A new clause to the Finance Bill has been tabled which confirms that businesses will not have to pay interest on tax deferred as a result of financial difficulty brought about by the outbreak of foot and mouth disease.
This will provide specifically for the charge to interest to be removed where the Inland Revenue has agreed, because of the effect of the foot and mouth disease outbreak, to defer payment of tax.
A new clause to the Finance Bill has been tabled which confirms that businesses will not have to pay interest on tax deferred as a result of financial difficulty brought about by the outbreak of foot and mouth disease.
This will provide specifically for the charge to interest to be removed where the Inland Revenue has agreed, because of the effect of the foot and mouth disease outbreak, to defer payment of tax.
Regulations will also be introduced to provide that interest is not charged on National Insurance contributions deferred in the same circumstances.
(Source: Inland Revenue press release dated 4 May 2001.)
Limited liability partnerships
New clauses to the Finance Bill have been tabled in relation to limited liability partnerships.
New clause 16 ensures that limited liability partnerships incorporated under the Limited Liability Partnership Act 2000 are in general treated as partnerships for tax purposes. It amends section 118ZA, Taxes Act 1988 and section 59A, Taxation of Chargeable Gains Act 1992. It also introduces a new section (169A) to the Taxation of Chargeable Gains Act to prevent chargeable gains held over on business gifts from falling out of charge when a limited liability partnership goes into liquidation.
New clause 17 and new Schedule 2 prevent tax loss through limited liability partnerships used for investment and property investment. Definitions of investment and property investment limited liability partnerships are introduced. Interest relief for investments by individuals in investment limited liability partnerships is removed by amending section 362(2)(a), Taxes Act 1988. This aligns the treatment of such partnerships with limited partnerships registered under the Limited Partnership Act 1907.
Exemptions for income and gains will not apply for pension funds, the pension business of life insurance companies and the tax exempt business of friendly societies where the income and gains are received in their capacity as a member of a property investment limited liability partnership.
(Source: Inland Revenue press release dated 3 May 2001.)
Payroll giving
Some £55 million was donated to charities through payroll giving in the year to April 2001 compared with £37 million in the previous year, the Revenue has announced. Nearly 1,500 employers set up a payroll giving scheme for the first time, enabling 680,000 more employees to take advantage of the scheme.
(Source: Inland Revenue press release dated 8 May 2001.)
Interest rates
The rate of interest charged on underpaid instalment payments of corporation tax has decreased from 6.50 per cent to 6.25 per cent. The rate on overpaid instalment payments of corporation tax, and on corporation tax paid early (but not due by instalments), has decreased from 5.25 per cent to 5 per cent.
(Source: Inland Revenue press release dated 15 May 2001.)
Tax Bulletin special foot and mouth
The Revenue has issued a special edition of the Tax Bulletin which brings together information about tax, National Insurance and VAT issues which may arise as a result of foot and mouth.
Excerpts from the Bulletin are reproduced below, but readers are referred to the complete version for full details.
Early claims to loss relief
Traders can claim relief for losses made in their business as soon as they know how big the loss is. The Revenue does not insist on precise loss relief claims. Traders can make a best estimate claim before their accounts are drawn up, with the final figure following as soon as possible. The information required is:
* the amount of relief being claimed; and
* the year for which relief is claimed.
Claims to carry back losses from 2000-01 to 1999-2000 or earlier can be made separately from the 2000-01 self assessment return which has just been issued. So someone with a 31 March 2001 year end can claim as soon as he can estimate his loss. The return can be sent in later, showing the final amount of the loss.
Agricultural buildings allowance
The effects of foot and mouth may lead to some farmers ceasing to trade. In such circumstances, where a farmer gives up farming, but retains the major interest in the farm, he continues to be entitled to agricultural buildings allowance. The allowances and charges are made in taxing any other trade he may carry on. If no trade is carried on in a chargeable period the allowances and charges are treated as expenses and receipts of any Schedule A business (income from property) carried on. If no Schedule A business is being carried on, then a notional Schedule A business is deemed to exist and the appropriate relief is given.
Furnished holiday letting
Where an established furnished holiday letting business is prevented by the foot and mouth restrictions from satisfying these conditions any loss would normally have to be dealt with under the less advantageous Schedule A rules. For tax years 2000-01 and 2001-02 the tests are being relaxed as follows. If the furnished holiday letting business satisfied the tests in 1999-2000 or 2000-01 but is prevented from doing so, by foot and mouth, in 2000-01 or 2001-02 then the failure will be disregarded and the furnished holiday letting rules will be deemed to be satisfied. This concession will enable losses to be offset against other income.
Appeal funds
Payments from appeal funds will not be taxable if they are unconnected with the trade (for example, if they are made purely to alleviate personal hardship being suffered by the trader and his family).
However, if a trader receives money from such a fund to be used in his business, for example, to supplement trading income or to help meet business expenses, then it is likely to be taxable under normal Schedule D, Case I principles.
Extra-statutory Concession B11
Farmers who suffer the slaughter of animals treated as trading stock because they are not on the herd basis may realise unexpectedly high profits in the year concerned with consequent liability to higher rate tax. This can cause problems when they want to restock. To help with this situation, Extra-statutory Concession B11 (Inspector's Manual at paragraph 2268a-d) allows farmers to remove profits arising from the compulsory slaughter of animals which are not on the herd basis and could not be following a late election, from the profits of the period in which the slaughter took place and spread them over the following three years.
In the particular circumstances of the present outbreak the Revenue will not seek to enforce the condition that animals which could be on the herd basis following a late election are excluded. The Revenue will regard slaughter resulting from the current outbreak of foot and mouth as being compulsory whether the animals are slaughtered because:
* they have or have been in contact with foot and mouth disease; or
* they are in firebreak zones surrounding outbreaks; or
* they are slaughtered under the welfare scheme.
Information regarding subscriptions to the Tax Bulletin can be obtained from Mrs F Chowdhury, tel: 020 7438 7812. It also available at www.inlandrevenue.gov.uk.
Cost of compliance
The revenue departments have sent questionnaires to businesses aimed at identifying which areas of revenue regulations are most costly, time-consuming and difficult. The Joint VAT Consultative Committee says that in this way, it can 'take a targeted approach to reducing costs in the future'. Two questionnaires are being issued at first, one on VAT and the other on corporation tax. 1,500 of the top 2,000 businesses will each receive both questionnaires, 5,500 small and medium-sized enterprises will receive the VAT one, and another 5,500 will receive the corporation tax questionnaire. The committee says that it is keen not to burden small businesses with two questionnaires.
The committee hopes to have draft final reports by late summer 2001, and is very keen that businesses complete the questionnaires to ensure a 'robust and accurate baseline and better identification of the problem areas for business to inform future policy decisions'. All information will be 'treated as strictly confidential' and 'no information enabling organisations to be identified will passed on' to Customs or the Revenue.
Later studies will look at the compliance costs associated with stamp duty, income tax, capital gains tax, excise duties, insurance premium tax, and air passenger duty, and international trade. No separate study relating pay-as-you-earn is mentioned, although this would certainly provide plenty of material for the Revenue in terms of unreasonable burdens placed on employers.
(Source: Joint VAT Consultative Committee Information Paper 3/01.)
Retail prices index
The retail prices index for April 2001 is 173.1.
