Removal of clients from
Self Assessment (SA)
The Revenue recommend to staff that they write to taxpayers when removing them
from SA but this is not mandatory.
When automatic removal is introduced the Revenue say that they will write both
to customers and to their agents explaining SA removal and making reference to
the Form P810. The P810 is a non statutory form, issued by the Revenue to check
that an annual return is not required.
In the meantime, we understand that a number of clients have been sent these
forms recently, usually instead of the SA Return and this has caused confusion.
There is no explanation being given to the taxpayer for their case having been
taken out of SA; no clear explanation of what the change means, nor how this
will change their responsibilities.
Whilst the form P810 may be appropriate, it is also important that it is made
clear that the taxpayer has the right to remain in SA and file a return if they
so choose.
If you have received a form P810 and are unsure of the implications please give
us a call.
New anti money laundering rules
New rules being brought in will apply to businesses that deal in goods and
accept in cash the equivalent of 15,000 euros or more for any single transaction
(approximately £10,000).
These businesses will have to register with Customs and put anti money
laundering systems in place. But businesses can choose not to be subject to
these rules by deciding not to accept large payments in cash they could for
example insist on payment by credit card or cheque.
The Regulations bringing in these new rules are expected to be made in June,
although there may be some delay. Businesses will have 3 months to put their
systems in place and 4 months to register with Customs.
If businesses fail to meet these requirements, they could face criminal
sanctions or a penalty of up to £5,000. Any financial penalty is appealable, and
may be reduced or removed if the business has taken reasonable steps to comply.
If you may be effected by the new legislation please give us a call.
New rates
announced for National Minimum Wage (NMW)
The government has announced increases to the rates of the National Minimum
Wage (NMW) to take effect from 1 October 2003.
The current NMW rates...
The main rate is £4.20 an hour - for workers aged 22 and above
The development rate is £3.60 an hour - for workers aged 18-21
The NMW rates from 1 October 2003...
The main rate goes up to £4.50 an hour
The development rate goes up to £3.80 an hour
NMW and Homeworkers
If you have employees who work at home, or if you contract-out work to
individuals who do not work at your premises, you must pay them at least the NMW
for every hour they work, even if you have no control over their total number of
working hours. This rule also applies to pieceworkers who work at your premises.
Employees from abroad
working in the UK
Changes have been made to the PAYE rules affecting employees and short-term
visitors coming from abroad to work in the UK.
Employees who are not resident, or not ordinarily resident, in the UK are
chargeable to income tax on payments in respect of duties performed in the UK.
Where all of the duties are performed in this country the calculation is
straightforward. Where duties are performed partly in the UK and partly overseas
an apportionment is required to determine how much of the emoluments are in
respect of UK duties. The balance will be attributable to duties performed
overseas. For UK resident employees who are not ordinarily resident, payments
for overseas duties will be chargeable to the extent that they are received in
the UK.
Whether emoluments are in respect of UK duties is essentially a question of
fact.
Where an attribution is required, apportionment according to the number of days
worked abroad and in the UK is acceptable except where this would clearly be
inappropriate.
The courts have consistently taken the view that time apportionment should not
be applied to emoluments that can be specifically allocated either to duties
performed in the UK or to duties performed elsewhere. So time apportionment
would be inappropriate in a case where the contract of employment specifically
allocated emoluments to periods spent working in the UK or overseas. Provisions
in a contract of employment that regulate the amount of time to be devoted to
the employment, dealing with matters such as the number of days to be worked,
the length of holidays or how to calculate compensation do not amount to an
allocation of particular parts of remuneration to particular days of work.
PAYE - Coding Allowances
Employees who are not resident or not ordinarily resident in the UK and who work
in the UK and overseas may only be chargeable to UK tax on their payments in
respect of duties performed in the UK. However, there is a requirement for
employers to deduct tax under PAYE from all payments of income to such employees
unless an employer's Inland Revenue office has given a direction authorising the
employer to deduct tax from a proportion of each payment.
An application for a direction must come from the employer or a person
designated by the employer. .
We are aware that in some circumstances tax offices have treated the emoluments
that they consider will not ultimately be assessable to UK tax under Schedule E
as an 'expense' included in a tax code.
The Inland Revenue have asked offices to withdraw coding allowances of this
nature as they come across them and are insisting the proper procedures are
adhered to for dealing with this issue.
PAYE -
Relaxation For Short Term Business Visitors
The employer's Further Guide to PAYE and NICs states that it may be possible to
relax strict PAYE requirements where an employee is likely to qualify for
protection from UK income tax under the Dependent Personal Services or
Employment Income article of a Double Taxation Agreement (DTA).
An approved arrangement requires an employer to keep as accurate as possible a
record of employees visiting the UK on business. The current minimum requirement
for a suitable reporting system is that -
staff of all grades will report periodically days spent in the UK on business
to the central point controlling the arrangements, and
staff should not spend more than 14 days intermittently in the UK in any 12
month period without reporting to that central point.
The Inland Revenue have recognised that the current limit has created
difficulties and we are increasing the limit to 30 days with effect from 14
February 2003. In future, to take advantage of these arrangements, the
employer's internal reporting system should have the following minimum
requirements -
staff of all grades will report periodically days spent in the UK on business
to the central point controlling this arrangement, and
staff should not spend more than 30 days in aggregate in the UK in any 12
month period without reporting to that central point.
Employees going abroad
The Employer's Further Guide to PAYE and NICs (CWG2) advises employers to
contact their tax office if they have to deduct foreign tax, as well as tax
through PAYE, from the earnings of employees sent to work abroad. Where they do
so, the Inland Revenue might approve an arrangement giving credit for foreign
tax by reducing the amount of UK PAYE deducted from salary by the amount of
foreign tax due on the gross salary before the employer pays the PAYE deducted
to the Accounts Office.
The procedures have been rewritten so that the arrangement is only to apply
where an employer is required to deduct foreign tax from payments it makes to
its employees in addition to UK PAYE. The arrangement aims to give provisional
relief for double taxation to employees who must pay both UK and foreign tax
from the same payments of earnings. Where an employee is obliged to pay foreign
tax direct to an overseas tax authority on payments taxed through PAYE, relief
for double taxation can be given through the PAYE code (see EP8204).
In many overseas contract situations, where an employee is abroad for less than
6 months, no foreign tax is ultimately found to be due usually because the
employees are protected under the terms of a Double Taxation Agreement (DTA).
The revised procedures makes it clear that it cannot be assumed that DTA
protection is available simply because an employee has worked in an overseas
country for less than 183 days. In particular, the 183 day protection may not be
available where the employee works for a resident of the overseas country who
functions as their employer or their contractual employer has an identifiable
permanent establishment in the overseas country.
Manufactured overseas dividends
A consultation document has been issued about proposed changes to the tax
accounting system for Manufactured Overseas Dividends (MODs).
Offshore losses and Group Relief
The High Court has ruled in favour of Marks & Spencer, Its group relief case
against the Revenue has now been referred to the European Court of Justice.
45 companies have already joined a Group Litigation Order (GLO) seeking to have
claimed for losses incurred in European Subsidiaries to be offset against UK
profits.
If the Inland Revenue do not appeal against the decision then the ECJ is likely
to hear the case next year, with a decision expected towards the end of 2004.
Corporation tax on chargeable
gains
The value of the retail price index, for April 2003 is 181.2
Double taxation convention:
Canada
A new Protocol to the Double Taxation Convention between the United Kingdom and
Canada was signed on 7 May 2003. The Protocol amends the Convention by updating
provisions on dividends, interest, royalties and pension contributions.
VAT missing trader fraud
The decision in the Bond House Systems Limited tribunal has reinforced
Customs' crackdown on Missing Trader Intra-Community (MTIC) VAT fraud.
The case concerned whether business transactions entered into by Bond House
Systems Ltd amounted to economic activity. Customs contended that as the goods
involved were repeatedly traded within a group of companies, without being sold
to an end user, there was no true economic purpose to the transactions. Customs
further contended that the transactions formed a, Missing Trader Intra Community
(MTIC), fraud. Bond House Systems were not alleged to be a knowing participant
in this fraud. As a result of these contentions, Customs believed that the
transactions fell outside the scope of VAT and the repayment claim being made by
the company was invalid.
The Chairman of the Tribunal, decided in the favour of the Commissioners. This
has major implications for trade sectors affected by MTIC fraud.
Following the decision a Customs spokesperson said:
"Today's decision confirms Customs' entitlement to deny repayment claims where
the transactions do not amount to economic activity. In other words the tribunal
agreed that Customs was right to disallow the majority of a repayment claim
where a chain of transactions had occurred which did not in reality involve
taxable supplies. This is a useful precedent for any future cases and in
particular in cases involving computer chips and mobile telephones."
If you would like further information on the decision and its implications,
please give us a call.
Special electronic registration and VAT accounting scheme for non-EU businesses
An Information Sheet has been released explaining the special electronic
registration and VAT accounting scheme for non-EU businesses which provide
electronically supplied services to EU consumers and how it operates in the UK.
This is a complex area, if you require a copy of the sheet or would like to meet
to discuss its implications for your business please give us a call.
VAT and the disabled
A new leaflet has been published to remind disabled people that they do not
need to pay VAT on certain purchases and home improvements.
For more detail on the reliefs available please give us a call.
VAT guidance to trading on
the internet
Changes to the VAT treatment of electronically supplied services take effect
from 1 July 2003. This is particularly complex , and businesses should be best
to take specialist advice.
VAT: Face Value Vouchers
Invoicing
Issuers of face value vouchers, which are not credit vouchers, who redeem
them for goods or services will need to issue a full VAT invoice if the vouchers
are sold to an intermediate supplier. As the issuer who redeems the voucher does
not need to account for VAT until the voucher is redeemed, it is suggested that
the invoice is annotated with the following wording, the issuer of the voucher
will account for output tax under the face value voucher provisions in Schedule
10A VAT Act 1994'.
Intermediate suppliers of face value vouchers, which are not credit vouchers,
must account for VAT on the sale of the vouchers at the time the vouchers are
sold. They will need to issue a full VAT invoice to any further intermediate
supplier in the supply chain. They will be entitled to reclaim input tax on the
purchase of the vouchers, and the evidence for this will be the VAT invoice they
receive from their supplier.
Where it is known that the voucher has been redeemed for zero-rated, reduced
rated or exempt goods or services, or those outside the scope of VAT, a
subsequent adjustment may be made by an intermediate supplier to reflect the
liability of those goods or services.
Where the intermediate supplier knows in advance that the voucher can be
redeemed for zero-rated, reduced rated or exempt goods or services, or those
outside the scope of VAT, the intermediate supplier may use a percentage split
from the outset and avoid the need to make later adjustments.
Information regarding any split in liability can only be provided by the issuer
who redeems the voucher. In order to avoid the need to track individual vouchers
redeemers can base adjustment figures on retail scheme percentages or other
overarching calculations, providing the result is fair and reasonable.
If the redeemer chooses to make this information available to intermediate
suppliers they may include the percentage split on any VAT invoice they issue to
an intermediate supplier. This split should be quoted on any further VAT
invoices issued by intermediate suppliers in the supply chain.
VAT on property
The Issue to be clarified is the VAT liability attached to the inducement
payments. These sorts of payments have been the subject of two recently decided
cases.
Both cases concerned the VAT liability of a payment described as an
"inducement". In the case of Trinity Mirror plc it was a payment made by a
landlord to its prospective tenant. In the case of Cantor Fitzgerald
International, a payment was made by a tenant to Cantor Fitzgerald International
to take an assignment of an existing lease. In both cases the defendants argued
that the supplies made by them in return for the inducement paid to them was
exempt from VAT and as such no liability could arise.
The VAT and Duties Tribunal found the supplies to be exempt. On appeal, both
cases were referred to the European Court of Justice. The Court gave its
judgments in the cases on 9th October 2001 and found in favour of Customs.
Following the judgment of the ECJ, Cantor Fitzgerald International consented to
the dismissal of its appeal. The appeal by Trinity Mirror plc was dismissed in
the High Court on 30th January 2003. |
