harming international trade.

We also cautioned that the timing of any changes to UK tax legislation must be carefully planned to ensure they are implemented at the same times as other countries to ensure the UK is not placed at a competitive disadvantage, risking investment and jobs. It is also important that there is time for companies to adjust and for co-ordinated introduction across jurisdictions.

We remain of the view that transfer pricing should be at the heart of the rules for taxing multinational companies. Transfer pricing, based on arm’s-length prices, has its difficulties, especially when measuring the value that should be attached to intangible assets such as brands. However, the underlying principle–that profit should be taxed in the country where it is generated–is sound, and we anticipate that it will endure, strengthened by tax authorities’ improved access to information.

The challenges facing tax administrations in developing countries are different from those in developed economies. Corruption and absence of the rule of law are probably the biggest obstacles to effective tax administration in developing countries, along with lack of administrative expertise and/or lack of understanding of the broader international tax and reporting context in which multinationals operate. Measures to improve governance, strengthen the rule of law and develop expertise are at least as important to effective tax administration as any tax-specific measures.

We concluded that it is too early to judge with any certainty the impact of the BEPS project on the UK or elsewhere. The implementation phase, which we are now entering, will be as important as the drawing up of recommendations.

House of Lords submission re: housingThe CIOT responded to the call for evidence from the House of Lords select committee’s inquiry into the economics of the UK housing market. The inquiry will consider the economic factors that influence the demand for and availability of low-cost housing to buy and to rent. The call for evidence asked these questions about taxation: Are there tax measures that would improve housing supply and affordability?will the proposed changes to inheritance tax due to

come into effect in April 2017 have any impact on ‘downsizing’ or housing supply in general? And

has the 2014 reform of stamp duty land tax improved the affordability of houses for first time buyers? Should there be further reform to stamp duty?


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Will the reduction of tax relief available to private landlords announced by the chancellor in the 2015 Budget increase the cost of privately rented accommodation? A copy of the CIOT’s submission can be found here www.tinyurl.com/h82ejm3.

The shifting sands of UK tax policy and the tax baseThe House of Commons’ Treasury committee has also launched an inquiry into ‘the shifting sands of UK tax policy and the tax base’. Further information can be found at www.tinyurl.com/j2rzdnf. The CIOT plans to prepare a response to the inquiry.

As an introductory part of that inquiry, John Cullinane was part of a panel of three quizzed by the commi ee as it began to consider whether radical changes were needed to corporate taxa on.

Higgs case and s 34(1) time limits – an updateMANAGEMENT OF TAXES

In my ar cle on p47 of December 2015’s Tax Adviser, I covered HMRC’s interpreta on of the Upper Tribunal’s decision in R (oao Higgs) v HMRC [2015] UKUT 92 and said we had asked HMRC to provide a statement for our members. It reads:

‘Further to the decision in R (oao Higgs) v HMRC [2015], HMRC have decided not to appeal the Upper Tier Tribunal decision. That means that, in certain circumstances, HMRC will process self-assessments however late that they are received.

There has been a change in internal guidance which sets out the circumstances in which HMRC believe that the interpreta on in Higgs relates to. These are: That the return has been requested in response to an s 8 TMA 1970 No ce to File. That there has been no determina on of tax for the tax year. That the return is an original return is not an amendment to an earlier return under s 8 TMA 1970.

‘When these are met, HMRC will accept and process the return submi ed whether there is a liability due or a repayment to issue.

‘However, on 25 November 2015 at Autumn Statement, the Chancellor of the Exchequer announced a new measure to clarify the me limits so that it was clear for customers when they need to submit their self-assessments to HMRC.

There will be four years from the end of the tax year to submit self-assessments. This will be for tax years 2013–14 onwards. This will be phased, and there will be up to 5 April 2017 for all

self-assessments for years 2012–13 and prior. This gives customers who have outstanding returns ample me to submit them.’

Dra legisla on has been issued which makes clear that:Dra clause 72 of Finance Bill 2016 in eff ect negates the Higgs decision by introducing clause 34A a er s 34 TMA 1970. This sets out that the normal me limit for self-assessments contained in a return under s 8 or s 8A is four years a er the end of the tax year it relates to. So the last date that you can submit a self-assessment return for the tax year 2020–21 will be 5 April 2025.The me limit may be longer than four years in two specifi c instances. They are:

1. when HMRC issues a taxpayer with a no ce to fi le within the four-year period, the taxpayer will always have three months to make and deliver their return; and

2. me limits in rela on to self-assessments made in response to determina ons by HMRC will not be aff ected.

There are some transi onal provisions. For self-assessments for 2012–13 and earlier, taxpayers will have un l 5 April 2017 to submit them to HMRC. In the explanatory notes to the Finance Bill HMRC repeats its view that it will accept a ‘late’ self-assessment return for any year from 1996–97 only if it meets the following criteria and if there is an overpayment of tax or a reduc on in payments on account. These are when: when HMRC issues a taxpayer with a no ce to fi le within the four-year period, the taxpayer will always have three months to make and deliver their return; and me limits in rela on to self-assessments made in response to determina ons by HMRC will not be aff ected.

Margaret [email protected]

Stamp Duty Land Tax (SDLT) on purchases of additional residential propertiesGENERAL FEATURE

The CIOT responded to HM Treasury’s consultation on higher rates of stamp duty land tax (SDLT) on purchases of additional residential properties, published on 28 December 2015. The CIOT pointed out that the short period in which to respond (deadline 1 February 2016), given such a radical change to the regime, was challenging, both for those giving their views and for HMRC in implementing the changes by 1 April 2016.

The CIOT had a number of key concerns: The apparent inconsistency in the proposals that those who already own a buy-to-let property but have not yet bought a main residence will be subject to the higher rate on the purchase of a (first) main residence. By contrast, a person who sells a main residence can acquire a buy-to-let and later replace their main residence without incurring the higher rates on either transaction. The imposition of the higher rates will impose greater complexity on the SDLT regime, which is not designed to make decisions about how a purchaser intends to use a property. The burden of administering the complexities of the higher rates will fall largely on conveyancers who may not have tax expertise. The intention is to treat married couples and civil partners living together as one unit unless separated under a court order or by a formal deed of separation under seal. We recommended extending the definition of separation to include factual separation in circumstances in which the split is likely to be permanent. A joint purchase may be made for reasons that have a clear social value and that are not contrary to the stated policy intent. Therefore imposing higher rates on the entire consideration appears inequitable. However, these inequities might be mitigated by a targeted relief for situations that accord with the policy intent such as parents helping children on to the housing ladder. We noted that it is intended that similar factors as for CGT


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private residence relief (PRR) will be used to determine whether a UK property is a main residence. Although there will be no right to elect which is the main residence for SDLT, it would be a useful simplification if existing CGT PRR elections were regarded as indicative for SDLT higher rates purposes. The complexities in determining a main residence should not be under-estimated. We suggested that a targeted relief from the higher rate is considered if the purchaser of the ‘old’ main residence defaults after exchange. In terms of property interests worth less than £40,000, we agree that a disregard by reference to value should be workable in most cases but we are concerned that the valuation of a lease may present difficulties. Consideration might be given to a disregard of a lease of fewer than seven years.

The CIOT’s full response can be read at www.tinyurl.com/h84znd2.

The ATT also responded to the consultation. Some of its concerns included: Treating married couples and civil partnerships as ‘one unit’ after marriage is ignoring the key principles of legal ownership and independent taxation. The ATT did not accept the argument that, because such couples are treated as ‘one unit’ for the purposes of claiming main residence relief (for CGT), this concept should be extended to the extra SDLT charge. Instead, it counter-argued that, if just one spouse owned a buy-to-let property, only that individual should be taxed on the rental income and only one CGT annual exempt amount would be available if the buy-to-let were sold. For all other purposes of income tax and capital gains tax, the tax treatment follows the legal ownership, so the SDLT charge should do the same.

Read the full submission at www. nyurl.com/hqkbnkx.Meanwhile, the CIOT responded to the fi nance commi ee of

the Sco sh parliament’s call for evidence on the proposed land and buildings transac on tax (LBTT) supplement on addi onal residen al homes. The supplement was announced in the Sco sh dra budget for 2016–17, published in December 2015, and it corresponds to the proposal for SDLT.

Again, the CIOT noted the short meframe and lack of a full consulta on as poten ally causing diffi cul es in producing good legisla on, while acknowledging that the Sco sh government felt it necessary to react to the UK government’s equivalent proposal for SDLT.

Given the Sco sh government’s stated commitment to a tax system that has regard to Adam Smith’s four principles, we raised concerns that the proposal would not fulfi l this commitment. For example, we believe it will lead to uncertainty and the tax will not be convenient to pay.

Many of the CIOT’s concerns on the addi onal SDLT charge also arise in rela on to the LBTT supplement, and so are not reproduced here.

It is likely that the legisla on (published at the end of January 2016) will be passed by the Sco sh parliament by the end of March, with the inten on of the measure taking eff ect from 1 April 2016. Revenue Scotland will publish guidance, on which it will engage with stakeholders such as the CIOT.

Read the full CIOT response at www.tinyurl.com/jkrzlok.

Kate Willis Alison [email protected] award@a .org.uk

Joanne [email protected]

Compliance Reform ForumMANAGEMENT OF TAXES

The following slide packs presented by HMRC at the December 2015 mee ng of the Compliance Reform Forum are available to view on our website at www. nyurl.com/hfod9hm.1. Compliance for the Future, HMRC’s vision and plans for

delivery.2. A briefi ng on HMRC’s Connect system.3. An overview of HMRC’s Connect system – what it does and

where it is going.4. Making Tax Digital for Business.

Margaret Curran [email protected]

VAT: option to tax notifi cations updateINDIRECT TAXES

Obtaining acknowledgement of an op on to tax (OTT) can be crucial to property deals and transfers of going concerns in par cular. Delays can jeopardise transac ons, given the understandable reluctance to complete contracts without certainty on VAT and many sales contracts require confi rma on that the OTT has been no fi ed and is not dis-applied because of an -avoidance measures.

Since the CIOT wrote to HMRC in October 2015 seeking reassurance that delays of 30 to 60 days would be addressed, HMRC had commi ed to restore service levels to around 15 days by November 2015. We have con nued to monitor this though our representa ves a ending HMRC’s land and property liaison group and the joint VAT consulta ve commi ee as well as direct contact with the OTT Na onal Unit and reports from members. Unfortunately, substan al delays have con nued and HMRC acknowledges it is not yet where it wants to be. We have been assured that extra resource has been deployed to the OTT team and HMRC reports that this is having an impact with the aim to have a signifi cant improvement in service levels by now.

To assist with monitoring this issue we are asking for feedback from members on their experiences. Please provide brief (anonymised) examples of delays that you and your clients may have experienced so that we can evidence concerns. It would be helpful to provide some context on whether the OTT is a standard or complex situa on and to explain what impact the delay has had. Please send your email to [email protected].

Angela [email protected]

Scotland updatePERSONAL TAX, INDIRECT TAX

LBTT additional homes supplement reference groupRepresenta ves of the CIOT a ended a mee ng set up by the Sco sh government to provide input into the development and implementa on of policy for the LBTT supplement, referred to


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earlier in the Finance Bill section. The meeting helped the CIOT prepare its response to the proposals.

The Scottish government has published a note of the meeting on its website: www.tinyurl.com/jzfevb9.

Scottish landfi ll tax (SLfT) forumRepresentatives of the CIOT attended a meeting organised by Revenue Scotland when the proposed statutory regime for Loss on Ignition Testing was discussed.

A brief report was provided on the consultation held last year. Most respondents favoured a statutory regime, with the aim of establishing a level playing field.

The intention is for the statutory regime to take effect from 1 October 2016 (to give the industry longer to prepare). Draft legislation was published in February 2016; it specifies the temperature and threshold (440°C and 10%) and takes the form of an amendment to the Scottish Landfill Tax (Qualifying Material) Order 2015. Revenue Scotland will produce detailed guidance. In the meantime, the current guidance must be followed.

Revenue Scotland led a discussion of the issues that the guidance needs to cover: Sources of waste – Revenue Scotland’s view is that the source should affect the rate of tax. Some stakeholders felt it would be easier simply to consider whether the final waste is taxable at the lower or standard rate. It was argued that this would be easier to audit too. Descriptions – stakeholders noted that the varied quality of waste transfer notes is a problem. It was suggested that Revenue Scotland could produce a pro forma questionnaire for site operators to use at the start of the process. Sampling – stakeholders suggested that the methodology set out in HMRC’s LFT1 would be a good starting point. It was felt that the frequency of testing should be risk-based. Testing – there was agreement that the legislation should contain the temperature and the percentage threshold, but that the rest of the detail should be within guidance. Cleaning up – there was a preference for setting out methods that are not approved (such as shredding and mixing). Compliance – Revenue Scotland emphasised that it wishes to minimise opportunities for avoidance and evasion. It was suggested that simplicity would assist with this; Revenue Scotland argued that the reverse might be true.

Revenue Scotland will post official minutes on its website: www.tinyurl.com/zjup7uk.

Joanne [email protected]

Changes to class 2 NICOMB

Since 6 April 2015 taxpayers have no longer been required to pay their Class 2 NI contributions ‘up front’ to HMRC. They will now be collected at the same time as the final tax payment; so, for 2015–16, on 31 January 2017, and so on.

This delay can result in some benefits being denied if contributions are not paid ‘early’. Taxpayers can make payments early if they choose, possibly using a budget payment plan, but they must make it clear to HMRC that it is NI payments that are being made or the Revenue will set the payments

against any outstanding debts first.The main benefit to be affected is maternity allowance

where eligibility is based on NI contributions paid for a 66-week test period before the baby’s due date.

There are two levels of maternity allowance: the standard rate, for which the mother must be self-employed for 26 weeks in that test period and have paid class 2 National Insurance contributions for 13 of them; and the lower rate, for which the mother must be self-employed for at least 26 weeks in that test period and have earnings of at least £30 a week on average. If the baby is due in August 2016, the claimant will have to

pay sufficient contributions in the 66 weeks leading up to that date. As we have seen, contributions for the tax year 2015–16 are not due until 31 January 2017. However, once an individual makes a claim, the Department for Work and Pensions contacts HMRC and the claimant is given the opportunity to pay the Class 2 contributions early.

The other two benefits that might be affected are the state pension and contributory employment and support allowance (ESA). The exceptions process for the state pension continues under the new regime: if contributions require to be paid early to complete the qualifying requirements, this may be done.

The more difficult situation arises with ESA. Class 2 contributions would have to be paid early only if the claim was initiated between the first Sunday in January and 31 January. In these cases the claimant needs to file their tax return and pay the NI before they make it.

Proposals to abolish class 2 NIA consultation document was issued in December 2015 on the abolition of class 2 National Insurance and, instead, making class 4 contributory for benefits purposes. These changes, which will not be introduced before April 2017 at the earliest, may simplify matters for many taxpayers. But for others – especially those with very low profits from self-employment who now choose to make voluntary class 2 NI contributions – these proposals may have a negative impact: they would have to pay class 3 NI instead, at a significantly increased cost.

For those in self-employment with earnings broadly equivalent to an employed earner who would obtain NI credits (those earning between the Class 1 lower earnings limit of £112 and primary threshold of £155 a week), it is proposed they would similarly be awarded NI credits.

Gillian [email protected]

Review of VAT groupingINDIRECT TAX

HMRC plans to undertake a consultation on three issues relating to VAT groups and cost sharing. This is in response to recent case law, including Larentia and Minerva and Skandia. The CIOT, with input from ATT, has responded in detail to HMRC’s request about which issues to consult on.

We will respond to the formal consultation when launched. We are grateful for responses received to date but would welcome any other views, which should be sent to [email protected]. Further details can be found in Revenue and Customs Brief 3 (2016) at www.tinyurl.com/jyme5rt.

Maric [email protected]


TECHNICAL

Recent CIOT submissions Further informa on Date sent

Dra Finance Bill 2016 Clauses

Clauses 1-4: Savings allowance and savings nil rate and deduc on of tax at source www.tax.org.uk/ref14 29 January 2016

Clauses 2–3: Dividend nil rate and dividend tax credits www.tax.org.uk/ref15 29 January 2016

Clause 8: Income tax: exemp on for trivial benefi ts in kind www.tax.org.uk/ref19 5 February 2016

Clause 9: Income tax: employment intermediaries and relief for travel and subsistence www.tax.org.uk/ref20 5 February 2016

Clause 11: Employee share schemes: simplifi ca on of the rules www.tax.org.uk/ref21 5 February 2016

Clause 12: Reduc on of pensions life me allowance www.tax.org.uk/ref22 5 February 2016

Clauses 16–18: Transac on in securi es: company distribu ons www.tax.org.uk/ref11 19 January 2016

Clause 33: Hybrid and other mismatches www.tax.org.uk/ref37 3 February 2016

Clause 37–39: Income tax: treatment of income from spor ng tes monials www.tax.org.uk/ref40 5 February 2016

Clause 43: Inheritance tax – domicile www.tax.org.uk/ref43 1 February 2016

Clause 44: Inheritance tax – increased nil-rate band – downsizing www.tax.org.uk/ref44 2 February 2016

Clause 60: General an -abuse rule – penalty www.tax.org.uk/ref54 2 February 2016

Clause 63: Serial tax avoidance www.tax.org.uk/ref55 2 February 2016

Clause 67: Civil penal es for enablers of off shore tax evasion www.tax.org.uk/ref59 2 February 2016

Clause 70: Off ences rela ng to off shore income, assets and liabili es www.tax.org.uk/ref61 2 February 2016

Clause 71: Simple assessment www.tax.org.uk/ref62 2 February 2016

Clause 79–80: Tackling the hidden economy www.tax.org.uk/ref70 3 February 2016

Clauses 83–88: Permanent establishment of the Offi ce of Tax Simplifi ca on www.tax.org.uk/ref73 3 February 2016

Other submissions Further informa on Date sent

Withdrawal of extra statutory concessions 2015 www.tax.org.uk/ref13 7 January 2016

Common consolidated corporate tax base (CCCTB) – EU Commission consulta on www.tax.org.uk/ref2 8 January 2016

Tax deduc bility of corporate interest expense www.tax.org.uk/ref3 14 January 2016

Cash, tax evasion and the hidden economy www.tax.org.uk/ref4 29 January 2016

Scotland proposed LBTT supplement on addi onal residen al homes www.tax.org.uk/ref83 29 January 2016

Higher rate of stamp duty land tax (SDLT) on purchases of addi onal residen al proper es www.tax.org.uk/ref88 1 January 2016

Business incen ves review www.tax.org.uk/ref67 5 January 2016

Employer provided living accommoda on www.tax.org.uk/ref99 9 February 2016

Recent ATT submissions Further informa on Date sent

Dra Finance Bill 2016 Clauses

Clause 1: Savings allowance and savings nil rate www.a .org.uk/ref14 28 January 2016

Clause 2: Income tax: changes to dividend taxa on www.a .org.uk/ref15 1 February 2016

Clauses 16–18: Transac ons in securi es: company distribu ons www.a .org.uk/ref11 2 February 2016

Clause 37–39: Income tax: treatment of income from spor ng tes monials www.a .org.uk/ref40 3 February 2016

Clause 40: Deduc on for replacement of furniture www.a .org.uk/ref41 1 February 2016

Clause 48 VAT: Changes to the reduced rate for energy saving materials www.a .org.uk/ref48 1 February 2016


TECHNICAL


Closer alignment of income tax and na onal insurance www.a .org.uk/ref1 5 January 2016

Exclusion of certain companies from the Na onal Insurance contribu ons ‘Employment Allowance’ www.a .org.uk/ref83 8 January 2016

Higher rates of SDLT on purchases of addi onal residen al proper es www.a .org.uk/ref84 25 January 2016

Withdrawal of extra statutory concessions 2015 BIM66301 – Remunera on of sub-postmasters www.a .org.uk/ref13 26 January 2016

Recent LITRG submissions Further informa on Date sent

Dra Finance Bill Clauses

Clause 1 and 4: Personal savings allowances www.litrg.org.uk/ref183 3 February 2016

Clause 2 and 3: Dividend taxa on www.litrg.org.uk/ref184 26 January 2016

Clause 8: Income tax exemp on for trivial benefi ts in kind www.litrg.org.uk/ref181 25 January 2016

Clause 71: Simple assessment www.litrg.org.uk/ref185 3 February 2016


Review of alignment of PAYE and NIC www.litrg.org.uk/ref177 4 January 2016

Small company taxa on www.litrg.org.uk/ref178 4 January 2016

APPG on fi nancial educa on for young people www.litrg.org.uk/ref179 14 January 2016

Employer-provided accommoda on www.litrg.org.uk/ref182 3 January 2016

Personal independence payments www.litrg.org.uk/ref180 4 January 2016

Members’ Support Service

• The Members’ Support Service aims to help those with work-related personal problems

•

support

• CIOT and ATT

•

To be put in touch with a member of the Support Service please telephone 0845 744 6611 and quote ‘Members’ Support Service’


The Tony Arnold Library is the library of the CIOT and ATT.

It is for the use of all members and students.

Tony Arnold Library

Tax information at your fingertips

King’s College London Chancery Lane London WC2A 1LR [email protected] or 020 7848 2568

The Tony Arnold Library contains books, articles and case law on taxation issues and policy.

To gain access you must have your membership or student card.

Chancery Lane or Temple

Birmingham and West MidlandsWednesday 16 MarchSharia issues: wills and succession and overview of main principlesHaroon RashidBirmingham16.15–18.15

Cumbria and South West ScotlandThursday 17 MarchRecent tax casesDiscovery assessmentsKeith GordonPenrith13.30–17.00

East AngliaTuesday 15 MarchCGT: land transac ons and property tax updateDean Woo enNorwich14.00–17.00

East MidlandsTuesday 22 MarchOverview of penal esCharlo e Ali, Heather BrehcistIan GallowayNo ngham16.00–20.00

HampshireThursday 17 MarchBudget updateFareham18.00–20.00

Harrow and North LondonThursday 17 MarchIR35: regaining the plotDave Smith17.30–20.30

Thursday 24 MarchInput VAT recovery: PE and business/non business expsPeter Hughes18.45–20.15Thursday 14 April

Branch eventsWhere do you get your CPD?

Does your fi rm provide your CPD needs? Have you tried a local Branch event before? Would you like the opportunity to meet with CTAs, ATTs and other professionals in your local network? Why not go along to a local Branch event. Below we have listed all the branch events taking place from 15 March to 14 April 2016. For a full list of branches, visit the CIOT and ATT websites: www.tax.org.uk/branches and www.a .org.uk/branches where you will fi nd informa on about each event and where you will be able to book online.

MAR-APR 2016


Divorce and taxes: ne’er the two do meetAnne Fairpo18.45–20.15

HullFriday 18 MarchStamp taxes: basics and planning updateMichael Collins16.45–18.15

LeedsWednesday 6 AprilVAT updateJohn Barnes18.00–19.30

LondonTuesday 15 MarchFull day conferenceInterna onal taxJonathan Schwarz (Chair)10.00–17.00

Tuesday 15 MarchStudent eventFA 2015 update (relevant for May 2016 exams)Chris Siddle17.30–19.00

Thursday 17 MarchInterna onal taxes17.45–19.00

Monday 21 MarchIndirect taxes17.45–19.00

Wednesday 13 AprilFollower no cesAccelerated payment no cesKeith Gordon17.45–19.00

Mid-AngliaThursday 17 MarchExploring the truth of pension freedomsDarren Wakefi eldStanwick18.00–20.00

Thursday 7 AprilTax planning for SMEs and their ownersRebecca BenneyworthBedford13.30–17.00

North East EnglandThursday 17 MarchOwner managed businessesMichael Steed Newcastle upon Tyne17.30–19.30

Thursday 14 AprilShares and incen vesAidan LangleyNewcastle upon Tyne17.30–19.30

Northern IrelandWednesday 23 MarchHot topics in VATNeil OwenBelfast17.00–19.15

Sheffi eldWednesday 6 AprilEmployment tax updateHelen Rylands17.45–19.45

Somerset and DorsetThursday 17 MarchFarming tax update incorpora ng developmentJulie ButlerDorchester16.00–20.00

South London and SurreyWednesday 16 MarchPensionsAndrew JohnstonCroydon18.30–20.00

South WalesTuesday 22 MarchHigher wealth clients: compliance and planning pointsRobert JamiesonCardiff 13.45–17.00

Tuesday 5 AprilPrivate businesses: what’s le for the prac oner to do apart from fi ling the tax returns?Tina RichesCardiff 15.45–18.00

South West EnglandWednesday 23 MarchPresident’s topical tax psChris JonesExeter15.45–19.00

SuffolkTuesday 12 AprilBranch AGMEmployment tax issuesSusan BallIpswich18.00–20.00

Thames ValleyMonday 21 MarchFarming: current issues and structuresCarlton CollisterOxford18.15–19.45

Wednesday 6 AprilHMRC clearancesPete MillerReading18.15–19.30

Saturday 9 AprilHalf day conferencePost-budget review 2016Robert MaasWindsor09.30–12.30

TAXATIONDISCIPLINARYBOARD

Disciplinary reportsFindings and orders of the Disciplinary Tribunal

Susan Helen JelksA member of the CIOT has been censured for contravening the rules of the an -money

laundering scheme.The Disciplinary Tribunal decided that Ms

Susan Jelks, of Shrewsbury, was in breach of provisions of the Professional Rules and Prac ce Guidelines in that she had failed to be registered on the CIOT’s Money Laundering Regula ons 2007 Registra on, Monitoring and Compliance Scheme and had breached its rules.

The tribunal censured Ms Jelks and ordered her to pay costs of £2,272.

The hearing was held on 16 December 2015.The full decision in this case can be found

at www. nyurl.com/hzepdjb.

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London, up to £90,000 + benefits

A multinational FTSE 100 currently operating in 16 countries is looking for an experienced senior tax manager to manage day–to–day operational tax queries as well as improving internal and external operational tax and assurance processes.

Reporting to the Head of International, Transfer Pricing and Operational Taxes you will support business units across the Group to develop and maintain an overall risk assurance framework of operational tax. This role will have a wide and varied remit with a strong emphasis on stakeholder engagement.

As a qualified accountant or tax professional, you will have experience of effective governance around operational taxes and a solid working knowledge of FATCA and CRS. Previous experience within financial services would be preferable.

Ref: 2681917

For further information please contact Sarah Rolfe on 020 3465 0138 or email [email protected]

YOU MAKE ALL THE DIFFERENCEMazars is looking to grow its Tax team with people who are strongly client focussed, driven, creative, able to resolve complex problems, and willing to embrace challenges.

Mazars is all about people – we believe that each individual makes a difference to our culture and client service.We have a friendly and inclusive working environment where everyone’s contribution is valued.

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Personal Tax Network

www.howellsconsulting.co.uk

Private Client Partner, Mid-Tier

London

£Six Figures

This highly-respected mid-tier accountancy firm has a

strong reputation in the Private Client field. They are

undertaking Partner succession planning and seek a

talented Partner or Director to deliver advice on IHT,

CGT, extraction of wealth etc. A high quality portfolio of

entrepreneurial HNWIs awaits the successful candidate,

so no client following is required. Clear route to equity.

Ref 4429

Personal Tax Manager – Transactions

London

To £60,000 + Bens

Our client is a well-respected non-Big 4 accountancy

firm, with a multi award-winning Private Client practice.

They act for a wide range of new-money private clients,

including non doms and have a highly-rated Transactions

sub-team, advising entrepreneurial HNWIs. This team is

keen to appoint an additional Manager, with the ability to

progress to Senior Manager in due course.

Ref 4439

Personal Tax Superviser

London

£45,000 – £50,000

Join a highly successful mid-tier accountancy firm,

that has built a strong reputation for advising dynamic

entrepreneurs and their businesses. You will oversee a

high quality portfolio of HNW private clients, providing

compliance and ad hoc planning services, as well as

reviewing the work of junior advisers. ATT or CTA

considered. Genuine scope to progress.

Ref 4442

Senior Manager, Private Client

Gatwick

£Excellent + Bens

Play a strategic role in a high profile Personal Tax

advisory team. Our client is a national firm, whose

Gatwick office advises entrepreneurial HNWIs and

their families on the full range of private client tax

planning issues. Demand for their expertise continues

to grow and they now seek a talented CTA at Senior

Manager level. Excellent Director prospects.

Ref 4441

In-House Private Client Tax Adviser

London

To £50,000 + Bens

No time sheets! An experienced personal tax adviser

is sought by a prominent London firm, to look after

their Partners’ personal tax affairs. You will require

demonstrable experience of managing UK personal tax

compliance and ad hoc planning. Strong communication

and interpersonal skills are also important, as you will

essentially be performing a ‘client’ facing role.

Ref 4444

Private Client Tax Senior

West End

To £43,000 + Bens

A super opportunity to build your personal tax career with

a thriving and respected London accountancy firm. Take

responsibility for an impressive private client portfolio

(including non doms and entrepreneurs) and work closely

with experienced Partners on a range of personal tax

issues. Full support for CTA will be provided if required.

Development towards Manager will be encouraged.

Ref 4445

HNW Private Client Tax Roles …

IHT Planning Senior or ManagerLeicester£excellentOur client is a niche firm which advises other firms of accountants on capital tax planning and, in particular, IHT planning. This business seeks a personal tax specialist with an interest in capital taxes to join their growing team. Would consider a tax senior or a junior manager. Ideally, you will be ATT qualified – CTA an advantage.Call Georgiana Ref: 2269

In-House Head of Tax ReportingCheshire£80,000 to £100,000 + benefitsWorking in the in-house tax team at this large international business, you will deliver the consolidated tax provision and associated disclosures at interim, year end and SRP. You will also ensure that all SOX controls are executed and evidenced, and will be responsible for managing the group’s effective tax rate. Previous tax reporting and forecasting experience a prerequisite.Call Georgiana Ref: 2263

Head of TaxStockon on Tees£market rateOur client is a large independent accountancy firm, seeking a qualified tax professional to lead their tax team. You will also provide all round tax advice to a mixed tax allocation of corporate tax and personal tax cases. A large part of your role will be to assist the partners with advisory work. Day to day, this will involve advice on transactions, EMI schemes, share for share exchanges and advice to family businesses. Prospects for further promotion for the right individual.Call Georgiana Ref: 2266

Tax Compliance Senior ManagerManchester£50,000 to £60,000 + benefits + bonusWell known and well regarded accountancy firm is looking for a senior manager to join a corporate tax team which focuses on helping clients with corporate tax compliance and reporting. Could suit someone currently working in industry and looking for an interesting role with management responsibility but with some flexibility round hours.Call Georgiana Ref :2236

In-House Tax Reporting Mgr or Senior MgrCheshire£55,000 to £70,000 + benefitsYou will assist with country by country reporting, the production of the consolidated tax provision and associated disclosures at interim, year end and SRP, and will produce the tax information for presentation to the board. You will also lead the evaluation and implementation of technology in the tax department.Call Georgiana Ref: 2268

Transfer Pricing Assistant Mgr or MgrManchester£excellent Great opportunity for a transfer pricing specialist to join a fast growing team based outside of the Big 4. You will be involved in a wide range of work including broader international tax. You will work with other regional offices and also closely with London. This is a key role with bags of opportunity for an ambitious individual. You may have gained transfer pricing experience in practice or industry. Study support available for ADIT and would consider someone who is currently more corporate tax focused.Call Georgiana Ref: 2259

Corporate Tax ManagerNottinghamTo £48,000 + benefitsYou will be working in a team that services some of the region’s most prestigious clients. You will have responsibility for managing and leading the corporate tax advisory work and supervising the work undertaken by the junior team members. You will also be expected to attend client meetings and discuss new tax ideas with your clients. You must be CTA/ACA/ICAS qualified, with sound knowledge of the UK corporate tax regime and tax accounting principles. International tax experience would also be advantageous.Call Alison Ref: 2223

Corporate Tax ManagerHarrogate£excellent + benefitsAs a corporate tax manager, you will run an interesting and varied portfolio which will include Plcs, large OMBs and entrepreneurial growing businesses. Reporting directly to the senior management, you will oversee the tax compliance on your portfolio and will be responsible for the more complex compliance issues and ad-hoc tax planning work. This is a fantastic role that would suit an ACA/CTA qualified tax specialist living in North Yorkshire.Call Alison Ref: 2264

Personal Tax SeniorLeedsTo £22,000 + study supportBased in modern offices in the city centre, you will manage the personal tax for a varied portfolio of clients. This will include the preparation and submission of the Self Assessment Tax Returns for sole traders, partnerships, company directors and HNW individuals. You will also deal with related Capital Gains Tax work, and will assist with planning and advisory projects. Ideally, you will be ATT qualified or qualified by experience.Call Alison Ref: 2190

Part Time Tax Investigations RoleLeedsTo £28,000 (FTE)You will assist the partners with a portfolio of tax investigations cases, including COP8, COP9, residence and domicile and employer compliance reviews. You will also assist with the HMRC settlement process, including liaising with clients and HMRC and calculating the final tax position. You must have recent practical tax investigations experience from either HMRC or practice, and be comfortable managing a portfolio of cases. This is a 3 or 4 day week role.Call Alison Ref: 2256

Share Schemes ManagerManchester/LeedsTo £48,000 + benefitsThis Big 4 accountancy firm is looking for a share schemes specialist to join their growing team in either the Leeds or Manchester office. You must have a good understanding of the UK tax and legal issues that may arise in relation to long term and equity based incentive arrangements, and also have experience of drafting legal documentation and giving technical advice. You may therefore be a ACA/ICAS/CTA qualified tax advisor or a qualified solicitor looking for a change of working environment.Call Alison Ref: 2267

Tolley’s

The Taxation Awards reward the success of teams and individuals in all areas of tax. Join us to applaud the best in our profession at the tax event of the year, attended by hundreds of your colleagues.

Catch up with old contacts and make new ones at the drinks reception.

Enjoy a fi rst-class three-course meal in the ballroom. Be entertained by a leading comedian and variety act. See the best in tax recognised as the awards are

presented. Dance to music from our live band, have fun at the

after-show party, or relax over drinks in the jazz bar.

For full details, including past winners, and a gallery of photographs from last year’s event, please visit www.taxationawards.co.uk or contact Alma Watson on: [email protected], or 020 8652 8026

19th May London Hilton

#TaxAwards2016www.taxationawards.co.uk

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Let us be

Morgan McKinley’s Taxation team in London specialise in placing experienced tax professionals into both in-house and practice roles nationwide.

We provide permanent, temporary and interim solutions at all levels of seniority. Our mission is

to be your Career Ally™, helping you realise your ambitions and discover your true potential.

And whether you are actively seeking a new role or simply looking for advice on your career, we are here to help you at every stage of the journey.

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If you would like to find out more about our services, please contact:

Archie Forbes Adam (Manager, People Services Tax) [email protected] 092 0142

William Hepworth (Manager, In-house Tax) [email protected] 092 0030

Ian Palmer (Associate Director, Tax) [email protected] 092 0029

Ref: 999007

Employment Tax ManagerLondon | £45,000 - £55,000

Are you looking to accelerate your career with a company well known for the continued development of its staff? If the answer to the above questions is yes, then this could be the perfect role for you.This position will afford you the opportunity to utilise your existing skills, whilst developing new ones. The ideal candidate will have extensive employment tax experience and be expected to manage their own portfolio and mentor junior staff. If this sounds like you please apply today.

For further information: Matthew Hemsley on 0207 092 0277 [email protected]

Expatriate and Personal Tax Consultant - BoutiqueLondon | £35,000 - £45,000This is a new position which provides an exciting role for an ambitious and enthusiastic qualified or part qualified tax professional looking to take more responsibility for an international assignment and UK personal tax portfolio.

The successful candidate will require experience in the international assignment and personal tax area. Working within the tax team, the role needs effective communication with other service teams and externally, including managing the US tax providers.

For further information: Matthew Hemsley on 0207 092 0277 [email protected]

Ref: 9786547

Indirect Tax Manager, Innovative TechBedfordshire | £55,000 + bonus + benefitsA excellent opportunity has become available for an Indirect Tax Manager to join a leading Hospitality organisation based in Bedfordshire. You will be responsible for managing the compliance for UK and Group companies including the preparation for review and timely submission of all UK VAT, MGD returns, Intrastat and EC Lists. Whilst this role does not have direct reports, you will actively engage and provide coaching to develop the Tax Analyst to ensure they gain experience of indirect taxes.

For further information: Matthew Bunyan on 0207 092 [email protected]

Ref: 2275265

Senior International Tax Manager, FTSE 250 Central London | £75,000 - £90,000 + bonus + benefits

A FTSE listed business based in Central London is looking to recruit an experienced International Tax specialist for an advisory driven in house tax position which has become available as a result of an internal promotion. This business operates in a sector which relies heavily on large projects and bids and so this role will focus on supporting the bid teams and advising on tax implications of such projects in jurisdictions around the world.

You’ll be operating as part of a small team that makes up the in house tax function and so will assist with group tax responsibilities at busy times. The ideal candidate will be ACA/CTA qualified (or equivalent) and have experience in International Tax advisory work.

For further information: Sophie Loughe on 0207 092 0003 | [email protected]

Ref: 658961

Expatriate/Personal Tax

In-House International Tax

VAT

Employment Tax

VAT Senior Manager, Big 4 London | £75,000 - £95,000 per annum + bonus + benefitsWant to work for a market leading brand? This Big 4 accountancy firm is looking for a VAT specialist to join their London Region Tax team as Senior Manager. This role offers the right candidate the chance to work on a diverse and varied client base ranging from SMEs to FTSE250 companies. With a clear path for progression, this will suit ambitious VAT professionals looking to move into a commercial role. Ideally CTA qualified or equivalent, with previous experience at a professional services firm.

For further information: Garkeing Ng on 0207 092 [email protected]

Ref: 612991VAT

How To Work Flexible Hours And Still Have a Career

What’s happening at the moment?

What are my opportunities?

Flexible working is becoming more and more common within the workplace. This can be seen at an international level; from France, Sweden and Germany but also in the UK. It is now every

with 26 weeks of service.

should this be reduced hours, working remotely or childcare obligations. In fact, a number of

working for the right person.

Practices are much more open to considering

cases, home working. This is driven partly by necessity, but also partly by the changing attitudes towards the working environment and the improvement in technology. We are

infrastructures to cope with reduced hours, but in smaller more entrepreneurial practices,

that if a person has a great background, and an

to make compromises. A lot of partners also realise that good quality staff can frequently do

course and there are limits to what a practice can offer you, however there is certainly greater

Please feel to contact me on my direct line or

0207 464 [email protected]

Write 1 Royal Exchange Avenue, London EC3V 3LT

Call 0207 464 4240

Email [email protected]

Visit www.creativetaxrecruitment.com

Go to www.creativetaxrecruitment.com for more detailed job descriptions.

Private Client Tax ManagerLewes, Sussex£55–60,000 Flexible Hours

This is a great opportunity to join a private client tax team in a local

are committed to extending the range of services and expanding the client base to continue steady organic growth. The role focuses around compliance and planning for HNWI’s and trusts. You can be a career manager looking for a decent work/lifestyle balance or you can be an ambitious tax manager looking to step up to senior manager/director. Ref:5542

Go to www.creativetaxrecruitment.com for more details on this role.

Corporate Tax Manager Tunbridge Wells, Kent £42–48,000 4 Days Week

with an award winning tax team. A lot of the professionals here are

got tired of the commute from Kent. As a corporate tax manager here you will work with an exciting range of clients and you can progress on your own merit, at your own speed. The last two

Ref:5587


Mixed Tax Advisory ManagerBristol£50-55,000 Part-Time

of the most successful in this area. Your primary responsibility is to plan and review the advisory work of the team. You will also coach others to improve their advisory skills and work very closely with the tax partner. This is a superb opportunity for

working. Ref:5647


Private Client Tax Senior ManagerLondon£70-90,000 Pro Rata

friendly culture.

and has grown rapidly. There are multiple private client tax partners

you with support. The partners are friendly, professional and have

lifestyle balance. Ref:5582


Trust and Tax ManagerLondon£50-60,000 Flexible Hours

history of growth. The tax fees have seen double digit growth in

by bringing on senior hires with the ability to generate further business. The role will be a mixture of private client tax and trusts and would be ideal for a trust manager who wants to deal with private client tax work, in addition to the trust work.Ref: 5080


Personal Tax Senior ManagerMaidstone, Kent£60-70,000 Flexible Hours

Work in a proactive, entrepreneurial, successful and fun to work with team that has professional standards but also and understanding of a life outside of work. The work is fed by the partners providing you with the opportunity to take on responsibility earlier in your career. The work is varied and involves advising on all of the main indirect taxes. The practice has a great track record of developing its staff and the partners are all ex Big 4. You can make manager in a 24 month time frame. Ref:5325


Find your next promotion

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