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VAT free memorial

Work carried out by the Royal Marines Charity on a nineteenth century war memorial is not to be subject to VAT, despite Customs having initially considered it to be applicable.

Peter Ladanyi, charities VAT manager at Chantrey Vellacott DFK, has acted for three such national memorials recently, and says that Customs have accepted eventually that VAT is not due, but conceded on different arguments in each case. He says that it would be much 'better and simpler for military charities if there were a published policy accepting that zero rating applied to such work'.

Alternatively, a VAT refund scheme, similar to that for church repairs, would be helpful.

Budget wishes

The Chartered Institute of Taxation has suggested that more flexibility and better scrutiny of legislation would arise if there were a move to a two-year cycle for technical changes. This is just one item on the Institute's wishlist for the Budget 2003. A selection of its other suggestions follows.

With regard to quarterly instalment payments of corporation tax, the Institute believes that there is a strong case for a safe harbour, for penalty purposes only, to apply whenever a company makes these payments based on its previous year's results.

On the subject of the abolition of withholding tax on interest, annual payments and royalties, the Institute suggests that the facility, introduced in Finance Act 2002, for payment of cross-border royalties without deduction of withholding tax where the recipient is entitled to the benefit of a double taxation agreement should be extended to the payment of interest, annuities and other annual payments.

Legal professional privilege was also the subject of Institute concern, which it believes should be extended to chartered tax advisers. The Institute is keen that advisers who work in the area of tax investigations and enquiries should not find themselves in an anti-competitive market if professional privilege remains the exclusive right of those in the legal profession as a result of the Proceeds of Crime Bill.

Looking at the basis of assessment of pension income, the Institute hopes for some rationalisation of the bases of assessment rules for pension income, as highlighted in the recent Exposure Draft 12 of the Tax Law Rewrite Project. It considers that such simplification could ease compliance burdens for individuals returning pension income for tax purposes.

The Institute has also looked at the 'cliff-edge' VAT registration problem. While welcoming the introduction of the flat-rate scheme for small businesses introduced in 2002, it thinks that an attempt should now be made to deal with what has become known as the 'cliff-edge' problem, i.e. the decision faced by taxpayers when they cross the registration threshold: whether to increase prices and risk losing customers, or to bear all or part of the VAT chargeable themselves and reduce profits.

The Institute's Budget 2003 representations can be obtained by calling 020 7235 9381 or by downloading them from www.tax.org.uk.

Having it both ways

The United States is not enthusiastic about the European Union's savings directive, according to a recent report in the Financial Times (26 September 2002). The directive would need the United States to divulge information about interest paid on accounts held by foreign citizens in the United States, and such automatic information-sharing goes against the United States principle of giving out such information for specific purposes only.

However, the United States has less scruples about obtaining information which it feels is necessary for it to know to combat tax abuse. In this respect, The Observer (29 September) reports that Jersey and Guernsey have agreed to provide a rapid response to United States investigators who ask for information about banks and companies on those islands. This service is not provided even to the United Kingdom Inland Revenue.

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