Wednesday, 9 January 2013


Welcome to the Exceed monthly newsletter.

Self Assessment deadlines
Artificial loss relief - tax avoidance scheme closed down
Tribunal – late submission of P35
UK - US FATCA tax agreement
Draft Finance Bill 2013 published
Charities online service
Budget 2013
Self Assessment deadlines Income Tax

Taxpayers are reminded that the deadline for submitting 2011/12 Self Assessment tax returns online is 31 January 2013. Taxpayers should also be aware that payment of any tax due should also be made by this date. This includes both the payment of any balance of Self Assessment liability for the 2011/12, plus any payment on account due for the current 2012/13 tax year.

The following penalties applies to Self Assessment returns that are filed late:

  • From day one: taxpayers will be charged a £100 penalty even if they have no tax to pay or have paid any tax due on time.
  • From 3 months late: taxpayers will be charged an automatic daily penalty of £10 per day up to a £900 maximum.
  • From 6 months late: taxpayers will be charged additional penalties which are the greater of 5% of tax due or £300.
  • Over 12 months late: there are additional penalties based on greater of 5% of tax due or £300. In serious cases this penalty may be increased up to 100% of tax due.
Artificial loss relief - tax avoidance scheme closed down Corporation Tax

The Government has announced that legislation is to be introduced, effective from 21 December 2012, to target a tax avoidance scheme. The scheme seeks to exploit the rules in relation to a property business by generating artificial loss relief for use by companies to reduce their Corporation Tax profits. Whilst the Government and HMRC do not accept that the scheme has the intended effect, the decision to block the use of such an arrangement will ensure that tax revenues amounting to tens of millions of pounds will be protected.

The relevant legislation will be included in Finance Bill 2013 (and backdated to 21 December 2012).

Announcing the new legislation, the Exchequer Secretary David Gauke said:

'This Government has made it very clear that we will not put up with tax avoidance which uses artificial structures to aggressively exploit rules contrary to Parliament’s intended purpose. Within days of HMRC being notified of the existence of this scheme we took decisive steps to shut it down once and for all.'

Tribunal – late submission of P35 Payroll

The First-Tier Tribunal recently heard a taxpayers appeal against penalties for the late submission of a P35 for the tax year ended 5 April 2010. The P35 should have been filed by 19 May 2010 but was ultimately filed on 7 June 2011.

The taxpayers’ business ceased to trade on 30 September 2009. Whilst the business was trading a part-time employee with responsibility for payroll had successfully filed the P35 submissions for 2007/08 and 2008/09 online. This employee had commented that she was not IT qualified and that the online filing was a learning curve. However, the fact that she had successfully filed two previous P35 submissions was noted by the Tribunal.

There was some conflicting reports of correspondence between the employee and HMRC with the employee arguing that she was advised that no P35 submission was required for 2009/10. This was incorrect. However prior to the deadline the employee was definitely made aware of the requirement to file a P35 online. The employee then argued that she had filed the P35 online however this was not the case and subsequent communications from HMRC made it clear that no return had been filed.

The taxpayers argued that there was a reasonable excuse for the late submission of the return based on the actions of their employee. The Tribunal rejected this argument and held that the taxpayers reliance on an employee under the circumstances did not amount to a reasonable excuse. The Tribunal was clear that 'there was at no stage a reasonable excuse and certainly not a reasonable excuse lasting the duration of the default'. The Tribunal Judge did mention HMRC’s unfortunate policy of waiting four months before issuing a first penalty notice for non-submission of a P35, however in this case this was not deemed a fact of significant importance.

UK - US FATCA tax agreement Overseas tax issues

The UK Government have been working together with the United States to combat tax evasion, specifically in relation to the US ‘FATCA’ legislation. The FATCA (the Foreign Account Tax Compliant Act) legislation seeks to combat tax evasion by requiring that US taxpayers with specified foreign financial assets that exceed certain thresholds report those assets to the IRS.

The UK and US Governments signed a new agreement in September 2012 to improve international tax compliance and implement FATCA.

The UK-US agreement seeks to:

  • Address legal barriers to financial institutions complying with FATCA.
  • Ensure that withholding tax will not be imposed on income received by UK financial institutions or on payments they make.
  • Ensure that the burdens imposed on financial institutions are proportionate to the goal of combating tax evasion.
  • Establish a reciprocal approach to FATCA implementation.

HMRC have now published draft legislation which is intended to bring into effect the UK-US Agreement. The draft regulations and accompanying guidance are open for comment from interested parties until 13 February 2013.

Draft Finance Bill 2013 published General

The Government published the Finance Bill 2013 draft clauses, explanatory notes and draft secondary legislation on 11 December 2012. The draft legislation is open for consultation until 6 February 2013 and the draft Finance Bill is due to be published after the 2013 Budget. The Bill and explanatory notes run to more than a staggering 1,000 pages.

Some of the main changes in the draft Finance Bill include the following 12 main tax announcements highlighted by HMRC:

  1. General anti-abuse rule (GAAR) - The GAAR is aimed at rooting out abusive tax arrangements and will apply to tax arrangements entered into on or after the date of Royal Assent to Finance Bill 2013. The GAAR is expected to apply to corporation tax, income tax, capital gains tax, petroleum revenue tax, inheritance tax, stamp duty land tax and the annual residential property tax. The GAAR will also be extended to cover national insurance but will this will require additional legislation.
  2. Statutory residence test – A new statutory residence test is due to come into force from April 2013 which will put the rules which determine an individual’s tax residence on a statutory basis. It was originally intended that the test would come into effect from April 2012 but this was delayed in recognition of the complex issues that had been raised.
  3. Disclosure of Tax Avoidance Schemes (DOTAS) – There are a number of proposals included in the Finance Bill draft clauses which will revise and extend the DOTAS regime.  
  4. Higher rate threshold - For 2014-15 and 2015-16 the increase in the higher rate threshold will be capped at 1%.
  5. Capital gains tax: annual exempt amount - The capital gains tax free limit will increase by 1% in 2014-15 and by a further 1% in 2015-16.
  6. Inheritance tax: nil rate band - The IHT nil-rate band was frozen at Budget 2010 at its current level of £325,000 until April 2015. For 2015-16 the band will be increased by 1% rounded up to £329,000.
  7. Fuel duty – Legislation will be introduced to ensure that the 3.02 pence per litre Fuel Duty increase that was due to take effect on 1 January 2013 will be cancelled.
  8. Changes to the value of the tax exemption for employer supported childcare. 
  9. UK-Switzerland agreement: remittance basis.
  10. Information powers.
  11. Overpayment relief: limiting the effect of prevailing practice and timing of loss mistakes.
  12. Building society capital instruments.
Charities online service General

From April 2013 HMRC are launching a new service called Charities Online. This change was first announced by the Chancellor as part of the 2011 Budget. The new online system will replace the current R68(i) Gift Aid and tax repayments claims form. According to HMRC, the new system will provide a way for charities and Community Amateur Sports Clubs (CASCs) to claim Gift Aid, tax repayments on other income and Gift Aid Small Donations Scheme top-up payments by using an online form. HMRC will also introduce new iforms which will replace the current ChA1 HMRC Charity application form, ChV1 Charities variations form and CASC(A1) registration form.

Charities Online will introduce three new options for charities and CASCs that will enable them to claim payments from HMRC Charities.

  1. Claim online
  2. Claim using external software
  3. Claim using a paper form – for charities without access to the internet a new paper form called ChR1 will be available from April 2013. The existing form R68(i) will be withdrawn from April 2013.

April 2013 will also see the launch of the Gift Aid Small Donations Scheme (GASDS). The GASDS will allow qualifying charities and Community Amateur Sports Clubs (CASCs) to claim a top-up equivalent to Gift Aid on up to £5,000 of small donations of money made without a Gift Aid declaration. A small donation is defined as a donation of £20 or less. The aim of the GASDS is to allow charities to claim a Gift Aid style payment on donations received in circumstances where it is difficult to collect donors’ details (such as a bucket collection) or where donors may be reluctant to give them.

Budget 2013 General

The Chancellor has announced that the 2013 Budget will be held on Wednesday, 20 March 2013.

The Budget will be George Osborne’s fourth and will take place on the final Wednesday before Parliament's Easter break.

Details of all the Budget announcements will be made on a special Budget 2013 section of the HMRC website which will be updated following completion of the Chancellor’s speech next March.


Best wishes,

The Exceed Team

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