Archive for May, 2013

New contractual conditions for government contracts

Thursday, May 30th, 2013

From 1 April 2013 bidders for government contracts will need to certify that they are tax compliant and if they fail this test they will be excluded from winning government contracts.

The new restrictions will apply to Central government tenders advertised on or after 1 April 2013. The bidding process will include a new pass/fail question in the pre-qualification questionnaire (PQQs). This will require bidders to self-certify that they had no occasions of non-compliance in the past. PQQs should be submitted within 30 days of the initial advert in the Official Journal of the European Union. Tax non-compliance will arise where the bidder has accepted, or a court has determined, that additional tax is due and as a consequence a tax return has been amended. Tax non-compliance will further depend on circumstances where one or more of the following criteria applies:

  • The new general anti-abuse rule applies.
  • The Halifax abuse principle applies – this is an abusive practice when two conditions are met. The first that the transactions concerned must give a tax advantage contrary to the purpose of the legislation, and secondly, that the “essential aim” of the transactions was to obtain a tax advantage.
  • The scheme was notifiable under the disclosure of tax avoidance scheme rules and has failed, or
  • There is a current criminal conviction for a tax related offence or a penalty for civil fraud or evasion.

Bidders will have an opportunity to add an explanatory statement setting out mitigating factors when they submit their PQQs. The new guidance applies to contracts advertised by: central government departments, executive agencies and non-departmental public bodies.

Google and Amazon face fresh allegations

Wednesday, May 29th, 2013

Multi-national companies continue to draw the attention of the UK press over allegations that they contrive to export profits made in the UK to lower tax jurisdictions. In this way economic activity in the UK escapes UK tax. This in contrast to numerous small and medium sized businesses who are reported to be paying their fair share of income tax and corporation tax.

Google have responded by pointing out that their tax planning strategies are allowed in law and that if the UK tax authorities are at odds with Google’s tax contribution they should change the law.

The UK is one of the most productive markets for both Google and Amazon and in both cases UK sales grew by more than 20% last year, British customers generating about 10% of global sales.  

In Google’s case evidence has emerged that UK staff are negotiating and closing deals – Google has always insisted, and continues to insist, that sales are negotiated in the UK and closed in Ireland. This issue is just one of the aspects that justifies their tax strategy. Pressure on these multi-national groups is likely to increase. Politicians will struggle to defend their austerity programme to UK voters if large businesses are being accused of not making a fair contribution to UK taxes.

 George Osborne is making this off-shore shift of profits a priority for Britain’s chair of the G8. 

HMRC name and shame list grows

Friday, May 24th, 2013

 In accordance with legislation HMRC may publish information about a deliberate tax defaulter where:

  • HMRC have carried out an investigation and the person has been charged one or more penalties for deliberate defaults, and
  • those penalties involve tax of more than £25,000.

However, their information will not be published if the person earns the maximum reduction of the penalties by fully disclosing details of the defaults. HMRC will publish sufficient information to identify the deliberate tax defaulter, the penalties imposed for their deliberate defaults and the amount of tax on which those penalties are based. This sufficient information includes the name of the taxpayer and their postal address.

The first list was posted on HMRC’s website on 21 February 2013. A further list was added on 14 May 2013.

 In the light of recent press interest in multinationals who, apparently, are legally avoiding the payment

Boris calls for London tax raising powers

Wednesday, May 22nd, 2013

In a radical rethink of the way in which London is funded the 17 members of the London Commission are due to report this week and are likely to recommend that certain tax raising powers are devolved. It is estimated that Revenue streams of up to £12bn could be placed under local control with a pound-for-pound reduction in Treasury grants.

Taxes mooted as possible candidates for the transfer include:

  • Stamp Duty Land Tax, and
  • Capital Gains Tax on property disposals

These would be in addition to Business Rates and Council Tax. In addition to these taxes the London Commission report seems likely to recommend a London tourist tax. This would be used to invest in London’s tourist industry. 

How these taxes would be collected is another matter. At present Capital Gains Tax in particular is assessed by HMRC from information filed via self assessment returns. Are we to expect a national and a London rate for CGT? Will London be issuing tax returns? It would seem there are a lot of practical issues to be sorted in addition to the Treasury’s attitude to devolving tax revenue streams to London.

It is also mooted that the present Treasury controls over local borrowings by the GLA (Greater London Authority) be removed in order that London can raise money to fund the promotion of growth or to reduce public expenditure.

No doubt Bristol, Birmingham, Liverpool and Manchester, and a number of the other, larger cities will be watching developments with interest. We may be moving toward a nation of city states?

HMRC scours data for off-shore tax dodgers and advisors

Thursday, May 16th, 2013

HMRC is currently investigating a large number of tax advisors and their clients who are suspected of concealing untaxed income and assets in off-shore tax havens.

Due to their recent success in reaching tax accords with off-shore jurisdictions HMRC are now working their way through 400 gigabytes of data. The data has revealed the use of complex structures to conceal assets in Singapore, the British Virgin Islands, the Cayman and Cook Islands.

Apparently HMRC is working with the US and Australian tax authorities to make sense of the data and so far there have been no comments offered as to the source of the data being investigated.

Jennie Granger, a HMRC commissioner, is quoted as saying:

“These arrangements may be perfectly legitimate and may already have been declared to HMRC. However they may involve tax evasion, avoidance or other serious offences by taxpayers. What has to stop is using offshore structures to illegally hide assets and income."

Interestingly, HMRC have made it clear that they will not only be contacting over 100 individuals already discovered during their research, but also more than 200 professional advisors who were involved in the set-up, promotion and implementation of the schemes.

Getting the best deal from banks

Monday, May 13th, 2013

Banks are tarred with being the cause of the recession that has plagued the global and UK economy for the past four years. Whatever truth there is in this point of view one thing is certain: almost without exception they are now risk-averse.

Unless you can prove that your need for financial support is well founded you will either fail to negotiate the loan you need, or, you will have to pay a premium rate.

In this posting we have highlighted just a few of the issues you should consider before making an application for funding:

  • Do you have a good track record with your existing lender? If yes then an application can be supported by previous bank statements proving that you can keep to your agreements.
  • Can you partner up with an accountant to prepare and present your application? This may give the bank some comfort.
  • Are you clear why you need the funding?  Vague assertions that you need more working capital will not inspire confidence.
  • Are you going to pass a credit reference check?
  • Does the present management team have a good track record and are they positively motivated to achieve the required results?
  • Do you have a healthy Balance Sheet? Are you highly geared? Why is this?
  • Are you reliant on one or two major customers?
  • Are you asking for support to develop an existing, well established business, or is the application for a new venture? If the latter bank will need additional evidence that you have thought through the implications.
  • You will need to prepare a business plan and the more detailed information you can provide the better.
  • You will also need to consider the extent to which you are prepared to offer guarantees and security. Leaving the bank to carry all the risk is unlikely to be a successful strategy.

The days of knocking together a quick spreadsheet and taking the bank manager to lunch are long gone. Your manager will need to run your application through a rigorous lending process before a decision can be made. Planning is a key ingredient. Put yourself in the bank’s position and consider their reaction to your application: what information would you need if you were approached for financial support? 

Tax Diary May/June 2013

Tuesday, May 7th, 2013

1 May 2013 – Due date for Corporation Tax due for the year ended 31 July 2012.

19 May 2013 – PAYE and NIC deductions due for month ended 5 May 2013. (If you pay your tax electronically the due date is 22 May 2013.)

19 May 2013 – Filing deadline for the CIS300 monthly return for the month ended 5 May 2013.

19 May 2013 – CIS tax deducted for the month ended 5 May 2013 is payable by today.

19 May 2013 – The payroll forms P35 and P14s must be filed by this date – employers late in filing these forms may receive a penalty.

31 May 2013 – Ensure all employees have been given their P60s for the 2012-13 tax year.

1 June 2013 – Due date for Corporation Tax due for the year ended 31 August 2012.

19 June 2013 – PAYE and NIC deductions due for month ended 5 June 2013. (If you pay your tax electronically the due date is 22 June 2013.)

19 June 2013 – Filing deadline for the CIS300 monthly return for the month ended 5 June 2013.

19 June 2013 – CIS tax deducted for the month ended 5 June 2013 is payable by today.



Beware emails purporting to be from HMRC

Tuesday, May 7th, 2013

HMRC have made it clear that they do not send taxpayers emails regarding their tax affairs. So the next time you receive an email purporting to be from HMRC you can safely bet that it is a scam and that it can be safely ignored. Whatever you do, do not follow any links in these emails as they will likely lead to all sorts of computer viruses infecting your computer. And do not provide any personal information, particularly bank details.

If you are in doubt as to authenticity of communications received call HMRC to clarify.

General Anti-Abuse Rule (GAAR)

Tuesday, May 7th, 2013

Readers may have noted that from the date the Finance Bill 2013 receives a Royal Assent, HMRC will be using new powers to stop abusive tax schemes from reducing a tax payer’s liability. The legislation is set out in the GAAR, the General Anti-Abuse Rule.

It is worth noting that HMRC can use the GAAR to counter certain arguments previously used by the judiciary. There are a number of well-known rulings where the tax payer’s right to use a tax scheme was endorsed. The following quote is from the judgment of Lord Clyde in the Ayrshire Pullman case:

“No man in this country is under the smallest obligation, moral or other, so as to arrange his legal relations to his business or to his property as to enable the Inland Revenue to put the largest possible shovel into his stores. The Inland Revenue is not slow – and quite rightly – to take every advantage which is open to it under the taxing statutes for the purpose of depleting the taxpayer’s pocket. And the taxpayer is, in like manner, entitled to be astute to prevent, so far as he honestly can, the depletion of his means by the Inland Revenue.”

Following the implementation of GAAR, Parliament is now in a position to side-step these judgments. HMRC have commented on this change of tack:

‘Accordingly, it is essential to appreciate that, so far as the operation of the GAAR is concerned, Parliament has decisively rejected this approach and has imposed an overriding statutory limit on the extent to which taxpayers can go on trying to reduce their tax bill. That limit is reached when the arrangements put in place by the taxpayer to achieve that purpose go beyond anything which could reasonably be regarded as a reasonable course of action.’

For taxpayers and their advisors this creates a new dilemma; who defines a reasonable course of action?

We will be keeping a close eye in the months to come on ways in which the GAAR is used to close down tax savings opportunities. Watch this space…

Re-opening the stable door

Tuesday, May 7th, 2013

Usually, it is necessary to perform an action within a tax year in order to impact your tax liability for that specific year. One notable exception is the ability to carry back charitable donations to the previous tax year in certain circumstances. The following notes are copied from HMRC’s website and explain what is involved:

‘You can ask for Gift Aid donations to be treated as being paid in the previous tax year if you paid enough tax that year to cover both any Gift Aid gifts you made that year and the ones you want to backdate.

Your request to carry back the donation must be made before or at the same time as you complete your Self Assessment tax return for the previous year but no later than the filing deadline for the tax return, which is 31 October if you file a paper tax return, or 31 January if you file online.’

What HMRC does not mention are the opportunities this facility provides, particularly to higher rate tax payers and those with income in excess of £100,000. Please contact us if you would like more information on this topic.