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Investment companies
Notification of a change of interpretation in respect of offshore income gains was announced in Tax Bulletin 79. It announced that an offshore income gain computed under TA 1988, s 761 does not fall within the definition of eligible investment income, and that this interpretation would be applied to accounting periods beginning on or after 1 January 2006. As more time is needed to consider fully the impact of this change, HMRC have announced that the new interpretation will apply to accounting periods beginning on or after 1 January 2007.
www.hmrc.gov.uk
EDS dispute
HMRC, Electronic Data Systems Ltd and Electronic Data Systems Corporation have negotiated a settlement of HMRC's claim for compensation for problems experienced with the information technology system developed by EDS, to support the 2003 launch and subsequent operation of tax credits, during EDS's partnership with HMRC.
An aggregate settlement of £71.25 million including an up-front payment and payments of additional amounts over time has been concluded. The specific terms of the settlement agreement are confidential.
HMRC chairman, David Varney, said that HMRC were 'determined to reach a fair settlement for the taxpayer', and he believed that this has been 'achieved'.
HMRC news release dated 22 November 2005
Tax Law Rewrite
The Rt Hon Lord Howe of Aberavon CH QC will step down at the end of 2006 after eight years' service as chairman of the steering committee of the Tax Law Rewrite project. The Government has appointed the Rt Hon Lord Newton of Braintree OBE DL to succeed him.
Lord Newton was MP for Braintree from 1974 to 1997 and was a Cabinet Minister from 1988 to 1997, including Secretary of State for Social Security and Leader of the House of Commons. He became a life peer in 1997, and currently chairs the Royal Brompton and Harefield NHS Trust and the Council on Tribunals.
The other members of the project's Steering Committee are Dr John Avery Jones CBE, Ian Barlow, Adam Broke, Baroness Cohen of Pimlico, Ian Dewar, Michael Eland, the Rt Hon Michael Jack MP, Eric Joyce MP, Rachel Karp, and David Swaine.
HMRC news release dated 21 November 2005
Working Together
HMRC published Working Together Issue 23 in November. This contains a number of articles, a selection of which are summarised below. The complete version is available on www.hmrc.gov.uk.
Local banking
In Working Together 22, HMRC said that from 1 January 2006 they would no longer be handling tax payments at local offices (see Update, Taxation, 8 September 2005, page 624). They have clearly had some response to this and, in an article in Working Together 23, say that they have changed the implementation date from 1 January 2006 to 6 February 2006. HMRC add that there has been confusion about what these changes mean for self assessment cheques paid at local offices. They will still be able to accept cheques, but 'strongly advise' taxpayers to send their cheque direct to the appropriate Accounts Office. Cheques received in a local office will be treated, for interest purposes, as having been received on the working day it is received.
Final filing date
Returns received up to midnight on Tuesday 31 January are on time. This includes returns received in office letter boxes that are opened first thing on Wednesday morning.
Returns received up to midnight on Wednesday 1 February are late but incur no late-filing penalty. This includes returns received in office letter boxes that are opened first thing on Thursday morning.
Returns received from the morning post of Thursday 2 February and onwards are late and incur a late-filing penalty.
Payroll giving
Until December 2006, a cash payment of up to £500 is available to help employers cover the setting up costs of offering payroll giving to their employees. In addition, the Government will match employee donations to their chosen charity for the first six months, by up to £10 a month.
Further information can be found on www.payrollgivinggrants.org.uk/ or by calling 0845 602 6786.
Adviser Guide
The first parts of HMRC's Customer Adviser Guide for use by HMRC 'customer advisers' came into use in May 2005. Subjects covered so far include:
- employment income guidance for employers and employees;
- personal allowances and reliefs;
- national minimum wage administration;
- social security payments, statutory payments and stakeholder pensions;
- the child trust fund; and
- National Insurance contributions for the newly self employed.
HMRC are developing the guidance as part of a range of initiatives to help their advisers to deliver accurate and complete answers to taxpayer enquiries. HMRC plan to add self assessment, tax credits and child benefit in the near future and intend to add more material in order to build up a comprehensive support tool covering the range of subjects about which taxpayers contact HMRC.
During 2006-07, HMRC plan to make this guide available on their website, so that taxpayers can access it directly for themselves.
North Yorkshire
HMRC would like to set up a working together group for the Harrogate and Ripon area. They are looking for tax advisers to join the group, and anyone interested should contact Janette Workman, tel: 01904 526747.
Employers 2004-05 returns
HMRC finished processing 2004-05 employer returns sent over the Internet that had no errors in them at the end of September, and the tax-free incentive payments have been credited to small employers' payment records.
Errors in around 100,000 returns need to be corrected before the tax-free incentive payment can be credited to the employers' payment records and HMRC hope to complete this by early 2006.
HMRC are sending electronic tax-free incentive payment 'letters' when online returns have been processed. Advisers who are registered and activated for PAYE Online for Agents — Internet will be sent the letter online to their secure mailbox. The information in the letter should be passed on to the relevant clients.
With regard to 2005-06 employers' annual returns filed online, HMRC say that when returns have passed their quality checks, they will hold them before sending the details in them on to their other computer systems. HMRC say that this helps control the flow of data to smooth out any peaks, but that they are doing everything they can to avoid a repeat of this year's processing delays. A 'live' testing service for 2005-06 will be available from mid-March 2006.
