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Other news - 26sep

25 September 2005 / Richard Curtis
Categories: News
ICAEW response to Lord Carter's review of HMRC online services; Royal Dutch Shell update

Get Carter!

The ICAEW's Tax Faculty has published its response to Lord Carter's review of HMRC online services. Paul Aplin, deputy chairman of the Tax Faculty, says that the 'perpetual underlying problem seems to be that HMRC work to arbitrary and unrealistic deadlines', and that some form of external monitoring should help solve this problem. Only then, he says, can 'credible services' be launched with 'take-up driven by the business case rather than incentives and compulsion'.
In brief, the Faculty's key recommendations include the following points:

  • The Faculty fully supports the Government's stated aim to encourage use of e-services, subject to those services being well designed and efficient in operation, but believes that better progress could have been made if lessons had been learned at an early stage.
  • Despite the existence of an e-strategy, the impression created is often of disconnected initiatives driven by arbitrary and unrealistic deadlines.
  • New e-services must be fully tested before launch, they must be easy to use, robust and must have sufficient capacity to meet demand throughout the year. Otherwise bad publicity is created and negative attitudes to e-services reinforced.
  • HMRC's e-strategy should be available in a public document, as it was in 2000.
  • In order to ensure sustainable and efficient service delivery, an independent body similar to the Electronic Tax Administration Advisory Committee in the US should be established. The body would report on HMRC's progress against its published e-strategy, encouraging the delivery of effective services to realistic timescales rather than flawed services to unrealistic timescales.
  • The effectiveness of e-service delivery in the UK should be compared with that in countries where the tax authorities design their own applications and the cost effectiveness of using external suppliers re-evaluated.
  • The faculty opposes mandatory e-filing, believing that functionality and a clear business case should be the drivers to take up. It must also be understood that not all taxpayers and businesses have access to the necessary technology or to broadband.
  • Forcing taxpayers and agents to e-file using inadequately designed and tested services with insufficient capacity creates considerable resentment, whereas an alternative and inclusive approach could work well for agents, taxpayers and HMRC. While efficient e-services can reduce costs, inefficient e-services impose additional burdens.
    ICAEW Tax Faculty TaxRep 39/05, 21 September 2005

Royal Dutch Shell update

 Finally, after weeks of negative press reports in the national media, Royal Dutch Shell is to offer, as an alternative to the cash payment to which they would otherwise be entitled under the merger, UK-resident Royal Dutch shareholders the opportunity to elect to receive loan notes that are exchangeable, at the option of the holder or Royal Dutch Shell, into Royal Dutch Shell A shares. These loan notes will achieve a rollover for UK capital gains tax purposes. See Richard Curtis' article 'Shelling out', Taxation, 21 July 2005, page 430 for details of the original tax implications of the Shell and Royal Dutch Petroleum merger.
The loan notes will have a total face 'amount' equal to the cash payment that a shareholder would otherwise be due. Loan notes will be exchangeable for Royal Dutch Shell A shares on one or more fixed dates based on a value that does not exceed the face amount of the loan notes. The loan notes will be exchangeable for Royal Dutch Shell A shares based on the market price of such shares at the time of exchange, subject to a cap equal to the number of shares the shareholder would have been entitled to in the original offer. In the event that the cap applies, there will be no entitlement to incremental cash compensation.
The exchangeable loan notes will only be available to electing UK resident shareholders providing an appropriate certification.
Kevin Sloane, head of information at the Association of Private Client Investment Managers and Stockbrokers, said that it has taken 'four months to convince Royal Dutch Shell to offer loan notes', and he was 'quite surprised' when the announcement was made, as the company had been intransigent up to then. He said that no details of the loan notes are available yet, and are not expected until mid November. However, while he is pleased that Royal Dutch Shell has taken action, his pleasure is tempered because a considerable number of UK shareholders, possibly some 2,000, accepted the original offer on the understanding that the company was not going to improve it. These shareholders now face possibly substantial capital gains tax bills which those who held out against the offer will not have. Many of these shareholders are retired and will have to sell some or all of their holding in order to pay the bill. Thus they will also lose a strand of their income coming from dividends arising on the shares.
There appears to be little that these unfortunate shareholders can do. Kevin Sloane suggests that they could form a shareholder pressure group to try to pressurise Royal Dutch Shell into doing something to help, but he did not seem overly optimistic.
The question that remains unanswered, however, is why were UK shareholders singled out for this unfair treatment, and not US or Dutch shareholders?

Categories: News
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