The Chartered Tax Adviser Examination

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1 The Chartered Tax Adviser Examination May 2018 AWARNESS MODULE F Environmental Taxes, Excise Duties and Stamp Duties Suggested Solutions

2 1. Smythston Ltd can claim the tax credit on its current return. It nets-off the credit from the amount of its payments and pays the excess. If the credit exceeds the payments HMRC will repay the excess amount. Claims are subject to the unjust enrichment provisions and the 4 year cap. If an error is discovered which amounts to a maximum of 10,000 or (if greater) 1% of turnover (subject to a maximum of 50,000), it can be corrected on the return in which the error is discovered. If the error exceeds these limits it must be disclosed separately to HMRC. Note: All valid points will gain credit eg a credit can be claimed at the same time as the levy is due (effectively a contra entry, so no tax is paid), the credit must come within the accepted circumstances and that special rules apply to credits for the NI scheme 2. Liabilities as follows: 1) Not subject to Aggregates Levy not commercial exploitation per s19(3)(d) FA ) Likely to be exempt from Aggregates Levy although the pitch is not regarded as a new building being erected per the tribunal case Pat Munro (Alness) Ltd, the fact that a sports pavilion is built at the same time should be sufficient for it to qualify for the exemption under s.17(3)(b) FA ) Not subject to Aggregates Levy exempt process under s18 FA ) Not subject to Aggregates Levy not commercial exploitation as it has become part of the land at the site from which it was extracted without being mixed with any other substance s.19(3)(e) FA ) Subject to Aggregates Levy as commercial exploitation. Statutory or Case references not required for marks 3. 1) There is no registration threshold for Aggregates Duty, so if B. Dharma Ltd is undertaking any taxable activities it will need to notify HMRC. 2) If it was just undertaking certain exempt activities, registration would not be required at all though it would still need to notify exempt activities that are listed in reg 3A. SI 2001/ ) Notification will be required within 30 days of forming the intention to carry out taxable activities or being required to be registered. 4) It will need to submit form AL1.Site details need to be notified on form AL 1A. 5) B. Dharma Ltd will be registered from the day that the requirement to register occurred. 1

3 4. 1) A taxable commodity has been supplied between Donny Ltd and Euswon Ltd upon which Climate Change Levy has been accounted for and paid to HMRC. 2) Donny Ltd and Euswon Ltd are not connected or the same person. 3) Euswon Ltd has been issued with a Climate Change Levy Accounting Document (CCLAD) or invoice showing the Climate Change Levy chargeable by Donny Ltd. 4) The debt has been written-off in Donny Ltd s accounts as a bad debt. 5) At least six months has elapsed from the due date for payment of the invoice. SI 2001/838, Reg Step 1: Calculate the quantity of the natural gas used in the production of electricity (Q). Using the formula: Q = (TFI - (QHO/81%)) x (1- (MO/TPO)) (1,548,000 (724,000/0.81)) x (1 (25,000/468,000)) = 619,228 MWh Step 2: Calculate the quantity of the natural gas referable to the production of nonqualifying electricity (R). Note ES cannot exceed the QPO. Using the formula: R = Q x (1 (ES/(TPO-MO))) = 619,228 x (1 (143,000/(468,000 25,000))) = 419,342 MWh Step 3: Calculate the percentage of natural gas arriving at the CHP covered by the current CHPQA referable to the production of non-qualifying electricity. Using the formula: (R / TFI) x 100 = (419,342/1,548,000) x 100 = 27.09% (rounded to 27%) (1 mark mark still awarded if no rounding) Step 4: Calculate the CPS due on the natural gas received in the quarter ended 31 March ,000,000 Kwhs x 27% x = 16,086 SI 2001/838 Schedule 3 2

4 6. A supply is treated as taking place each time a Climate Change Levy accounting document (CCLAD) is issued. The document must be issued no later than 15 weeks (for small scale users) or 6 weeks (for other users) after the day on which the actual supply was made. If the CCLAD is not issued within these time limits then the supply is treated as taking place at the end of the respective 15 week or 6 week period. For electricity, small scale user is a customer whose maximum demand in any one year period including the date they are having their status determined is less than 100 kilowatts, (or any rate where the supplier does not provide an invoice more than once in a six week period). Para 27 Sch 6 FA 2000 & reg 53 SI 2001/ ) Weight of the material disposed of. 2) The date of disposal of the material. 3) An identifying number. 4) The total amount payable for which the invoice is issued. 5) Where the Landfill Tax chargeable is shown separately on the invoice a statement must be included confirming that the tax must not be treated as input tax for VAT purposes. SI 1996/1527 reg ) Qualifying materials are listed in the eight groups of the Landfill Tax (Qualifying Materials) Order 2011 and are less polluting wastes (and qualifying fines that satisfy certain criteria). Qualifying materials are subject to the lower rate of Landfill Tax; currently 2.70 per tonne. 2) Sufficient evidence is required to substantiate the lower rate to prove that it is qualifying. This is usually through an accurate description of the waste in the waste transfer note (or similar documentation if an in-house site) which matches a term used in the Qualifying Materials Order. 3) If the quantity of non-qualifying materials (i.e. standard rated materials) are small amounts i.e. incidental and there would be difficulty in separating them then the whole load can be subject to the lower rate. However for mixed loads where the standard rated and lower rated supplies occur and the standard rated materials are not incidental, the whole load is standard rated. 3

5 9. The circumstances when waste can be discounted for water are only when the water has been added and not when it occurs naturally (or residue from the treatment of effluent or sewage). The water must be 25% or more of the waste by weight (this limit does not apply to the effluent/sewage category) and must have: been added to allow transportation of the material; or to be used for the extraction of minerals; or arisen or been added, or both, in the course of an industrial process. SI 1996/1527 reg. 44(5)& (7) 10. 1) Come Bingoing Ltd will not have to pay any duty in the period to 25 March 2018 and can carry over the loss as excess winnings into the next period. (2 marks) 2) Bingo profits are calculated for an accounting period. Accounting periods are for a four or five week period which ends on the last Sunday of each month. The return (and payment) is due on the 15 th day of the month following the accounting period end. (2 marks) 3) HMRC can authorise non-standard periods of between 27 and 35 days. The authorisation needs to be renewed every 12 months. 11. Billy Ltd can register as a Temporary Registered Consignee (TRC). It will register through completion of a TRC1. HMRC must be informed using a TRC2 before the goods are dispatched. Billy Ltd must either pay or secure the UK excise duty. HMRC provide a unique authorisation number (the Temporary Consignment Authorisation - TCA) which Billy Ltd must then give to the consignor. The consignor will use this TCA to raise the Electronic Accompanying Document ( ead ) through Excise Movement and Control System ( EMCS ). Billy Ltd must inform HMRC of the arrival of the goods; pay the duty (if a security was deposited, the security becomes the payment) and lodge the receipt through the EMCS. 12. Records must be maintained of all spirits processes, including: fermentation; distillation; the start and finish of each distillation period; any process or stage of the process in the manufacture of spirits, and delivery to warehouse; and any incidents that affect production including machinery breakdowns. (1 mark for each to a maximum of 4 marks) Records must be maintained for 6 years. 4