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News briefing, 25 April 2014

Apr 25, 2014, 10:00 AM
Authors : Taxation
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Post date : Apr 25, 2014, 10:03 AM

Avoidance & evasion

The chancellor, George Osborne, has drafted a criminal offence of failing to declare offshore income, to make it easier for HMRC to impose jail terms or heavy fines on UK residents who evade tax. The department will not need to prove intent by the individual.
Guardian; Financial Times; Times

This news is best viewed through the lens of HMRC having insufficient experienced staff to do all they would like to do. It is clearly far easier to get a conviction when dishonesty does not have to be proved, since that is the element of the charge most at the mercy of a jury. The legislative change might well have meant someone with the same arrangements as Harry Redknapp – who had an undeclared offshore account in the name of his dog Rosie but was found innocent in 2012 of cheating the public revenue – would have been found guilty.


The business secretary, Vince Cable, has announced he will press ahead with plans for a public register on company ownership to track the ultimate owners of UK businesses, so making it more difficult for firms to evade tax. The new database will hold information on individuals with an interest in more than 25% of shares or voting rights in a company, or who otherwise control a firm.

Two of the key issues are whether other countries would follow suit, and whether the UK’s register would be extended to overseas territories. Where it not to be, there is high likelihood that ownership of British companies would simply be transferred to shell vehicles in secretive jurisdictions.

Junior partners are rushing to take out bank loans that will cover the equity they must inject into their firms, according to banks, as HMRC tightens rules to prevent businesses keeping their National Insurance bills low by taking on self-employed partners instead of regular employees.
Financial Times

Many commentators seem to have missed the anti-avoidance provision included in the new s 836G(1) in ITTOIA 2005 – which states arrangements should be disregarded if they have been entered into with a main purpose of ensuring the new rules do not apply.

Capital gains

Taxpayers hoping to sell their holiday homes in France have four months to take advantage of a reduced rate of capital gains tax (CGT). A 25% discount will apply on transactions completed by 31 August.
Financial Times

French CGT rates start at 19% plus social charges, and start to taper after six years of ownership, reaching full exemption after 22 years. It is therefore entirely possible that UK CGT will significantly exceed the French liability in any case and full double tax relief will be due – assuming, of course, that the UK owners were intending to disclose the sale, as they should, to the UK authorities in the first place.


The personal financial information of millions of taxpayers could be sold by HMRC under proposed new legislation that would allow the Revenue to release anonymised tax data to third parties including companies, researchers and public bodies where there is a public benefit.
Guardian; Telegraph; Guardian

There is little detail available about these plans, but the readiness of HMRC to consider making a fast buck out of selling supposedly anonymised data does not sit well with the absolute insistence on taxpayer confidentiality, made before the Public Accounts Committee.


Newly retired pensioners who have cancelled their annuity contract since the Budget on 19 March will not be penalised, HMRC have confirmed, following reforms that removed the effective requirement for an annuity.
Financial Times

The individuals won’t be punished by HMRC. They may well be penalised by taking out the funds and paying higher rate tax, only to invest the money in something less secure and worse-performing than an annuity.

Pension holders of all incomes should receive 50p per pound in tax relief to a limit of £8,000 – effectively a 33% rate – according to a report from the Centre for Policy Studies think-tank. The proposed system would be disadvantageous for wealthier individuals, who currently enjoy 40% or 45% relief up to £40,000. Pensions minister Steve Webb has suggested a 30% flat rate and the end of the lifetime allowance.
Telegraph; Financial Times

A flat rate would work only if a corresponding tax charge was levied where appropriate on employees for contributions by employers – which would hit higher-rate employees for whom auto-enrolment employer contributions were made. But it would be most marked for those in final salary pension schemes. Since the hardest-hit group would be the senior civil servants advising Mr Webb, the Sir Humphreys will doubtlessly ensure the proposal never actually comes to fruition.


Legal moves by companies to recover backdated VAT have been stymied by a Court of Appeal decision to reject BT’s claim for a £65.2m refund going back more than 20 years. The communications giant failed in its argument that legislation introduced in 1997 unfairly closed the door on its claims for pre-1990 VAT on bad debts.
Financial Times

In a poetic turn of phrase, the judge said, “EU law has been flowing up our estuaries since 1972 and BT had every opportunity to obtain the most expert advice as to its rights”. Given the money involved, the matter will probably go to the Supreme Court.

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