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News briefing, 26 July 2013
Our weekly review of the tax stories in the national press
Avoidance & evasion
Investors who claimed tax relief on shares in failed start-up companies face a criminal investigation into their investments as part of a crackdown on aggressive tax planning.
Financial Times
As the FT explains in one of the last paragraphs (where the inconvenient truths that undermine the sensationalism of the headlines of many newspaper stories can normally be found), it is the schemes that are being investigated, rather than the investors – at least at the moment.
Taxpayers being targeted for alleged avoidance are being left in “limbo” as HMRC struggle with a huge backlog.
Telegraph
HMRC are taking a tougher stance against avoidance because they have been directed by the government to do so. If businesses and individuals in schemes are unhappy with the time it is taking to have their affairs agreed, they ought to reconsider their decision to enter into arrangements deemed by the authorities to be abusive.
A global action plan for battling tax avoidance, instigated by the Organisation for Economic Cooperation and Development (OECD), could create new loopholes for corporations to exploit, experts have warned.
Times; Times; Financial Times
The blueprint unveiled by the OECD in Moscow to tackle the BEPS agenda (business erosion and profit shifting) recommends country-by-country reporting of tax paid and restrictions on the movement of intellectual property to tax havens, among other things. However much an overhaul of international tax is needed, it would be naïve to think more loopholes will not be found.
More than £2bn in unpaid tax remains to be collected from offshore trusts that companies unlawfully used to allow high-earning employees to minimise income tax, according to HMRC.
Times
The problem for HMRC is that many companies still think it is worth waiting to see if the department intends to litigate. The Revenue’s reluctance to commit the resources to pursuing the significant number of schemes in existence will only encourage recalcitrant behaviour.
An expected windfall of £3.2bn in tax recouped from the Swiss bank accounts of UK residents has been slashed to £342m.
Times
The estimate of the amount to be recovered from Swiss banks in relation to the tax agreement between the UK and Switzerland has been cut to £342m according to the Office for National Statistics’ June 2013 public sector finances statistical bulletin. The original £3.2bn was merely an estimate – albeit an optimistic one. However, the savage cut suggests that much of the money simply fled to the next secrecy jurisdiction.
Business
An online sales tax would be an “extremely backward step” that could wipe out many digital start-ups, according to Simon Wolfson, the chief executive of clothes retailer Next.
Telegraph; Times
Thwack! It’s a dead horse being flogged. See last week’s briefing for our response.
The Business Select Committee of MPs has caused dismay in the City by making demands for a financial transactions tax (FTT) as part of its response to the Kay Review on corporate governance.
Telegraph
The chancellor and many of his predecessors have been against an FTT, and there is no reason to suppose this will change.
The Labour party paid no corporation tax in 2012 despite having made a surplus of £2.8m for the year.
Times
The analysis by The Times is worthy of the Public Accounts Committee at its worst. It states that the corporation tax bill was reduced from £516m, when this appears to be the notional liability if all the income was liable to tax. In fact, the party is liable only to tax on investment income and commercial activities. The more interesting question is about why the losses brought forward on these have increased from £37,000 to £103,000 in the year, given that the accounts show a surplus of over £1.5m on commercial activity in addition to £62m in interest receivable.
Income tax
Extension of the new real-time information (RTI) operation for reporting PAYE should be halted to avoid complications that have plagued the reforms, according to Kate Upcraft, a payroll adviser who was among those who provided guidance to HMRC on the launch of the system.
Telegraph
HMRC have said small firms with fewer than 50 employees will not have to report via RTI until 6 April 2014; the department has given no indication that other concessions are likely, but Taxation understands that pressure continues to be exerted by the accountancy bodies.
Thousands of students looking to earn extra money this summer will no longer be able to ask not to have income tax taken from their wages
Times
Employers using RTI have to treat all employees the same by deducting PAYE tax and National Insurance from their earnings (if the amounts are high enough). Students can claim back the tax they have overpaid, either at the end of the tax year or during by way of a form P50.
Policy
The government's proposed tax break for married couples is largely "symbolic" because marriage provides little benefit to the development of children, according to the Institute for Fiscal Studies.
Telegraph
The mooted relief is little more than a sop to keep elements of the Conservative party on board.
The prime minister, David Cameron, has indicated he intends to cut taxes if the Conservatives win the next election.
Independent; Times; Telegraph
This is another deceased nag, the response to which was in the briefing a fortnight ago.
Residence
New residence rules in the form of a statutory test have confirmed, after the Finance Bill received Royal Assent.
Financial Times
Many tax experts believe the new residence regime could be much simpler than its predecessor – although taxpayers will still have to keep detailed records of their days in the UK.
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