Windover HoUse st Ann street sAlisBUry WiltsHire sP1 2dr tel: 01722 420920 FAx: 01722 411375 e-mail: firstname.lastname@example.org web: www.fawcetts.co.uk trevor AUstrenG CtA riCHArd Allen siMon ellinGHAM niCK Jones Registered to carry on audit work and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales Professional Accountancy MattersBusiness UpdateNew team AUTUMN 2011memberWe are delighted to welcome James New task forces to tackle tax dodgersHayes back to Salisbury.James has joined us as head ofbusiness development from a practiceon the south coast where he was aClient Director. His role with us is varied HMRC announced in May that it is introducing specialist teams which willbut sees him develop his portfolio and undertake ‘…intensive bursts of compliance activity in specific high risk tradeassist us with plans to develop ourbusiness. sectors and locations across the UK’.Achievement HMRC stated that the first task force will initially focus ‘The person whose tax position you are checking or on the restaurant trade in London and then the occupier of the premises you wish to inspect has restaurant trades in Scotland and the North West. the right to refuse you entry. It cannot be overridden,and success Mike Eland, Director General Enforcement and so a person retains the right to refuse entry to their property even when an officer has a right to enterThis month we are celebrating the girls Compliance, said: and inspect with Tribunal approval.’from Fawcetts who took part in ‘These task forces are a new approach which usesSalisbury’s Race for Life event in aid of If you receive any direct contact from HMRC, HMRC’s resources to identify and tackle rule- whether it is a telephone call or a visit, it is vital toCancer Research. breakers and evaders swiftly and effectively. retain control of what is happening. Please getFawcetts Fillies team leader, Anna- Only those who choose to break the rules, or in touch with us immediately if youMarie McBurney, said “The girls did deliberately evade the tax they should be paying, will have any such approach frombrilliantly, Race for Life is such an be targeted. Honest businesses have absolutely HMRC.inspirational event, a big thank you to nothing to worry about.everyone who supported us withsponsorship.” But the message is clear – if you deliberately seek to evade tax HMRC can and will track you down, andA word from our you’ll face not only a heavy fine, but possibly a criminal prosecution as well.’sponsors HMRC is planning a further nine task forces in 2011/12, with more to follow in 2012/13.This month we became Corporate As part of this and other compliance activityAssociates of the Salisbury Playhouse. measures, HMRC may use their power toOne of the UK’s leading producing request access to business premises to checktheatres, with a national reputation for business operations. Such visits can be arrangedwork of the highest quality and an in advance or be unannounced. However, toextensive participation programme that quote HMRC guidance:puts it at the centre of the community.IN THIS ISSUE: 1 October brings equality for agency workers | Residence - a test of three partsCompany car troubles | Self-employed - travel expenses where is the base of operations?Excuses Excuses! | Implementation of the Bribery Act 2010
1 October brings Residence -equality for agency workersFrom 1 October 2011, after a certain period of time, a test of three partsworkers supplied to a company (or to any entity) by The Government has published a are present in the UK for fewer thanan agency will become entitled to receive the same consultation document on its plans for 45 days in the current tax year or a statutory residence test (SRT) whichequivalent pay and basic working conditions as any aims to be transparent, objective and • were resident in the UK in one or more of the previous three tax yearsdirectly employed employees doing similar work. In simple to use including the possibility of and they are present in the UK formany cases, until now, agency workers have providing an interactive tool for individuals to self assess their status. fewer than 10 days in the current taxreceived significantly less pay than the entity’s The aim is to enable taxpayers to year oremployees and have also not had entitlement to a assess their residence status in a • leave the UK to carry out full time straightforward way. Furthermore, it will work abroad, provided they arenumber of other employee benefits. enable those who come to the UK on present in the UK for fewer than 90This entitlement is to begin after a 12 week qualifying period. This business, as employees or investors, to days in the tax year and no more12 week period commences 1 October 2011 for existing agency have a clear view of their tax treatment. than 20 days are spent working inworkers. If the employer wishes to avoid any additional cost and the UK in the tax year. Tax residence has an important bearingchooses to end the agency worker’s contract within 12 weeks, on an individual’s UK tax liability, If you do not fall within Part A of the testthere will need to be a break of more than 6 weeks between especially if they have overseas income you would then need to consider Partassignments with the same employer. The regulations inevitably or capital gains. In most cases B or Part C.include comprehensive anti-avoidance provisions dealing with residents are liable to tax on some or allissues such as moving the agency worker to a different department of their overseas income and capital Part B of the test determines that anto try to avoid the obligation! gains. At present there is currently no individual is resident for the tax year ifThe changes also mean that from 1 October 2011, agency workers full legal definition of tax residence, they:have an entitlement to access employer supplied facilities such as which means that the rules are unclear, complicated and seen as subjective. • are present in the UK for 183 days orcanteens, car parking, transport services and childcare from the The definition largely rests on legal more in a tax year orfirst day they work for the entity, though if there were a waiting listthey would have to wait until the facility became available. There are cases decided in the courts over a long • have only one home and that homealso various provisions concerning pregnant workers and new period of time and is based on a world is in the UK (or have two or moremothers who, for example, would be entitled to attend antenatal completely different from today’s fast homes and all of these are in the UK)medical appointments and classes after completing a 12 week paced global environment. For many orqualifying period. years there have been a number of • carry out full time work in the UK. appeals and test cases through theWhere it is likely a temporary worker may benefit from the Courts involving some very high profile Part C of the test only applies toregulations, the agencies supplying the workers will require the hiring taxpayers with potentially millions of individuals whose status is notentity to provide information about pay and basic working pounds of tax at stake. The current determined by Part A or Part B. Aconditions. The agencies bear the main practical responsibility for uncertainty for individuals about their number of factors are considered to beensuring the appropriate comparability is achieved but obviously will residence status is seen as a deterrent relevant to an individual’s residencepass on all relevant additional costs. to businesses and individuals investing status but only when linked to theBreaches of the regulations, which could be committed either by in the UK. amount of time that person spends inthe agency or the employer, may be dealt with by Employment the UK. Those factors are to include: The Government is also consultingTribunals though the involvement of ACAS is encouraged prior to separately on reforms to the taxation of • family being resident in the UKtaking this step. non-domiciled individuals. • accommodation – the individual hasComprehensive guidance of 51 pages was published in May 2011 The SRT is set to be based on the accessible accommodation in theby BIS (Department for Business Innovation & Skills) and is available amount of time an individual spends in UK and makes use of it at someon their website. the UK and the other connections they time during the tax year (some have with the UK. exclusions will apply) • substantive work in the UK – the The SRT will: individual does substantive work in • determine tax residence for the UK but not on a full time basis individuals not companies • UK presence in previous year – the • apply for the purposes of income individual spent 90 days or more in tax, capital gains tax and inheritance the UK in either of the previous two tax tax years • more time in the UK than in other • not apply for non tax purposes and countries. • supersede all existing legislation, These factors would then be combined case law and guidance. with days spent in the UK on a scale basis to determine the individual’s Part A of the test determines that an residence status. We will keep you individual is not resident in the UK for a informed of further developments as tax year if they: these proposals progress, but please • were not resident in the UK in all of do contact us if you require further the previous three tax years and they information at this stage.
Company car troublesEmployer provided cars are a very common benefit offered by employersto employees in the UK. Despite repeated increases in the income taxand national insurance charges that employees and employers face, it isestimated that about one in ten cars on UK roads are company cars.An employee is generally charged to tax on the benefit. The contracts were in the nameprovision of an employer provided car if: of the company only and signed by the directors respectively.• the car is made available by reason of the employment and The company paid the leasing instalments each month. These were lease payments then the leasing company would• without any transfer of property in the car. have had recourse only to the company and not then charged against the directors’ loan accountsSo, a car that is bought by an employer which is in the company’s accounts. In addition, all other the directors.then immediately sold at full cost to an employee costs were paid personally by the directors. In another recent case cars which were financedwill not fall within the above conditions as the HMRC argued that there was a benefit on the through hire purchase contracts in the name ofemployee is now the outright owner of the car. provision of employer provided cars. The the company were also determined as employerHowever, consider the scenario where an taxpayers’ accountant argued that: provided cars. The directors in this case hademployer leases a car and the employee ends up argued that the only reason the finance • the directors had acted as agents for thepaying the rentals. Will the employee still face a agreements were in the company name was due companytax charge on the benefit of having the use of the to an administration error by a companyemployer provided car as well as having to pay • HMRC should consider substance over form ie employee.the lease rentals? the directors had leased the cars, paid for them However, the Tribunal again agreed with HMRC and were the registered keepersA case heard last year at the First Tier Tribunal that the cars were made available by the • common sense dictated that as the directors company and that assessable benefits arose.considered this very issue. The company had paid the costs of the cars in full it wasdirectors wished to acquire new Mercedes cars nonsensical that there should be a tax liability. It is clear that detailed care is required in relationby leasing and established that it was cheaper to to the structure of car provision to mitigate ordo so through the company. They were then The Tribunal agreed with HMRC that the cars had avoid assessable benefits - so do contact us foradvised that if they were charged by the company been made available by the company and as a further advice.with all the costs of the leases, then the company result the directors had received a benefit. Theywas acting as nominee and there would not be a noted that if the company had defaulted on theSelf-employed -travel expenses where is the base of operations?If a self-employed person has a base to the market. The taxpayer also distances from his home. He arguedof operations that is separate to their traded at two shows in Blackpool that his home was the base of hishome, then the cost of travelling to and Kendall. work so that the travel expensesand from that base to home will be from his home to the sites were tax His trailer, together with stock and One final case concerned a taxpayertreated as ordinary commuting and deductible. other items used in his business was who was a self-employed pipe fittertherefore will not be tax deductible. stored in a unit which was about four HMRC argued that the base of in the petrochemical and brewingHowever, where a person’s base of miles from his home. Four days a operations was the sites he attended industries. He lived in Cheshire andoperations is at their home then the week he attended the yard in order and not his home and sought to worked for a company in London ascost of travelling between their home to clean and maintain his equipment. disallow the travel costs incurred. well as a number of other places.and the places where they work On market days he collected theshould be allowable. The taxpayer emphasised the HMRC’s argument was that the trailer from the yard, transported it to following: travel costs incurred between the market and then returned it toBeware though that if any of these Cheshire and London were not the yard before he went home. • he did preparatory work at homeplaces become an established base allowable as they were the costs ofof operations then HMRC would be as well as attending the sites HMRC allowed his travel costs ‘ordinary commuting’ between homelikely to challenge that home was no between his home and the yard but • all business records, tools and and a base of operations.longer the base of operations. It refused the costs of travel between equipment were maintained at hiswould appear that HMRC are paying The Tribunal, however, agreed with home and the markets on the basis office at homemore attention to this area as a the taxpayer that his home in that the place of business was thenumber of disputes between them • all correspondence was sent to his Cheshire was his work base as this market place.and self-employed persons have home address which was also was where he organised new workbeen presented over the last six The Tribunal agreed with HMRC that shown on his public liability and that the travelling expenses weremonths at the First Tier Tax Tribunal. the place of business was the market insurance policy. therefore allowable. place.One case involved a taxpayer who The Tribunal concluded that the The number of recent cases on thissold fast food from Chelford Market. Another case concerned a self- taxpayer had to have a base for his area does appear to indicate that it isHe had a trailer from which he employed electrician who carried out business and that the facts an area of HMRC interest so do getoperated and which was transported electrical work on sites at varying suggested that this was his home. in touch if this is an area of concern.
Excuses Excuses!Tax related forms including Self advised the representative that the submittingAssessment tax returns, VAT returns form and cheque had not been the returnand Corporation Tax returns, received. The representative then late andwhether filed online or otherwise, immediately cancelled the cheque, agreed thathave to be filed on time. If the filing submitted a new return electronically there was adeadline is missed HMRC can and and paid the outstanding stamp reasonable excuse. facility, he had to make ado impose automatic fixed duty by electronic transfer. significant cash investment in hispenalties. Lucky with PAYE company to enable it to keep The taxpayer argued that they had a trading and avoid making a number reasonable excuse as the original Another case concerned a taxpayerHowever, taxpayers can appeal of employees redundant. This, he who believed his accountant wasagainst these penalties if they have return must have got lost in the post argued, promoted enterprise and filing his end of year PAYE returna reasonable excuse. HMRC’s and that their representative acted as his company was now ‘beating whilst his accountant believed thatpublished guidance is that a without unreasonable delay upon the current economic trend and the taxpayer would personallyreasonable excuse is when an being advised that HMRC had not was very busy’ he should not be attend to this. As a result of the twoexceptional and unforeseeable event received the return. penalised by these additional getting their wires crossed thebeyond the taxpayer’s control has charges. Despite HMRC’s arguments that taxpayer was issued with a £400prevented them from filing the return there was no evidence of the form late filing penalty. The FTT agreed with HMRC thaton time. being posted within the time limit the legislation precludes the The taxpayer appealed on the basisWhat is reasonable? and that the representative had no insufficiency of funds as being a that a mistake of fact could amount internal processes to follow this up reasonable excuse but there isA number of rulings at the First Tier to a reasonable excuse. the FTT found for the taxpayer. authority for finding that the causeTax Tribunal (FTT) have recently of that insufficiency may constitute The FTT found that a mistake of factrefuted the view that a reasonable VAT returns affected such an excuse. However, as they is capable of amounting to aexcuse is only applicable in had not been provided with A further case concerned the reasonable excuse and that theexceptional circumstances. This is evidence that an actual imposition of a VAT surcharge in facts of this case meant that therebecause the ordinary English words insufficiency of funds prevented the excess of £21,000 because a VAT was a reasonable excuse.‘reasonable excuse’ should be given taxpayer from paying his tax return and the payment of the VATtheir normal and natural meaning. A HMRC victory liability, there was no reasonable were two days late. The financial director argued that due to a excuse. Furthermore, the paymentA stamp duty land tax However, the cases do not always significant drop in revenue the of taxes is a statutory obligationexample go in the favour of the taxpayer. which cannot be excused because business was being reorganised and Another case concerned a taxpayerA recent case concerned the a number of employees, including taxpayers consider that the country who appealed to the FTT againstimposition of a flat rate penalty of him, were faced with being made would receive a greater benefit if the imposition by HMRC of interest£100 for failing to submit a return of redundant. The threat of this they invested their money in other and surcharges for the lateland transactions within 30 days of preoccupied his mind and due to ways. payment of tax in relation to histhe purchase of a new property. the stress and anxiety he was 2006/07 and 2007/08 self Clearly each case is unique and will feeling, he submitted thatImmediately following completion of assessment liabilities. The taxpayer be considered on its own merits, so compassionate circumstancesthe purchase, the taxpayer’s legal accepted that his tax had not been if you feel that you may have a could amount to a reasonablerepresentative submitted the return paid on time, but argued that he reasonable excuse against the excuse.together with a cheque for the had a reasonable excuse. He imposition of a penalty contact usrequisite amount of stamp duty. The FTT looked at the underlying submitted that due to the removal for advice on how to make anSome six weeks later HMRC cause for the financial director by the bank of a substantial loan appeal.Implementation of the Bribery Act 2010At the end of March 2011, the Justice Secretary, Kenneth Clarke • increases the maximum penalty for bribery from seven to 10 yearsannounced that the Bribery Act 2010 would finally come into force on 1 July imprisonment, with an unlimited fine.2011. The introduction into law of the new corporate offence of failure ofThe new Act replaces, updates and extends the existing UK law against commercial organisations to prevent bribery is an important developmentbribery and corruption. This important new legislation: that essentially requires all businesses to consider the requirements of the new Act. This new corporate offence is coupled with a defence where, if the• introduces a corporate offence of failure to prevent bribery by persons business can show that it had ‘adequate procedures’ in place to prevent working on behalf of a business. A business can avoid conviction if it can bribery, it can be protected from committing the new criminal offence. show that it has adequate procedures in place to prevent bribery All businesses are expected to familiarise themselves with the statutory• makes it a criminal offence to give, promise or offer a bribe and to guidance and begin to assess the risk of bribery occurring in the business. The request, agree to receive or accept a bribe either at home or abroad. The extent of any further action will be dependent on the results of this risk measures cover bribery of a foreign public official and assessment. Please contact us for further information or guidance on this area.Disclaimer - for information of users - This newsletter is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken withoutconsulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this newsletter canbe accepted by the authors or the firm.UK200Group is an association of separate and independently owned and managed accountancy and lawyer firms. UK200Group does not provide client services and it does not accept responsibility or liability for theacts or omissions of its members. Likewise, the members of UK200Group are separate and independent legal entities, and as such each has no responsibility or liability for the acts or omissions of other members.