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News briefing, 5 April 2013

Apr 5, 2013, 09:33 AM
Authors : Taxation
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Post date : Apr 5, 2013, 05:06 AM

Our weekly comments on tax stories by the national press


The prime minister, David Cameron, has cleared the way for Scotland's Conservative party to propose even greater tax-raising and political powers for the Scottish parliament.

There are no details available, but The Guardian is surely correct to infer that the development is a political move to boost the campaign against Scottish independence.


Tax experts have called for a delay in the introduction of the general anti-abuse rule (GAAR) – designed to combat aggressive tax avoidance – until it has been made clearer. There are worries traditional tax-planning measures could become outlawed.
Telegraph; Times

Revised draft legislation and draft guidance were published for consultation on 11 December, and there was a previous consultation on the new rule. Time will tell how it works out, but it should be remembered its focus will be on abusive schemes, to which only a very few, usually very rich, taxpayers subscribe.

Rules changes aimed at tackling inheritance tax avoidance schemes will hit people who borrow against their homes to fund business investments, according to accountancy group UHY Hacker Young.
Financial Times

The change, which was not consulted on in advance, is effectively retroactive – as we pointed out in our recent Budget coverage.


The chancellor, George Osborne, has handed a secret tax break to banks worth up to a £1bn a year.

This is the Times’, er, emotive way of describing the government’s decision, in light of the Capital Requirements Directive IV, to ensure banks’ Additional Tier One debt capital instruments will be deductible for the purposes of a bank in computing profits for corporation tax.

Bosses who sell their companies to their workforce will be rewarded with tax relief, under a £50m government plan announced by Nick Clegg, the deputy prime minister.

The government says it is keen to encourage employee ownership and intends to introduce legislation – to appear in the 2014 Finance Bill – on a new capital gains relief on the sale of a controlling interest in a business into an employee ownership structure. But £50m is a low figure, and some of the proposals mooted by the deputy PM would be prone to abuse by companies setting up special employee-owned vehicles specifically to harvest the reliefs.

Business groups in Northern Ireland have warned the prime minister, David Cameron, that he risks alienating the business community, politicians and the public by further delaying a decision on whether or not to devolve the right to set corporation tax rates to local politicians.
Financial Times

The government is working on unifying the UK’s corporation tax main rate and small profits rate at 20% by 201,  but appears to have put on hold plans to devolve the Northern Ireland corporation tax rate – possibly concluding that the reduction will be enough to stop leakage over the border to Ireland’s 12.5% rate on trading income.

Income tax

The new tax system that is the foundation of the government's welfare reform programme has been delayed, in the latest blow to the universal credit scheme.

The story here is a muddy explanation of the temporary relaxing of real-time information rules for employees with fewer than 50 employees. The firms will be allowed to report payments to staff members by the date of their normal payroll run instead of at the time of making the payment. The measure is unlikely to have an impact on the introduction of universal credit. The rumoured problems with IT, which may be behind the delayed rollout of the pilot programmes this month, are a far more likely source of chaos.

A UK family of one worker and two children now pays more tax than the international norm: 27. 9% of earnings compared with 26.2% before the coalition government was elected, according to the Organisation for Economic Cooperation and Development.

The Conservative part of the government has said it would like to introduce a tax break for married couples, but has set aside plans until the economic outlook improves. Meanwhile, moves have been made to help with the cost of childcare.


Owners of second homes in the countryside should be taxed so hard that they give up their rural retreats, according to the head of the Campaign to Protect Rural England, Andrew Motion.

Owners of second homes used to pay a reduced rate of council tax on their other property. From this month, most will have to pay the full amount, after the government gave councils permission to scrap the concession.


Charities are to receive tax cuts worth millions of pounds to encourage them to take over NHS services.

Charities are unable to recover VAT incurred in providing non-business activities – which are likely to be those for which the organisations were established, such as providing hospice care, rather than fundraising pursuits. The situation puts charities at a disadvantage compared to businesses, so offering an element of VAT exemption would help level the playing field.

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