The Chartered Tax Adviser Examination

The Chartered Tax Adviser Examination November 2016 AWARENESS MODULE F Environmental Taxes, Excise Duties and Stamp Duties Suggested Solutions

Question 1 Aggregate Levy exempt processes are: 1) The cutting of any rock to produce stone with one or more flat surfaces (1 mark); 2) Any process by which a relevant substance is extracted or otherwise separated from any aggregate (1 mark) 3) Any process for the production of lime or cement from limestone or from limestone and anything else (1 mark) 4) The use of clay or shale in the production of ceramic construction products (1 mark) 5) The use of gypsum or anhydrite in the production of plaster, plasterboard or related products (1 mark) FA 2001 Part 2 s.18 Question 2 1) Valid documentary evidence that the aggregate has left the UK must be obtained within three months of making the claim. (1 mark) 2) Examples of evidence that when taken together provide clear evidence that the aggregate has been removed outside of the UK are: a) Commercial transport documents from the carrier responsible for removing the aggregate from the UK b) Customers orders c) Inter-company correspondence d) Copy sales invoices e) Advice notes f) Packing lists g) Details of insurance or freight charges h) Evidence of payment i) Evidence of the receipt of the aggregate abroad (1 mark for each example max 3 marks) 3) If evidence is not gathered within three months of the claim then the relief claimed must be accounted for and repaid to HM Revenue & Customs on the next return. (1 mark) SI 2002/761 1

Question 3 1) The return submission due date is the last working day of the month immediately following the end of the accounting period to which the return relates. (1 mark) Payment will be taken by direct debit through the Aggregates Levy direct debit scheme 7 days after the submission due date of the return. (1 mark) 2) Box 2 on the return shows the total tonnage of taxable aggregate in the period including any aggregate which is, or may become, eligible for relief. (1 mark) Box 3 on the return shows the total tonnage of aggregate relieved in the period, including exported aggregate. (1 mark) Box 4 on the return shows the total tonnage of aggregate exempt from levy in the period. (1 mark) Question 4 A balancing period is a period of 3 months. (1 mark) An averaging period ends once it has run for two years (1 mark) but can finish earlier if a) At the end of a balancing period cumulative exempt sales in the averaging period equal the cumulative exempt generation purchased; (1 mark) or b) At the end of a balancing period cumulative exempt generation purchased exceed the cumulative exempt sales in the averaging period ; (1 mark) or c) At the end of the balancing period the supplier has ceased making exempt renewable energy supplies to their customers. (1 mark) FA 2000 Sch 6 para. 20 Question 5 1) A deemed supply is a taxable supply by a utility to itself. (1 mark) An example of this would be where an electricity utility uses some of the electricity it has purchased in its own offices. (1 mark for a valid example) Other examples to gain credit, eg a change of circumstances, in para 24, CPS on receipts of carbon based commodities in para 24A & 24B (the latter CHPS CPS), para 43B, supplies at a reduced rate that actually incur full rates 2) A deemed supply of coal (that has not yet been invoiced) has a tax point on the date it was used or burned by the utility. (1 mark) A deemed supply of gas (that has not been invoiced) has a tax point 15 weeks from the date the gas was supplied if the utility is a small scale user. (1 mark) If the utility is a large scale user the tax point is 6 weeks from the date the gas was supplied. (1 mark) FA 2000 Sch 6 s. 23, 34, Other examples to gain credit eg CPS deemed supply is the arrival of the commodity on the site and change in circumstances is when the change arises. 2

Question 6 1) Hug the Planet Energy Ltd is not currently liable to register for Climate Change Levy as it only makes exempt supplies of electricity and no taxable supplies. (1 mark) 2) There is a requirement to notify HM Revenue & Customs within 30 days of the date from which the company intends to start making taxable supplies; therefore by 31 December 2016. (1 mark) The registration will be effective from the date on which the company makes or intends to make the first taxable supply, i.e. 1 December 2016. (1 mark) 3) For all registrations a CCL 1 Climate Change Levy Application for registration form must be completed. (1 mark) To apply for group registration they must also complete CCL50 Climate Change Levy Application for group treatment form and CCL51 Climate Change Levy Group member details form. (1 mark) Question 7 1) The landfill site operator must inform HMRC in writing of the need to deregister from Landfill Tax within 30 days of the intention to cease making taxable disposals. (1 mark) A penalty of 250 is applied for failure to notify HMRC by this date. (1 mark) 2) Examples of post deregistration credits that can be claimed back from HMRC are as follows: a) Credits relating to bad debt relief b) Credits for Landfill Tax paid on waste which will now be removed to another landfill site c) Credits for Landfill Tax paid on disposals at the site which have now been removed for recycling, incineration or re-use d) Credits for Landfill Tax paid on disposals that were subject to a prescribed landfill site activity and are subsequently being reused to restore the landfill site. Maximum of 3 marks available for three examples from the list above 3

Question 8 1) Qualifying fines are small particles that are produced when waste is subjected to a process. They must contain no more than an incidental amount of non-qualifying material and not be hazardous waste. (1 mark) 2) Fines must not be treated as qualifying fines unless they meet all of the below conditions: a) The registrable person holds a transfer note in respect of that quantity of material; (1 mark) b) The registrable person holds such evidence as is specified in a published notice that the fines are qualifying fines (1 mark) c) Where a LOI (loss on ignition) test has been conducted on any part of the fines in accordance with any published notice, the LOI percentage determined by the test does not exceed 15% if disposed of prior to 1 April 2016 and 10% on or after 1 April 2016. (1 mark) d) Where the Commissioners have directed a registrable person to conduct a LOI test of a quantity of material proposed to be disposed of as qualifying fines, that person conducts the test. (1 mark) FA 1996 s.42 (3A) SI 2015/1385 Credit given for mentioning the actual evidence in the Public Notice eg pre-acceptance checks, inspection checks on arrival and testing. Question 9 1) Trashy Ltd is the licence/permit holder or landfill site operator and is registered for Landfill Tax purposes. They are liable to pay the Landfill Tax. (1 mark). However, under this new contract Minnion Ltd will be the controller of the site and will also be jointly and severally liable for the Landfill Tax should Trashy Ltd fail to pay. (1 mark) 2) Trashy Ltd and Minnion Ltd must jointly notify HM Revenue & Customs of Minnion s details and the date Minnion Ltd started operating the site. (1 mark) Notification is required within 30 days of Minnion Ltd becoming the controller of the site. (1 mark) Failure to notify HMRC of these details within the time period prescribed will result in a 250 penalty. (1 mark) FA 1996 Sch 5 para. 48-61 4

Question 10 1) An excise warehouse is a place authorised by Customs where excisable goods may be stored without being subject to excise duty. (1 mark) Types of goods that can be stored in an excise warehouse are: a) Alcohol (1 mark) b) Energy products (i.e. hydrocarbon oils) (1 mark); and c) Tobacco Products (1 mark) 2) A duty point usually occurs when the goods are removed from the warehouse or made available for consumption in the UK. (1 mark) Question 11 Credit given for other circumstances where duty can be payable eg unexplained losses 1) Examples of excepted vehicles i.e. off-road vehicles that can use oil delivered for home use without affecting the rebate are: a) Agricultural tractors which only use public roads for purposes relating to agriculture, horticulture, forestry or cutting verges, hedges or trees bordering public roads (or other uses in Schedule 1 para 2 eg spreading material to deal with frost, ice or snow). b) Light agricultural vehicles with revenue weight not exceeding 1,000 kilograms, designed to seat only the driver and primarily not for the public roads (subject to other conditions in para 3(d) Sch 1). c) Agricultural material handlers d) An agricultural engine e) Agricultural processing vehicles f) Vehicle used for agricultural purposes which only goes on to public roads in passing between different areas of land owned by the same person. The distance between those two areas must not exceed 1.5 kilometers. g) A mowing machine h) Snow clearing vehicles i) Gritters j) Mobile cranes k) Mobile pumping vehicles l) Digging machines m) Works trucks n) Road Rollers o) Road surfacing vehicles p) Tar sprayers (1 mark for each example maximum 3 marks) HODA 1979 Sch 1 5

2) Not including fruit and vegetables other horticultural produce are a) Flowers, pot plants and decorative foliage b) Herbs c) Seeds other than pea seeds, bulbs and other materials for sowing or planting for the production of fruit, vegetables, flowers, pot plants, decorative foliage and herbs; or for reproduction of the seeds, bulbs or other material planted d) Trees and shrubs other than trees grown for the purpose of afforestation but does not include hops. HODA 1979 Sch 2 (1 mark for each example maximum 2 marks) Question 12 1) 0 exempt (1 mark) 2) 0.5% x 2,000 = 10 (1 mark) 3) 0.5% x 58,000 = 290 (1 mark) 4) 0 exempt (1 mark) 5) 0 exempt (1 mark) 6