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04 June 2002
The Revenue has updated its published leaflet on dispensations (IR69 Expenses payments and benefits in kind. How to save yourself work), to make it clear that a dispensation may be considered for controlling directors who decide their own expenses provided the expenditure is vouched by independent documentation. The guidance in the Schedule E Manual at paragraph SE30059 has also been amended to make this clearer.
(www.inlandrevenue.gov.uk)
Private sector
(www.inlandrevenue.gov.uk)
Private sector
The Revenue has updated its published leaflet on dispensations (IR69 Expenses payments and benefits in kind. How to save yourself work), to make it clear that a dispensation may be considered for controlling directors who decide their own expenses provided the expenditure is vouched by independent documentation. The guidance in the Schedule E Manual at paragraph SE30059 has also been amended to make this clearer.
(www.inlandrevenue.gov.uk)
Private sector
The Revenue has published an article clarifying the approach it takes to establishing the scope of trades carried on by private sector entities involved in private finance initiative projects. The article follows consultation with the private finance initiative working group referred to on page 642 of Tax Bulletin 40 (April 1999).
The scope of a particular trade is essentially a question of fact. In some cases the Revenue has accepted that the scope of the trade includes design and construction services as well as other support services.
In a typical private finance initiative transaction, a private sector entity (the operator) contracts to provide services to a public sector body (the purchaser) for a period, in return for annual service charges (the unitary charges). This will often involve the operator in the design and construction of a facility, for example a prison, hospital, or road.
Previous articles in Tax Bulletin 40, April 1999 and Tax Bulletin 43, October 1999, were specifically concerned with projects where, on the facts, it was clear that the operator's design and construction costs were capital expenditure for tax purposes.
Private finance initiative projects can be structured in a variety of ways and the trade of a private finance initiative operator can cover a wide range of activities. At one end of the spectrum is the operator who builds a facility as the setting in which to carry on the trade. An example is the operator whose trade is running a prison and who constructs a prison on land acquired for that purpose. There is the operator who builds a facility in order to rent it out, with related support services. For example, an operator acquires land to build a hospital, leases it to a National Health Service Trust and also provides non clinical support services to the lessee by way of trade. In both of these examples the construction costs are capital expenditure for tax purposes and relief is only available against Schedule A or Case I income to the extent that it qualifies for capital allowances.
At the other end of the spectrum is the operator who does not acquire a major interest in land, and whose trade is the provision of design, construction and maintenance services. An example is the operator who contracts to build and maintain a road or hospital on land that belongs to the purchaser. Here, the design and construction costs, together with the costs of any other services provided, are revenue expenditure for tax purposes. None of this expenditure will qualify for capital allowances.
The question of whether or not a private finance initiative operator is carrying on a trade of providing services is, generally, not in dispute. The scope of such a trade is a separate question, and is essentially a question of fact. Each case will depend upon its own particular facts and it is not, therefore, possible to provide a definitive checklist of all the factors to consider. However, the intention of the operator, the terms of the private finance initiative agreement, as well as what the operator actually does, are all relevant factors.
The operator's stated intention does not, by itself, resolve the question of the scope of the trade. The question is what trade is actually carried on, not what trade the operator claims to carry on. However, where the facts are equivocal, the intention of the operator may well be a relevant factor in reaching a conclusion.
This article will appear in the August 2002 edition of the Tax Bulletin.
Online goes down
The Revenue's self assessment online service was made unavailable on Monday 27 May because of security problems. Taxpayers using the Revenue self assessment service discovered that they were able to see snippets of other taxpayers' information on screen. At the time of writing (31 May) the service remained unavailable and was being thoroughly checked by the Revenue's technology partner, EDS.
A Revenue spokesman said that taxpayers can continue to file online if they use one of the commercial software products to complete their tax returns. The pay-as-you-earn and corporation tax services are not affected.
The spokesman said that the Revenue is 'deeply unhappy' that the security breach has happened, and said that the Revenue 'aims to make all systems as secure as possible'. However, this does not bode well for the Government's enthusiasm for online filing, with potential fines for employers not doing so, and public confidence in the system must be dented.
(www.inlandrevenue.gov.uk)
Private sector
The Revenue has published an article clarifying the approach it takes to establishing the scope of trades carried on by private sector entities involved in private finance initiative projects. The article follows consultation with the private finance initiative working group referred to on page 642 of Tax Bulletin 40 (April 1999).
The scope of a particular trade is essentially a question of fact. In some cases the Revenue has accepted that the scope of the trade includes design and construction services as well as other support services.
In a typical private finance initiative transaction, a private sector entity (the operator) contracts to provide services to a public sector body (the purchaser) for a period, in return for annual service charges (the unitary charges). This will often involve the operator in the design and construction of a facility, for example a prison, hospital, or road.
Previous articles in Tax Bulletin 40, April 1999 and Tax Bulletin 43, October 1999, were specifically concerned with projects where, on the facts, it was clear that the operator's design and construction costs were capital expenditure for tax purposes.
Private finance initiative projects can be structured in a variety of ways and the trade of a private finance initiative operator can cover a wide range of activities. At one end of the spectrum is the operator who builds a facility as the setting in which to carry on the trade. An example is the operator whose trade is running a prison and who constructs a prison on land acquired for that purpose. There is the operator who builds a facility in order to rent it out, with related support services. For example, an operator acquires land to build a hospital, leases it to a National Health Service Trust and also provides non clinical support services to the lessee by way of trade. In both of these examples the construction costs are capital expenditure for tax purposes and relief is only available against Schedule A or Case I income to the extent that it qualifies for capital allowances.
At the other end of the spectrum is the operator who does not acquire a major interest in land, and whose trade is the provision of design, construction and maintenance services. An example is the operator who contracts to build and maintain a road or hospital on land that belongs to the purchaser. Here, the design and construction costs, together with the costs of any other services provided, are revenue expenditure for tax purposes. None of this expenditure will qualify for capital allowances.
The question of whether or not a private finance initiative operator is carrying on a trade of providing services is, generally, not in dispute. The scope of such a trade is a separate question, and is essentially a question of fact. Each case will depend upon its own particular facts and it is not, therefore, possible to provide a definitive checklist of all the factors to consider. However, the intention of the operator, the terms of the private finance initiative agreement, as well as what the operator actually does, are all relevant factors.
The operator's stated intention does not, by itself, resolve the question of the scope of the trade. The question is what trade is actually carried on, not what trade the operator claims to carry on. However, where the facts are equivocal, the intention of the operator may well be a relevant factor in reaching a conclusion.
This article will appear in the August 2002 edition of the Tax Bulletin.
Online goes down
The Revenue's self assessment online service was made unavailable on Monday 27 May because of security problems. Taxpayers using the Revenue self assessment service discovered that they were able to see snippets of other taxpayers' information on screen. At the time of writing (31 May) the service remained unavailable and was being thoroughly checked by the Revenue's technology partner, EDS.
A Revenue spokesman said that taxpayers can continue to file online if they use one of the commercial software products to complete their tax returns. The pay-as-you-earn and corporation tax services are not affected.
The spokesman said that the Revenue is 'deeply unhappy' that the security breach has happened, and said that the Revenue 'aims to make all systems as secure as possible'. However, this does not bode well for the Government's enthusiasm for online filing, with potential fines for employers not doing so, and public confidence in the system must be dented.
