2020 Innovation November 2015 Tax Webinar

Transcription

1 2020 Innovation November 2015 Tax Webinar Martyn Ingles Agenda Finance Bill progress More consultations HMRC announcements, other developments Recent tax cases Offshore assets Common Reporting Standard 1

2 Finance Bill 2015 Progress IHT Residence Nil Rate Band clause 9 amended Direct descendants expanded to spouses and widow(ers) of direct descendants Also certain trusts, step and foster children Buy to Let interest to be restricted from 6 April 2017 Restriction does not apply to companies But will apply to trusts pass BR relief to beneficiary Finance Bill 2015 Progress New clauses added at Report Stage: 4 (EIS, VCTs etc: excluded activities) inserted as clause 27. = Feed in tariffs 8 (restitution interest payments) inserted as clause 38 45% tax 5 (corporation tax instalment payments) inserted as clause months earlier if profits > 20m 6 (carried interest and disguised investment management fees: arise ) inserted as clause 45. 2

3 Venture capital changes Company raising capital under EIS or VCT must do so within 7 years of starting to trade (10 years for knowledge intensive company) Lifetime cap on the amount a company can raise using these schemes of 12m ( 20m if knowledge intensive) In addition to the current 12 month cap of 5m Venture capital changes Remove the requirement that 70% SEIS money must be spent before EIS or VCT funding can be raised for investments made on or after 6 April 2015 Cannot use EIS/VCT finance to acquire another business Existing shareholders barred from acquiring more shares in the same company under EIS or SEIS unless current shares acquired under these schemes 3

4 Tax Credit Changes Blocked by Lords Tax credit clawback rate increased from 41% to 48% Income threshold for tax credits reduced from 6,420 to 3,850 a year Income increase disregard reduced from 5,000 to 2,500 Overall benefits cap to be reduced from 26,000 to 23,000 (London) and 20,000 (outside) No additional tax (universal) credits for more than 2 children from 2017 Other Legislative Changes NIC rates locked in by NIC (Rate Ceilings) Bill 12% What will Class 4 be 2016/17? 9% => 12%? Draft Small Charitable Donations Act (Amendment) Order 2015 Increases the max. amount of small donations on which a charity may claim BR tax from 5,000 to 8,000 with effect from 6 April Will also apply to donations to CASC Draft Finance Bill 2016 clauses issued 9 Dec

5 More Consultations Interest relief for multi-national companies to be restricted in line with BEPS Action Point 4 Suggests limiting to 10% => 30% of EBITA Above a de-minimis threshold Patent Box rules to be tightened up Link patent profits to R&D spend Current relief to continue to 30 June 2021 Tax breaks for innovative company PATENT INVENTION R&D PHASE Super profits 230% relief for costs 10% corp. tax (if SME) 5

6 HMRC Announcements and other developments HMRC Guidance R&D Tax Credits for Small Businesses Govt. to raise awareness of R&D tax relief amongst smaller companies Introducing Advance Assurance November 2015 Try to identify those that should be claiming Business Records Checks to end 6

7 Payrolling Benefits in Kind Reporting through RTI rather than end of year P11d Spread cash equivalent over tax year => PAYE Voluntary initially Employers can now Register and update payroll software before 5 April for 2016/17 tax year Cannot start part way through the year Certain benefits cannot be payrolled Need not include all benefits, or all employees Updated Factsheet on Compliance Checks Factsheet CC/FS3 sent to taxpayers At least 7 days notice of visit to business premises Includes businesses run at home May request meeting at agent s office or HMRC May need to interview: Persons who keep accounting records Workers, to check their status! Penalties for failure to comply 7

8 Tax implications of FRS 102 HMRC have updated their guidance Consider tax implications of accounting changes: Transitional adjustment arising on conversion to FRS102 Accounting under FRS102 going forward Applies to a/c periods commencing on or after Comparatives to be restated (B/fwd balances) FRS102 - Accounts and tax Tax legislation for companies requires that the profits of a trade are calculated in accordance with generally accepted accountancy practice, subject to any adjustment required or authorised by law in calculating profits for corporation tax purposes Section 46 Corporation Tax Act 2009 Also section 25 ITTOIA

9 Accounts and tax General rule: Tax treatment follows accounting treatment, GAAP, unless tax law overrides Main exceptions/overrides: Tangible fixed assets capital allowances Share based payment Pension costs Provision for bonuses/ commissions Tax implications of FRS 102 Consider tax implications of main accounting changes: Financial instruments/ hedging transactions => Fair value disregard for tax? Or spread over 10 years? Business combinations separate intangibles Lease incentives over length of lease Employee benefits - Holiday pay accrual Goodwill and intangibles 10 year write off 9

10 IHT - Normal Expenditure out of Income HMRC Trusts and Estates Newsletter gives advice on claiming this valuable IHT exemption Not a transfer of value for IHT Does individual have sufficient net income after tax to make regular gifts and still maintain their normal lifestyle? Give details on page 6 of Form IHT403 Support with spreadsheet detailing income and expenses each year Recent Tax Cases 10

11 What is a Valid Gift for IHT? Scott v HMRC UKFTT Case involves the transfer of 2 sets of paintings First set physically transferred as evidenced by letter but remained hanging in the family home Second set also remained in Aunt s home until she moved into care home HMRC contended not valid gifts, also date of transfer In absence of Deed of Gift there must be intention and delivery FTT held that delivery was when Aunt went into care Payment for not claiming damages taxable? Hill v HMRC UKFTT Employed to work in Luton and within 10 mile area Seconded to work in London No proper consultation under TUPE rules 30,000 paid under compromise agreement For not claiming damages Held to be taxable as employment income 30,000 tax free ex-gratia payment rules did not apply 11

12 Payment under Compromise Agreement was PILON P Andrew v HMRC UKFTT 68,800 paid under compromise agreement Entitled to 6 months notice in contract of employment Was 30,000 tax free? At discretion of employer? Thorn EMI v Caldicott (1999) need not be in contract if custom and practice in organisation Held that was PILON and taxed in full HMRC 1 Glasgow Rangers 0 HMRC v HMRC at Scottish Court of Session = HC Payments to Footballers via EBT Scheme FTT had held that not emoluments Trustee of the Principal Trust had a genuine discretion as to how to apply the funds No PAYE or NICs due Now overturned - Held to be taxable as employment income Other EBT schemes? 12

13 Rangers - EBT Loan Scheme COMPANY TRUST LOANS Taxable Sub Trusts VAT DIY Housebuilders Scheme - Not a Careless Error Simon Coates v HMRC UKFTT Relied on accountant to reclaim VAT Prepared by junior staff and reviewed Not all costs qualified, but included in error HMRC applied 15% penalty for careless error FTT No penalty reasonable to use accountant to assist with claim 13

14 Offshore Tax Evasion and Common Reporting Standard Tackling Offshore Tax Evasion - Consultations 4 consultations: 1. Strengthening civil deterrents for offshore evaders 2. Civil sanctions for enablers of offshore evasion 3. A new corporate criminal offence of failure to prevent the facilitation of evasion 4. A new criminal offence for offshore evaders 14

15 Common Reporting Standard (CRS) Overseas financial institutions will be obliged to provide Details to HMRC of foreign assets owned by UK resident taxpayers 90 countries committed to supplying data Crown Dependencies and Overseas Territories 2017 other countries CRS What information? Name, address and date of birth of taxpayer Investment data - account number(s), year-end valuations/ balances, Interest credited and proceeds of assets sold Include trustees, settlors, beneficiaries, nominees, companies, and non-uk companies under the control of UK persons. 15

16 CRS What Next? HMRC will start making investigations and invite individuals to make a disclosure Lichtenstein Disclosure Facility (LDF) now closed There will be a final disclosure facility But the penalty will be at least 30% of the tax rather than 10% or 20%, which was the norm under the LDF THE END Any questions? Please post online 16