The Chartered Tax Adviser Examination

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1 The Chartered Tax Adviser Examination May 2017 AWARENESS MODULE F Environmental Taxes, Excise Duties and Stamp Duties Suggested Solutions

2 Question 1 1. Henrich Gmbh must register within 30 days of forming the intention to commercially exploit aggregate or doing so. There is no threshold. (1 mark). It will be registered from the date the requirement to register arose (1 mark). 2. As a non UK resident Henrich Gmbh is likely to be required to appoint a Tax Representative who will be responsible for ensuring its obligations are met, including payment of the levy. (1 mark) Henrich Gmbh and the Tax Representative should jointly request approval of the appointment of the Tax Representative by HMRC on Form AL5 within 30 days of the appointment. (1 mark) The penalty for failing to request approval of the appointment of a Tax Representative within this time limit is subject to a penalty of 10,000. (1 mark) Question 2 1. The weight of any quantity of aggregate is to be determined at the time it is first subjected to commercial exploitation. (1 mark) Where there is a working weighbridge at a site it must be used. (1 mark) If for some reason the weighbridge cannot be used AggregatesRUs Ltd must contact HMRC to agree an alternative method of calculating the weight. (1 mark) 2. Added water (excluding rainwater) may be discounted either at standard percentages. These are 7% for washed sand, 3.5% for washed gravel and 4% for washed rock/aggregate (1 mark) or after agreeing an appropriate method with HMRC. (1 mark) 1

3 Question 3 1. If the total price paid for the aggregate was less than twice the levy rate applicable at the time, then the bad debt relief that can be claimed is half the outstanding amount. (1 mark) Applying this test: The rate was 2.00 per tonne therefore the price of the aggregate ( 3.58) is less than twice the levy rate. The maximum credit that can be included on the return is 50% of the total amount of the written off invoice. (1 mark) The value of the credit for the return is therefore 50% x (625 x 3.58) = = 1119 (rounded to the nearest ) (1 mark) 2. If any dividends are received from the insolvency practitioner relating to these invoices after the credits have been claimed some or all of the credit will have to be repaid to HMRC. (1 mark) If the full amount outstanding is not received the amount of Aggregates Levy to be repaid is calculated as the credit claimed multiplied by the dividend received divided by the outstanding amount. (1 mark) Question ,000 x = supplies to a prison not excluded and subject to CCL at the appropriate rate (1 mark) 2. NIL supplies to a hospice are excluded (1 mark) 3. NIL supplies to a dwelling are excluded (1 mark) 4. 8,900 x = supplies to a hospital not excluded (1 mark) 5. NIL supplies that do not exceed 1,000 kilowatt hours of electricity per month are excluded (1 mark) 2

4 Question 5 1. The conditions to be met to be authorised for annual accounting for Climate Change Levy are: 1) SmallCo Ltd has been registered for at least twelve months at the time of making its application and have submitted at least four quarterly Climate Change Levy returns; (1 mark) 2) There are reasonable grounds for believing that the amount of Climate Change Levy on taxable supplies made by SmallCo Ltd, or due to be made in the twelve months from the date of the authorisation will not exceed 2,000; (1 mark) 3) The registration is not a group or divisional registration; (1 mark) and 4) SmallCo Ltd has not, in the 12 months preceding the date of application, ceased to make annual returns. (1 mark) 2. If SmallCo Ltd becomes aware that the Climate Change Levy liability is likely to exceed the 2,000 threshold, it should notify the Commissioners in writing within 30 days. (1 mark) Question 6 List 5 from list in Sch 1 SI 2005/1715 including: 1. Electricity in electrolysis for the production of fluorine; 2. Electricity in battery formation; 3. Natural gas as feedstock to produce hydrogen; 4. Methane as a feedstock in producing higher paraffins and their derivatives; 5. Coke as a resistor in lector-thermal furnaces (1 mark for each example no marks for examples taken from Mixed Uses List) Question 7 1. The tax point is the date of disposal, 30 April Issuing a Landfill Tax invoice prior to the date of disposal does not create a tax point for landfill tax. (1 mark) 2. The tax point is the invoice issued date, 31 March (1 mark). The landfill tax invoice was issued within 14 days of the disposal and therefore creates the tax point. Payment in advance of disposal does not create a tax point. (1 mark) 3. The tax point is the date of disposal, 31 March (1 mark). The Landfill tax invoice was not issued within 14 days of the disposal so the disposal date remains the tax point. (1 mark) 3

5 Question 8 1. Landfill Tax records typically must be retained for six years. (1 mark) Examples include (see reg 16 SI 1996/1527): Landfill Tax account All landfill invoices and similar documents All credit or debit notes or other documents that evidence an increase or decrease in the value of consideration for a relevant transaction Transfer notes and any other original or copy records in relation to material brought onto or removed from the landfill site Business and accounting records Such other records as the Commissioners may specify (Max 3 Marks) 2. A maximum penalty of 70% would apply to a deliberate but not concealed error in a Landfill Tax Return. Reductions are available for prompted and unprompted disclosures. (1 mark) Question 9 The landfill tax payable on the five disposals is as follows: 8 tonnes of dredged waste from the canal exempt Nil 5 tonnes of broken 2.65 per tonne tonnes of general per tonne tonnes of fines with a tested loss on ignition (LOI) of per tonne Note the lower rate only applies to fines with a LOI of 10% or less (15% for a transitional 12 month period from 1 April 2015) tonnes of bottom ash from wood 2.65 per tonne Total 2, (1 mark for each point) (Total 5 marks) 4

6 Question Any two from on-course bets, spread betting, bets by way of pool betting (2 marks) 2. Bookmaker s profits are the ordinary profits and retained winning profits from bookmaking. i.e.: Stake money falling due in the bookmaker s accounting period, less Amounts paid out by way of winnings; plus Retained winnings profits (3 marks) Question , ,500 = 13,500 x 0.5% = (rounded up to nearest 5) = 70 (1 mark) 2. NIL share transfers valued at 1,000 or less are exempt (1 mark) 3. 1,500 x 0.5% = 7.50 (rounded up to nearest 5) = 10 - not a gift for no consideration which would have been exempt. Instead stamp duty calculated on the consideration received. (1 mark) 4. NIL transfers on divorce or dissolution of civil partnerships are exempt (1 mark) 5. 4,000 x 0.5% = 20 - value of shares above 1,000 de minimis limit and therefore not exempt and subject to Stamp Duty (1 mark) Question Scotmay Ltd should follow the procedures set out in Reg 70 onwards of SI 2010/593 and become approved and registered as a Registered Commercial Importer. (1 mark) 2. Returns are sent monthly and generally paid via a deferment account. (1 mark) 3. Before receiving the goods, a HM4 must be completed. This provides information about the consignment in advance. (1 mark) 4. Payment of the UK duty must be secured. The supplier will not be allowed to send the goods until he has received evidence that the UK duty has been secured. This will generally be within 15 days. (1 mark) 5. Upon receipt of excise goods Scotmay Ltd will complete the certificate on the back of copies 2 and 3 of the accompanying document (Simplified Administrative Accompanying Document ( SAAD )) and sends copy 3 back to the supplier. The HM4 is returned to HMRC with a copy of the receipted SAAD. (1 mark) 5