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Centre
for Non Residents – Double
Tax guidance notes
A new series of notes are presently being published. The first of these deals
with the way in which the Inland Revenue Centre for Non Residents will deal
with applications for relief from UK Tax.
A
PDF form will be available on the internet for applications for relief at
source and claims for repayment
of United Kingdom income tax. This should be
used where a company in another Member State of the European Union receives
interest or royalties from an “associated company” in the UK.
For more information about making such claims please contact us.
VAT
Civil Penalties
Two new types of civil penalty have been introduced in relation to international
trade in the changes to the Finance Act 2003, one for civil evasion and one
for contravention of customs law.
The civil evasion penalty will cover less serious cases of evasion of import
VAT or customs duty and came into force on 27th November 2003. The contravention
of customs law penalty came into force on 23rd December 2003 and covers non
compliance of European and national customs laws covering imports and exports
where evasion is not a factor.
For more information on these penalties please contact us.
Sales of phone cards
A business brief article has been published giving the views of HM Customs
and Excise with regard to the VAT treatment of phone cards supplied to a UK
distributor by an issuer in another EU Member State.
It
had been suggested that such arrangements could lead to less VAT being payable
on telecom services
supplied in the EU compared with that due when
a phone card is issued by a UK company. HM C & E do not accept that there
are any circumstances in which such services consumed within the EU can be
VAT free. Where arrangements are in put in place to obtain a VAT free or reduced
VAT status HM C & E will view this as avoidance and challenge such arrangements.
VAT treatment of medical services
Interim
advice has been published, in light of the European Court of Justice (ECJ)
decision in the
case of Dr d’Ambrumenil, with regard to the VAT
treatment of certain medical services. Presently such services are exempt from
VAT but this ruling introduces a purpose test to determine whether a medical
service should be exempt or not.
Medical services provided for the protection, maintenance or restoration of
health for an individual remain exempt from VAT but medical examinations or
reports to enable a third party to decide a course of action will not be exempt.
Specific examples given by the ECJ where VAT is chargeable are as follows:
? pre-employment medicals
? medicals to assess levels of insurance premiums
? medical reports in connection with personal injury litigation and
professional medical negligence
? medical reports to assess a persons entitlement to a war pension
or similar benefit
HM
Customs & Excise
are in discussion with the BMA and other relevant parties to establish exactly
which services will be affected and will issue
a further business brief in due course. In the meantime people supplying such
services are not required to register for VAT or charge VAT on these services.
Please
also bear in mind that VAT is only chargeable when a business is registered
for VAT and a business
is not required to register for VAT, at the moment,
until their level of taxable supplies reaches £56,000 per annum.
If you feel this may affect you and you require more information please contact
us.
VAT invoicing – unit prices
From
1st January 2004 new rules for VAT invoicing come into effect. One of the
main changes is that
VAT invoices will have to show the unit price for
countable items. HM Customs & Excise have however confirmed that they do
not view the changes as making it necessary to show hours worked and hourly
rates where fees charged are single amounts for work carried out.
For full details of the new rules please contact us.
Income Tax
Inland Revenue targets late returns
Since
October 2003 the Receivables Management Service within the Inland Revenue
has been seeking
to impose the daily penalty of up to £60 per day wherever
possible for taxpayers who refuse to submit their tax returns. These penalties
are not dependant on the final tax liability of the tax payer and so will remain
even if they exceed this amount. They can however only be imposed with the
agreement of the Commissioners.
Fraudulent evasion of income tax
Moonlighting taxi drivers have been warned to watch out by the Inland Revenue
after a self employed taxi driver became the first person in England to be
successfully prosecuted for Fraudulent Evasion of Income Tax.
In
the landmark case Mr Mark Michael Brown, a self employed taxi driver, failed
to tell the Inland
Revenue of his business and fraudulently evaded tax of nearly £2,500.
In addition to the taxi driving Mr Brown was also in full time employment and
claiming Working Families Tax Credit. The Inland Revenue is to take civil action
to recover the tax due plus interest.
Bank and Building Society Interest
A revised leaflet detailing how to get interest paid gross and how to reclaim
tax deducted from interest where it is not due has been issued by the Inland
Revenue.
If you require a copy of the leaflet or feel that you may not be due to pay
tax on your interest then please contact us.
Gifts to charity
From April 2004 taxpayers who are due a repayment of tax will be able to donate
some or all of their repayment to charity via their Self Assessment Return.
The donation will be paid directly to the chosen charities bank account.
35,000 charities have already signed up and the list is to be reopened so
that new charities can be added.
If you require more information about donating your repayment to charity or
you want to sign your charity up to receive repayments then please contact
us.
PAYE & NIC
Expenses and benefits for employees working at home
With the number of people working from home ever increasing there are now
a number of benefits that can be provided by an employer free of tax and a
number of expenses that can be reimbursed.
Items such as computer equipment, telecommunications links, office furniture
and supplies can now be provided by an employer without a tax charge.
Additional
household costs incurred by employees working from home can also now be reimbursed
by the
employer tax free. No detailed records of expenses
have to be kept if the employer pays the basic Inland Revenue rate of £2
per week. However, if higher amounts are to be paid, these must be justified.
The Inland Revenue may also allow a scale rate to be applied with an annual
increase in line with inflation.
Also these workers may be entitled to claim for any travel expenses into the
office if it is not deemed to be the permanent workplace.
If you require more information for you or your employees please contact us.
Non residents working in the UK for short periods
Updated advice has been given by the Inland Revenue regarding employees who
have been sent to the UK for a short period to work. This states that even
if the employer ought to be deemed their economic employer the UK will not
seek to tax them if they meet the following criteria:
? the employee is in the UK for less than 60 days in the tax year
? this period does not form part of a more substantial period
? the employee must come from a country with which the UK
has a Double Tax Agreement.
? the employee must not be on the UK payroll
For more information please contact us.
P35/P11D(b)
To
avoid any further confusion the Inland Revenue Working Together team have
confirmed that if you have
ticked the box on the P35 Employers Annual Return
form for “No P11D and no P9D due” then you are not required to
submit a P11D(b) Return of Class 1A NI and Employers declaration form.
The P11D(b) forms for 2003/2004 should now have been amended to indicate that
this is the case.
Capital Gains Tax
Transfers between spouses
The Inland Revenue has changed its view on transfers of rights under life
insurance policies, capital redemption policies and purchased life annuities
between spouses.
It
is now no longer deemed that the spouse receiving the rights has given money
or money’s worth
for them and so no chargeable event will occur and no gain will arise.
If you have previously had such a gain assessed then please contact us immediately
as we may be able to adjust this by way of an amended self assessment return.
Shares with negligible value
The latest negligible value list is now available. Please contact us for more
details.
Stamp Duty Land Tax
Treatment of Private Finance Initiative (PFI) projects
The government recently announced regulations to clarify the treatment of
land transactions forming part of a PFI project in relation to the new Stamp
Duty Land Tax. Such transactions are to be treated the same, for the time being,
as they were under the Stamp Duty.
For more details on Stamp Duty Land Tax which came into force on 1st December
2003 please contact us.
Corporation Tax
Chargeable Gains
The value of the Retail Price Index, which should be used for calculating
capital gains for corporation tax purposes, is 182.7 for November 2003.
International Accounting Standards
For years beginning on or after 1st January 2005 listed companies will be
required to use adopted international standards in their consolidated accounts.
The use of these adopted international standards will be optional for other
companies from this date.
These new standards may cause a difference in treatment from their present
UK equivalent which may in turn give rise to different profit measurement and
tax liabilities.
The main areas where there may be differences are:
? Inventories
? Changes in accounting estimates and errors
? Events after the balance sheet date
? Leases of land and buildings
For more information on the international standards and possible tax effects
of their implementation please contact us.
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