Archive for the ‘Private Client Tax’ Category

Retrospective Taxation Lawful, Rules Court of Appeal

Monday, August 8th, 2011

The Court of Appeal has ruled that legislation which retrospectively imposed significant tax liabilities on people who used a popular tax-avoidance scheme is lawful.Royal Courts of Justice

 
In a test case heard in July, the Court considered the position of two IT contractors who made use of trusts set up in the Isle of Man to receive remuneration nearly tax free.
 
Such schemes were made ineffective in 2008, but the legislation then enacted was retrospective. In one of the cases, HMRC was seeking nearly £200,000 in additional tax. There was no doubt at all that the scheme was lawful when entered into.
 
Appeals against the legislation were brought on several grounds, the main one being that it was disproportionate and interfered with the taxpayer’s right to enjoy his possessions.
 
The main lesson to be learned is that if HM Revenue and Customs (HMRC) see any form of tax planning as abusive, they may seek some form of retrospective effect. If the legislation is retrospective, the courts are unlikely to be moved if HMRC can demonstrate that the tax is a proportionate response to the loss of revenue.
 

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Tax Fraud Immunity Offered by HMRC

Wednesday, August 3rd, 2011

HM Revenue and Customs are to offer formal immunity from prosecution for 60 days for those informing them of tax fraud. The facility is expected to be used by whistleblowers that wish to ‘come clean’ but will also be a powerful negotiating tool for HMRC when proceeding with investigations.

A taxpayer making use of the facility will still have to pay interest and penalties, but will avoid prosecution, and thus, a possible order under the Proceeds of Crime Act

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‘Paperless’ Revenue and Customs

Friday, July 29th, 2011

Whilst a ‘paperless office’, in which the use of paper is virtually eliminated, is the holy grail for those seeking to woTax formrk in an environmentally friendly way, this aim was not the reason for the failure of HM Revenue and Customs (HMRC) to send out more than half a million self-assessment tax statements for tax due on 31 July 2011.

The lack of paper arose because the number of statements that needed to be printed greatly exceeded HMRC’s estimates! The fiasco has at least one positive aspect, however.

 
The failure to send the demands, which also have the necessary payslip attached in order to make the payment at a bank, has led HMRC to issue a statement that interest for late payment will not be charged on payments made up to 30 days late.

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HMRC Sees Sense Over Farmhouse

Wednesday, July 6th, 2011
House in CountryFarmers will give a sigh of relief following a decision of the First Tier Tribunal in a case in which HM Revenue and Customs (HMRC) attempted to deny Agricultural Property Relief (APR) for Inheritance Tax (IHT) on a farmhouse.
 
APR operates to exempt wholly or partially the agricultural value of an agricultural property from IHT in situations in which a chargeable transfer would otherwise occur. The relief includes ‘any farmhouses, cottages or buildings, which are of a character appropriate to the property’.
 
The Tribunal concluded that, based on the history of the agricultural holding, the three-bedroom farmhouse should qualify.
 
The HMRC guidance states that ‘Normally a farm cottage or farmhouse occupied by someone who is not employed in agriculture will not qualify for relief. By concession, a cottage occupied by a retired farm employee or their widow, widower or surviving civil partner is treated as being occupied for agricultural purposes if either:
 
  • the occupier is a statutorily protected tenant; or
  • the occupation is under a lease granted to the farm employee for his or her life, and that of any surviving spouse or civil partner, as part of the employee's contract of employment by the landlord for agricultural purposes.’
 
It was the ‘character appropriate’ restriction that was seized upon by HMRC to contest the claim for APR, the tax man arguing that the property was not appropriate for a 16-acre smallholding.

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Tax Treaty Update

Monday, April 18th, 2011
Beach2Following a period in which tax information sharing agreements have been being signed at an unprecedented rate, HM Revenue and Customs (HMRC) have issued updated guidance on double taxation treaties.
 
Over recent years HMRC have negotiated tax treaties and information-sharing agreements with many former ‘tax havens’.
 
If you have a financial connection with a foreign country and want to know what the implications might be, click here for the regulations and call us for advice!

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Tax Credit Changes

Thursday, March 24th, 2011

Tax credits are set to change on 6 April 2011. If you are in receipt of tax credits, this is what will happen:

 
  1. Working Tax Credit (WTC) and Child Tax Credit (CTC)
These have been largely uprated in line with inflation. The basic and 30-hour elements of WTC will then be frozen for three years;
 
  1. CTC
The child element is increased above inflation – to £2,555 per year. The baby element, which currently is £545 per year, is withdrawn;
 
  1. Income Disregard
In a move that will hit many CTC recipients, the income disregard is reduced from £25,000 to £10,000. This will reduce to £5,000 in 2013. The upper income limit is being reduced from £50,000 to £40,000 from April 2011; and
 
4. Withdrawal Rate
The ‘withdrawal rate’ for all tax credits for those exceeding the income limits is being increased to 41 per cent: this is a huge jump for CTC, for which the withdrawal rate is currently 6.67 per cent.
 
Other changes have been announced for future years, the broad effect of which will be to reduce tax credit entitlement.

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