Friday 21 December 2012

Accountant fraud

A Surrey accountant who fiddled his VAT and pocketed the tax and national insurance contributions paid by his staff has been sentenced to two years in prison.
Chartered accountant Peter Rose, 65, of Tadworth - who previously ran Mayfair Associates (Surrey) Ltd, offering pensions advice, accountancy and book keeping services - used a redundant VAT number to invoice his clients. But he held back £150,000 in VAT from HMRC, paid over by customers.
Rose went further - defrauding his own staff over a nine year period by keeping £150,000 in Pay As You Earn (PAYE) and national insurance contributions he had deducted from their salaries. He also failed to pay £65,000 income tax or national insurance on his own earnings
John Pointing, assistant director for Criminal Investigation at HMRC, said: ‘Peter Rose conned his clients and his own staff by persistently and deliberately committing fraud. He may have thought his professional skills made his crimes undetectable, but he was wrong.
‘HMRC is increasing its resources and efforts to track down and investigate tax fraud. We will not hesitate to seek out these fraudsters – we owe it to the honest and law-abiding to do so.’
Rose was arrested by HMRC officers in July 2012. He admitted the offences at a previous hearing and appeared at Guildford Crown Court.

VAT fraud

Hairdresser jailed for brush with VAT crime

A tax fraudster – who stole more than £147,000 with his daughter, using an innocent businessman’s details to reclaim VAT – has been caught and jailed after being on the run and abandoning his daughter to face the law alone.
The pair also pocketed Pay As You Earn (PAYE) contributions from their employees before John Littleboy absconded.
Littleboy and his daughter ran two hairdressing salons, both called Headcandi, from premises in Gidea Park and Chafford Hundred in Grays, Essex.
Littleboy was the main organiser of the fraud and, together with his daughter Katy, stole the identity of a legitimate businessman.
Using the businessman’s details, they submitted bogus claims for refunds of VAT for their hairdressing business. Their criminal activity included keeping tax and National Insurance deducted from the wages of their staff instead of paying it to HMRC.
HMRC finally arrested Littleboy on Monday 17 December 2012 – he’s been handed a two-year prison sentence.
Peter Millroy, assistant director of HMRC Criminal Investigation, said: ‘John Littleboy tried to avoid his punishment by absconding, but he has been caught. He organised a catalogue of criminal activity along with his daughter, Katy Littleboy. Not only did they steal from their employees but also used the identity of an innocent businessman to commit a sophisticated tax fraud purely for their own greed.
‘Stealing over £147,000 in tax destined to pay for public services is not acceptable. If you know of anyone committing tax fraud please tell us by calling our Hotline, 0800 59 5000.’
In handing down sentencing, judge Owen-Jones said: ‘This was a skilful, scheming, well-planned and determined operation to claim large repayments of VAT by creating invoices to defraud HMRC. This impacts on every member of the general public.’

Christmas Party

Mindful of the approaching Christmas and New Year festivities, it is timely to review the tax rules concerned with the provision of Christmas parties, other annual parties and gifts for employees.
The cost of entertaining employees is deductible for corporation tax, as long as it is available to all staff and not incidental to the entertainment of others. If customers are invited to the event then it will be necessary to consider a suitable apportionment of cost, to disallow the customer element for corporation tax purposes.
There is an exemption from income tax and national insurance contributions on the benefit for employees, where an employer provides a Christmas party or annual party or similar function for employees if three conditions are met.
  1. The cost per head of the event is no more than £150
  2. The event is open to all employees
  3. It is annual event such as a Christmas party, summer ball or barbecue
If the three conditions are met the employer will not be required to report to HMRC the provision of the benefit involved. The problem for the employer as always is to ensure that the detail requirements are met to ensure either that there is no chargeable benefit or any chargeable benefit is minimised.

The £150 limit per head

It is important to be clear that the £150 limit is not an allowance that can be offset against the cost of providing such events, where they exceed £150 whether there is one or event or a number of events.
Where an employer provides an annual event during the tax year which is open to all employees and does not cost more than £150 per head, then there is no chargeable benefit on the employee and the employer does not have to report the details of the benefit to HMRC.
Where an employer provides two or more such annual events during the tax year each of which costs no more than £150 per head and which the total of the events does not exceed £150, then there is no chargeable benefit on the employee and no need for the employer to report the benefit provided to HMRC.
Where the combined cost of two or more events exceeds £150 then the exemption can be applied to the combination of events which best utilises the limit of £150. The Greenhill Adventure Garage Limited which prepares vehicles for long adventure safari type trips as well as specialist vehicles for use in hostile environments holds three functions during the tax year which are available to all it’s employees.
The Christmas party costs £95 per head, while the summer ball costs £85 per head, and the summer solstice barbecue costs £50 per head. Because the combined total of the three events is £230 which exceeds the limit of £150 per head it is necessary to consider whether there is a combination of events which best utilises the exemption.
The Christmas party and summer ball have a combined cost of £180 per head, the Christmas party and barbecue have a combined cost of £145. The combined cost of the summer ball and barbecue is £135. Clearly the best combination to utilise the exemption, is that of the Christmas party and barbecue.
This means that the employer has to report a benefit in kind of £85 for each employee attending the summer barbecue. Where the employee takes a guest such as wife or partner then the reportable benefit in kind will double to £170.
Where a business has more than one location, then an annual event which is open to all staff at that location will be eligible for the exemption. Where the business has it’s employee’s organised into separate department then where a separate party is held for each department, it will also be eligible for the exemption as long as each of the companies employee’s is entitled to attend one of these events.
For some functions it may not be possible to accurately determine how many people went to an event. A company must exercise reasonable care when calculating the cost per head for an event. If this is not done then the company could face penalties where this leads to a loss of tax.
For some functions it may be difficult to determine the number of people who attend, especially where people drift in and out throughout the event. To avoid penalties it will be necessary to arrive at a careful estimate, and to keep the calculation of the estimate to show that reasonable care was taken in arriving at the cost per head for that event.
When calculating the cost per head of a function the costs used must include the cost of the venue, entertainment, food, drinks and other associated costs which include transport to and from the event where the company pays for this, as well as accommodation that is for the whole of the event from beginning to end.
VAT must be included in the calculation even where this is fully recoverable by the company. The total cost of the event is then divided by the total number of people attending the event. The total number of people includes not just employees but also guests.
VAT is fully recoverable on the cost of the function as it is considered by HMRC to be staff welfare costs and not entertaining costs. Where the company is also entertaining UK clients as well as employees then it will be necessary to disallow part of the VAT incurred as input tax.
This disallowance should be calculated as a proportion of the number of clients to staff which attend the event. Where the event is provided for customers and staff are there to attend to those customers, then the whole event will be considered to be entertainment and the VAT incurred cannot be claimed.
Where the function is mainly for the directors and so excludes other employees then VAT input tax cannot be claimed.

Reporting to HMRC

Where an employee earns at a rate of less than £8,500 per year the employer has no need to report the benefit to HMRC, and there will be no tax or NIC’s to pay.
For all company directors regardless of earnings level and employees who earn at a rate of more than £8,500 per year any benefit arising will need to be reported by the employer on HMRC form P11D section M.
The employer will also need to pay Class 1 A national insurance contributions, on the value of the benefit at the current rate of 13.8% for 2012/2013.
The employee will not suffer a national insurance contribution charge on the benefit, but the employee will be chargeable to income tax on the value of the benefit provided. The employer can enter a Pay As You Earn Settlement Agreement (PSA) with HMRC so that the employer can pay the tax due on the on the employee’s benefit.
Where a PSA is used the employer will also be chargeable to Class 1B national insurance contributions on the value of the amounts included on the PSA, which would normally be chargeable to Class 1 or Class 1A contributions on the value of the tax which is payable on the PSA.

Trivial Gifts

Christmas gifts paid to employees in the form of cash and or vouchers will be taxable along with other earnings and treated as a normal pay item and be subject to tax and national insurance deductions.
If the company gives an employee a seasonal present such as a Christmas turkey, wine or chocolates, then HMRC will consider it to be a trivial gift.
HMRC do not consider trivial gifts to be taxable, and will allow such a gift as a deductible expense for corporation tax purposes. HMRC will not say what they regard as the monetary limit for a trivial gift.
A gift of less than £50 in value will usually be accepted by HMRC as a trivial gift. Any gift over this amount should be reported on the PIID in the normal way.
Robert Lillycrop FCA, CTA independent accounting specialist, author of CCH Tax Digest on HMRC powers

Thursday 20 December 2012

LIBOR rigging

The Financial Services Authority (FSA) has imposed its biggest ever fine of £160m on UBS for misconduct relating to the fixing of Libor and Euribor rates.
It said the Swiss bank’s misconduct “was extensive and widespread”. At least 2,000 requests for inappropriate submissions to Libor were documented together with an unquantifiable number of oral requests.
The fine dwarfs the £59m penalty slapped on Barclays by the FSA in June for manipulating Libor – a scandal that led to the resignation of its chief executive Bob Diamond.
The City regulator said manipulation by UBS was also discussed in internal open chat forums and group emails, and was widely known. At least 45 individuals including traders, managers and senior managers were involved in, or aware of, the practice of attempting to influence submissions.
The FSA said the routine and widespread manipulation of submissions was not detected by the bank’s compliance or by group internal audit teams, which undertook five audits of the relevant business area during the relevant period.
Even when the trading and submitting roles were split in Autumn 2009, UBS’s systems and controls did not prevent traders from camouflaging their requests as “market colour”.
Given the widespread and routine nature of the requests to change Libor and Euribor and the nature of the control failures, the FSA found that every Libor and Euribor submission, in currencies and tenors in which UBS traded during the relevant period, was at risk of having been improperly influenced to benefit derivatives trading positions.
Tracey McDermott, FSA director of enforcement and financial crime, said:
‘The findings we have set out in our notice today do not make for pretty reading. The integrity of benchmarks such as Libor and Euribor are of fundamental importance to both UK and international financial markets. UBS traders and managers ignored this.’
‘UBS's misconduct was all the more serious because of the orchestrated attempts to manipulate the Japanese yen Libor submissions of other banks, as well as its own, and the collusion with interdealer brokers and other panel banks in co-ordinated efforts to manipulate the fix.’
The FSA said that between 1 January 2005 to 31 December 2010, the bank’s misconduct included collusion with interdealer brokers in co-ordinated attempts to influence Japanese Yen Libor submissions made by other panel banks.
It also found that corrupt brokerage payments were made to reward brokers for their efforts to manipulate the Libor submissions of panel banks.
Other illicit acts included adopting Libor submissions directives whose primary purpose was to protect the bank’s reputation by avoiding negative media attention about its submissions and speculation about its creditworthiness.
The misconduct occurred in various locations around the world including Japan, Switzerland, the UK and the USA.

Wednesday 19 December 2012

Tax schemes targeted

HMRC has announced an opportunity for participants in certain tax avoidance schemes to settle their affairs and pay the tax due, or face the prospect of costly litigation.
The taxman aims to contact all participants by the end of January 2013.
HMRC said that taxpayers making use of film partnership sale and lease back schemes; and interest relief schemes which result in a claim to interest relief under S353(1) ICTA 88 - which is used as a deduction against general income - will not be included in the current campaign.
It follows the government's announcement earlier this month that it would provide an additional £77m to HMRC to help it clamp down on tax avoidance and evasion.
A spokesman for HMRC said: ‘Following this announcement, we are inviting some participants in certain schemes to settle their tax liabilities by agreement, without the need for litigation.
‘We believe that this settlement opportunity offers both the taxpayers and HMRC the best opportunity to resolve these disputes in a way which is cost-effective and consistent with the law.
‘Where people decline the settlement opportunity, we will increase the pace of our investigations and accelerate disputes into litigation.
‘We aim to contact all those who are eligible for the offer by the end of January 2013,’ HMRC said.
The settlement opportunity is made in accordance with HMRC's Litigation and Settlement Strategy.
HMRC said it will advance all available arguments if disputes are litigated.
‘As well as continued uncertainty, delay in resolution, additional costs and potential reputational damage, taxpayers who choose the litigation route may end up with a worse tax result than they would obtain under the settlement opportunity’, the spokesman added.
While full details have yet to be released, HMRC said the settlement opportunity will be offered to participants in ‘schemes which seek to use Generally Accepted Accounting Practice (GAAP) to write off expenditure or the value of assets to create losses either for sole traders, or individuals or companies in partnership’ and ‘schemes seeking to access the film relief legislation for production expenditure’.
Another option is for ‘schemes seeking to create losses in partnerships through reliefs such as first year allowance, payments made for restrictive covenants, specific capital allowances’.

Comet collapse

The Department for Business, Innovation and Skills (BIS) is to launch an immediate probe into the acquisition and administration of doomed electrical retailer Comet.
The move comes on the same day that the beleaguered chain is set to close the last 49 of its 236 stores, bringing a cruel end to a 79-year presence on the British High Street.
Up to 7,000 people will have lost their jobs as a result. The British taxpayer will have to pick up the £49.4m in redundancy payments and lost taxes.
A BIS spokesman confirmed that the Insolvency Service had been appointed to investigate the saga after a number of MPs raised concerns.
He said: ‘We can confirm that the Insolvency Service has launched a fact finding inquiry under section 447 of the Companies Act into Comet Group Ltd. The purpose of the inquiry is to investigate the circumstances surrounding its insolvency and to establish whether further action is required.
‘We are not in a position to comment further at this stage. To do so could prejudice the outcome of the investigation and any future action.
‘The Department for Business is already reviewing the overall insolvency regulatory framework, to see whether it remains fit for purpose in today’s environment.’
On Monday, Comet’s administrators, Deloitte announced that all unsecured creditors, which include HMRC, various landlords and ITV, would receive less than 1% of their outstanding money owed to them.
A staggering £233m is owed to unsecured debtors, with HMRC accounting for £26.2m in unpaid taxes.
Holders of £4.7m of unclaimed Comet gift vouchers are also left high and dry. As are a number of landlords who are believed to be owed some £135m in unpaid rent and other debts as well as broadcaster ITV and internet search giant Google, which have both been left with outstanding advertising bills.
As Deloitte has been unable to find a buyer for the business – which was controversially bought for just £2 by OpCapita investment vehicle, Hailey Acquisitions, in November 2011 - the government's Redundancy Payments Service will have to stump up the £23m in outstanding redundancy and holiday pay.
Comet was bought from the Anglo-French group Kesa last year.
The Big Four firm estimates Comet’s losses to be in excess of £300m. But Hailey Acquisitions is widely tipped to receive a payment of just under £50m as a secured creditor - a £95m shortfall on the sum owed.
Deloitte’s report shows Hailey Acquisitions Limited (HAL) received £11.5m in interest and arrangement payments while OpCapita and an additional Hailey vehicle netted £1.3m for “quarterly monitoring fees”.
Soon to be unemployed Comet employees are furious that OpCapita allowed the business to collapse within weeks of buying the company which came with a £50m dowry from Kesa.
Deloitte's report shows that the secured creditors – led by HAL – will receive £49.7m from funds raised by the sale of Comet’s stock and assets. Deloitte and the legal team carrying out the administration will pocket £10.4m between them.

Crooked financial controller jailed

A financial controller has been jailed after plundering £90,000 from luxury UK property developers Candy and Candy.
Southwark Crown Court heard how Ross Smith - a ‘work in progress controller’ - stole the money over a two-and-a-half year period to fund a luxury lifestyle and pay off his debts and rent arrears.
The 26-year-old was able to access money in client accounts set up to renovate various properties including London’s multi-million pound One Hyde Park development – currently the country’s most expensive address.
The court heard how he had changed invoices in order to redirect funds into his own personal bank account as well as using his colleagues’ company credit cards to spend over £90.000.
Smith, who earned £25,000 a year, later told police how ‘easy’ it was to fleece the brothers due to their ‘lax’ grip on the finances.
The court heard that while Smith had repaid about £26,000 into the Candy & Candy client accounts he had stolen from, some £65,000 was still outstanding.
On sentencing him to a two-year prison term, Judge David Higgins said: ‘You stole far more than was required to discharge your debts. In essence you stooped to sustained criminal wrongdoing to fund a lifestyle you could not otherwise afford. You did so in my judgement in a breach of the highest degree of trust.
‘Your behaviour was routinely deplorable and deeply anti-social and if you choose to behave in this way then you must of course accept the consequences.’
While Smith began working for the brothers in 2008, his crimes were only unearthed when he left the job in March 2012 after a routine check spotted the fraud.
Smith duly admitted the offences and sent a letter of apology to Nick Candy.
The Brixton resident pleaded guilty to fraud by abuse of position.

Tuesday 18 December 2012

HMRC slammed

HMRC has been slammed by the National Audit Office for shoddy customer service that cost callers – one in four of whom couldn’t even get through - £136m in 2011-12.
The NAO’s damning report found that taxpayers shelled out £33m in call charges, many clocking up huge bills on costly premium rate numbers even while they were waiting in a queue for the call to be connected.
The government spending watchdog estimated that the value of ‘customers’ time while on the telephone to HMRC was £103m, based on a £15 an hour wage.
Between April – September 2011, 6.5 million taxpayers were kept waiting for over 10 minutes just to have their call answered.
In 2011-12, HMRC answered 74% of phone calls, but some 20 million – one in four - were not answered.
Margaret Hodge, chairman of the Public Accounts Committee which oversees the NAO, said taxpayers had experienced a “substandard” performance and it was “totally unacceptable that HMRC uses costly 0845 numbers and charges people for the privilege of waiting for the department to pick up”.
She said:
‘HMRC needs to be far more ambitious in its efforts to improve the customer service it currently provides.’
‘Targets must better match those of other organisations to greatly reduce the time callers are left hanging on the line and it needs to provide alternatives to 0845 numbers.’
‘Customer service at HMRC has been too poor for too long. It needs to put in place a formal strategy for how it is going to make long term service improvements that centre on the needs of customers.’
The report did, however, point to service improvements from “a low point in 2010, when problems with the new National Insurance and PAYE system increased the number of queries”.
So far in 2012-13, HMRC has improved its handling of post but its performance in handling calls has been varied. However, in October 2012, HMRC answered 91% of calls, its highest monthly performance since December 2009.
But significant improvements still needed to be made, as NAO chief Amyas Morse, highlighted.
He said:
‘The taxpayers and claimants who phone HMRC do not have a choice about whether they interact with the department. Despite some welcome improvements, HMRC has acknowledged that its performance in providing services to the public has been unacceptable.’
‘HMRC faces difficult decisions about whether it should aspire to meet the service performance standards of a commercial organisation. It could do only by spending significantly more money or becoming substantially more cost effective.’
An HMRC spokesman said:
‘In 2010/11 we answered 48% of all call attempts, rising to 74% in 2011/12. By late 2012 we were answering over 90% of calls to our contact centres. We are well aware that in the past we have not delivered the standard of service to which we are committed. We are determined to build on this progress and we have invested £34 million so we can deliver on our improvement targets earlier than planned.’
‘We receive well over 10 million pieces of post every year, and the most recent figures show we are now replying to over 80% within 15 working days.’
‘We want people to be able to access our phone services at the lowest possible cost to them, while ensuring value for money to the taxpayer. As part of this commitment we have transferred our Tax Credits Phone Lines, accounting for around 40 per cent of our calls, from 0845 to 0345 numbers.’
‘We are determined to build on these improvements until we deliver the quality of service that our customers are entitled to expect.’
More details are available on the NAO website.

Monday 17 December 2012

Why is GDP growth slow?

I was reading an interesting article in the Sunday Times by the economist, David Smith. He was trying to explain why the GDP growth figures are so poor when employment has risen by 500,000 in the last twelve months and reached record levels. Unemployment is now at the same level as pre the financial crash in 2008.

One answer that he has identified is the impact of the North Sea oil economy. It is...
declining rapidly - in fact it is running at about 20% of where it was in 2009.

However, the real (i.e. non oil) economy is growing strongly.

The net result is that the decline in the North Sea oil economy is having a depressing effect on the overall growth in the UK GDP.

If his analysis is then this is good news - unless you happen to be Scottish and in favour of independence!

Friday 14 December 2012

Pub disqualification

Last orders for pub empire boss in £1m tax debt rap

Frederick Robert Ward, the director of CT (2010) Limited (formerly Churchill Taverns Limited), which ran five pubs in Northamptonshire, has been disqualified from acting as a director for four years for not paying tax.
The disqualification follows an investigation by The Insolvency Service.
Ward, 59, of Wellingborough, Northamptonshire, has given an undertaking to the Secretary of State for Business, Innovation and Skills, that he will not act as a director of a limited company until 14 December 2016.
CT (2010) Limited – CT – signed a Company Voluntary Arrangement (CVA) with its creditors, including HMRC in November 2008, setting out a plan to make contributions totalling £172,000 over 5 years. However, CT contributed just £6,000 under the CVA before the CVA was terminated in November 2010.
The CVA stipulated that CT would be responsible for the payment of any taxation liabilities after the approval of the CVA, but the company paid just £64,050 to HMRC, before it went into administration on 8 October 2010 owing £988,893 to HMRC.
After administration, CT’s assets, including its five pubs were sold to Clementines Tavern Ltd (Clementines),of which Ward was a director. Clementines entered into administration on 9 August 2012. The five pubs still trading are the Olde Victoria in Burton Latimer, Kettering; the Kings Head, in Spratton, Northampton; the Sun Inn, Kislingbury, Northampton; the Plume of Feathers, Weedon, Daventry; and Rafferty’s, Wellingborough, Northants.
Commenting on the disqualification, Mark Bruce, a chief examiner at The Insolvency Service said: ‘Directors who fail to pay taxes to the Crown after they have taken the money from the public, whether from customers or employees, should not expect to get away with it. This is cheating the system by gaining an unfair advantage over their competitors at the public’s expense and we will put a stop to it.
‘Other directors tempted to follow this path should remember that if they run a business in a way that is detrimental to either its customers or its creditors they will lose the protection afforded by limited liability. The Insolvency Service will investigate them and seek to remove them from the business environment.’

Thursday 13 December 2012

Financial Transactions tax

Eleven EU countries planning to introduce a financial transaction tax (FTT) received the go-ahead from MEPs on Wednesday. Together, they account for 90% of Eurozone GDP. MEPs have long advocated an FTT to make financial market players take more responsibility for resolving the crisis in the EU.
"It is not a solution to spare the financial sector from a tax, the very same sector which is now even benefitting from the crisis. Delay in implementing this tax is costing money which is being footed by normal people" said rapporteur Anni Podimata in the debate on Tuesday. Her resolution was adopted by 533 votes to 91, with 32 abstentions.
The text stresses that the ultimate goal should still be a worldwide FTT, and urges the EU to continue campaigning for it. To this end, the pioneer eleven should set an example of what a geographically wider tax could achieve, it adds.
The 11 participating countries are Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain.
Having obtained Parliament's consent, the Council now needs to gain a qualified majority vote to allow the Commission to initiate enhanced cooperation in order to turn the FTT plans into reality.
The rate or scope of the tax has not yet been determined, although it has previously been proposed by the European Commission to have a 0.1% tax on share and bond transactions, and a 0.01% tax on derivatives.
Further details are available from EUROPA.

Wednesday 12 December 2012

Statutory residence test

The government has published draft legislation for Finance Bill 2013 and a tax policy update outlining key proposals including introduction of a GAAR, rules for above the line R&D credit and new residency and domicile rules.
At the same time, following a number of consultations conducted since the last Budget, the government is publishing response to these consultations alongside draft legislation to be included in Finance Bill 2013.
In a written statement, Treasury secretary David Gauke, said: ‘This fulfils our objective to confirm the majority of intended tax changes at least three months ahead of publication. Draft legislation will be open for technical consultation until 6 February 2013.'
Details of the clauses published today are set out in the Overview of Legislation in Draft (OLD) document, which also includes Tax Information and Impact Notes (TIINs) for each measure. All publications will be available on both the Treasury and HMRC websites. The government is publishing draft legislation on policies announced at Budget 2012, including:
• A General Anti-Abuse Rule (GAAR), to target abusive tax avoidance schemes;
• An ‘above the line’ R&D credit to encourage investment in research and development;
• Introducing a statutory residence test, abolishing ordinary residence and eliminating the concept of ‘ordinary residence’ for tax purposes as far as possible;
• Corporation tax reliefs to encourage investment in the production of animation, high-end television and video games; and
• A package of property tax policies including a new annual residential property tax to be payable by certain non-natural persons that own interests in dwellings valued at more than £2m, and an extension of the capital gains tax regime to non-residential non-natural persons disposing of interests in UK residential property valued at over £2m. The capital gains tax will be payable only on gains accruing on or after 6 April 2013. For consistency, the government is considering extending the CGT regime to also apply to disposals of high value residential property by UK NNPs. The government would welcome views on the impact and implementation of this potential change by 18 January 2013.
The Overview of Legislation in Draft (OLD) is available on the Treasury website , clickHERE

GAAR

The introduction of the general anti abuse rule (GAAR) is to be delayed. It will now come into force from royal assent to the Finance Bill 2013 in July, instead of from 1 April 2013 as originally planned.
A number of new amendments have been made to the draft legislation to reflect the comments received. Key among the changes is the “double reasonableness test”, the wording of which has been clarified to ensure that the GAAR operates as intended.
The list of example indicators of abusive tax arrangements has also been amended and the revised legislation includes an example indicator of non-abusive arrangements.
Meanwhile, the provisions dealing with counteraction and consequential adjustments have been expanded, and the legislation makes it clear that the consequential adjustments can only reduce a person’s liability to tax.
The updated draft legislation sets out the procedural requirements relevant to the application of the GAAR by HMRC. This includes details of the role in this process of the GAAR Advisory Panel.
The GAAR will have effect in relation to any tax arrangements entered into on, or after, the date of Royal Assent to Finance Bill 2013.
Patrick Stevens, Chartered Institute of Taxation (CIOT) president, said: ‘This is an example of good consultation and the result is a rule that is evolving sensibly. We and many other groups have been in very active dialogue with HMRC and it is good to see they have listened.
‘A number of changes – including the ‘double reasonableness’ test – reflect points we have made and although not all of our concerns have been met, we are getting towards a workable rule that will be effective against abusive schemes whilst not getting in the way of general business planning.’
He said he was particularly “pleased to see publication of the document setting out 15 situations with HMRC’s views on whether or not the GAAR applies” and welcomed the delay in implementation.
‘This delay is something we argued for as we really do need the extra time to debate the examples and the draft guidance and make sure they all get to the right answer, ‘ said Stevens. ‘From a first look at the draft guidance, it does need work to make sure it helps taxpayers and their advisers with the areas of uncertainty that will inevitably arise under the GAAR.’
But John Overs, head of corporate tax at City law firm Berwin Leighton Paisner, was less upbeat: ‘The draft legislation released today fails to lift the cloud of uncertainty that surrounds the operation of the proposed GAAR, partly due to the many nuances and subtleties it includes. The panel is a limited safeguard for taxpayers but ultimately too much discretion is left to HMRC and the courts, especially where the arrangements in question fall beyond the examples given in the guidance or are not sanctioned by previous clear and unequivocal HMRC practice.
‘As a result, there is a risk that changes in the views of HMRC regarding the line between reasonable and unreasonable behaviour, and the intensifying debate over ‘morality’ in the tax system, will make it harder and harder for businesses to plan with any certainty – a crucial component of sound investment decisions.’