The most recent articles from Accountancy Age

Video: ICAEW pushes for legal privilege for tax advisers

2010-07-30T16:33:00.000Z

Accountancy Age, Friday 30 July 2010 at 16:33:00

Institute goes to court to argue for legal professional privilege for chartered accountants giving tax advice

Kevin Reed talks to Ian Young, technical manager at the ICAEW's Tax Faculty about the institute's decision to wade into the Prudential's High Court appeal for legal privilege for its tax advisers.

Doubts raised over future of new PAYE system

Rachael Singh — 2010-07-30T10:56:00.000Z

Rachael Singh, Accountancy Age, Friday 30 July 2010 at 10:56:00

HMRC's track record of implementing new technology raises doubts over proposals for a computerised tax account for all employees

A drastic change to HMRC's PAYE system, which will provide real-time information on employees, needs to be sufficiently funded and adequately piloted if it is to be successful in the coming years, said a Baker Tilly tax director.

HMRC opened a consultation on a computerised tax account for every employee with the aim that the software will be up and running in the lifetime of the current government.

However, tax director at Baker Tilly, Lesley Fidler, warned HMRC there is a " long way to go" before the software can be implemented.

"While it is important that there be aspirational goals for our tax system, HMRC does not have a strong record of implementing IT projects," she said.

She gave the example of recent efforts to merge the previously separate computerised National Insurance and PAYE systems, which was plagued by " difficulties".

Fidler added: "Anyone who was involved with the short-lived attempt at paying tax credits via the payroll will hope that this fresh initiative will be fully researched, adequately piloted and sufficiently funded before it goes live."

Currently both employers and pension providers make tax and national insurance payments for employees to HMRC and report them to the tax office once a year. Annually reporting those figures can result in under- and over- payments of tax, the Financial Times reports.

The latest consultation is proposing each employee be given a single computerised tax account which brings together their employment and NI records, giving HMRC real time information of all payments made.

According to the consultation document, proposed changes would also remove the need for employers or employees to fill in forms to obtain the right tax code, and could simplify the process when a person changes jobs.

HMRC has already invested in the software to create the accounts.

Further reading:

Firms on HMRC's Time to Pay approval panel revealed

Taxman farms out debt collection in £140m chase

Accountants not ready for iXBRL says CCH survey

Tax hike threat to Scottish businesses

David Jetuah — 2010-07-30T10:54:00.000Z

David Jetuah, Accountancy Age, Friday 30 July 2010 at 10:54:00

Plans to give Scotland autonomy for tax-raising purposes could damage its fortunes as a place to do business, says Calman Commission report

Scotland's standing as a place to do business could be dented by plans to arm its government with tax-raising powers, a new report has said.

There is a proposal on the table which could see the tax rate in Scotland cut by 10p, then allowing the Scottish government to raise it back up to the level required.

A report entitled Conversations with Scottish Business found that 57 per cent of firms thought a two-tier tax system in the UK would have "considerable impact " in cost, administration and time, the Daily Express reported.

Advisers issue warnings after AstraZeneca VAT voucher case

David Jetuah — 2010-07-30T10:26:00.000Z

David Jetuah, Accountancy Age, Friday 30 July 2010 at 10:26:00

Advisers ring alarm bells after European judges rule FTSE 100 giant must account for VAT on employee vouchers

Advisers have warned that companies could be open to probes from the taxman after European judges ruled AstraZeneca must account for VAT when passing on shopping vouchers to staff in salary sacrifice schemes.

The FTSE100 giant had previously bought the vouchers with VAT included and then recovered the tax before handing them over to staff.

However, the European Court of Justice said giving staff vouchers which could be used to buy goods and services represented a "supply", and that VAT is due on the amount of salary sacrificed.

Marc Welby, VAT partner at BDO, believed the decision could cost employers over £100m per year, with an additional £500m due if HMRC look to collect VAT from the last four years.

Because of the ruling, companies may find themselves exposed to "significant " VAT probes from the taxman if they do not account for the VAT when they transfer them to staff members.

Giles Salmond, a director in the Deloitte tax dispute resolution group, and adviser to AstraZeneca during the ECJ case, said:

"Large employers which use retail vouchers as part of any salary sacrifice arrangement for staff may now have to revisit how they deal with the VAT accounting on these vouchers."

The ECJ believes it should result in a nil VAT burden for employers, where they simply pass on to staff the cost of the vouchers including VAT, but advisers do not agree.

Welby commented that "This decision of the European Court will result in many employers who have introduced salary sacrifice arrangements – and not just voucher arrangements - being landed with a substantial additional VAT liability. "

It will also cause confusion as the salary sacrificed is not treated as a payment for direct tax and national insurance purposes, he added.

Ellie Gamble, senior manager of Employer Solutions at Grant Thornton, said almost 50% of the UK's employers offer their staff some kind of flexible benefits package with discounted retail vouchers being a popular option.

"For employers using salary sacrifice arrangements for vouchers, this judgement could potentially cost significant sums."

Further reading:

EU judges clear path in voucher VAT minefield

Taxman farms out debt collection in £140m chase

David Jetuah — 2010-07-29T11:05:00.000Z

David Jetuah, Accountancy Age, Thursday 29 July 2010 at 11:05:00

HM Revenue & Customs seals contracts with four external debt collections agencies in efforts to rake in an extra £140m

The taxman is farming out part of its debt collection operations to four companies in moves to rake in an extra £140m of tax debt.

HMRC has signed contracts with Commercial Collection Services Ltd, Credit Solutions Ltd, Fairfax Solicitors Ltd, iQor Recovery Services Ltd to boost HMRC’s debt collection capacity and help the pursuit of lower value debts.

Following a successful pilot,HMRC announced in the Emergency Budget that it was planning to use Debt Collection Agencies.

Safeguards have been put in place to ensure the companies operate under industry and HMRC standards.

Nick Lodge, HMRC Director, Debt Management and Banking, said:

“We do understand that some businesses and individuals are not in a position to pay what they owe and we have put procedures in place to help those who are genuinely struggling.

But those who simply refuse to pay have to be pursued, and our partnership with DCAs ensures they will be.”

Before the debt is referred to a DCA, HMRC will write to the debtor giving one final opportunity to pay or reach an agreement, the taxman added.

BP chasing $10bn tax credit

David Jetuah — 2010-07-29T09:40:00.000Z

David Jetuah, Accountancy Age, Thursday 29 July 2010 at 09:40:00

Oil giant trying to secure $10bn in the wake of its financially damaging oil spill in the United States

BP is chasing a tax credit claim of $9.7bn (£6.3bn).

The oil giant, which is looking to bolster its finances after the Gulf of Mexico oil spill, announced the move in its Q2 results, tax-news.com reported.

BP's group income statement for the second quarter posts a pre-tax charge of $32.2bn linked to the oil spill and a tax credit of $9.79bn.

Under US tax laws, BP can offset a proportion of its losses against US tax, but the move may prompt a backlash from Stateside critics.

Further reading:

US to hit oil companies with disaster tax

Only 419 register for Liechtenstein amnesty: McGrigors

David Jetuah — 2010-07-28T13:05:00.000Z

David Jetuah, Accountancy Age, Wednesday 28 July 2010 at 13:05:00

"Disappointing" number of people taking advantage of the Liechtenstein Disclosure Facility, says law firm McGrigors

419 taxpayers have registered for the Liechtenstein Disclosure Facility out of the "thousands" eligible to do so, law firm McGrigors said today.

The low response rate to the LDF, which runs until 2015, comes after it emerged just 1,500 medical professionals had registered for a special tax amnesty out of the 30,000 believed to have undisclosed tax liabilities.

It had been hoped that the more favourable terms of the LDF amnesty, including only having to come clean about undeclared tax liabilities in offshore accounts going back ten years - compared to 20 years in the New Disclosure Opportunity - would act as a draw.

However, the law firm said HMRC figures showed just 419 taxpayers have registered for the LDF between 1 September 2009 and 31 March 2010. This compares to approximately 10,000 who registered for the NDO.

Phil Berwick, director of tax investigations at McGrigors, said: "It is surprising how few taxpayers have registered for the LDF. Many more probably would have done so, but were unaware that they qualified, or even that the LDF existed."

"Many taxpayers could have reduced their tax, interest and penalty bill by a significant amount by using the LDF. Overall, we could be talking about millions of pounds here."

The taxman remained optimistic despite the relatively low numbers. "HMRC is very pleased with the number of people who have so far voluntarily registered for LDF, and that the number doing so is steadily increasing.

"Unlike other short term disclosure opportunities, registration for LDF is available until 2015," he added.

Millennium & Copthorne takes £5m hit after tax rules change

Kevin Reed — 2010-07-28T12:41:00.000Z

Kevin Reed, Accountancy Age, Wednesday 28 July 2010 at 12:41:00

Changes to New Zealand tax rules set to impact on Millenium & Copthorne's group interims

Hotels group Millennium & Copthorne will post a £5m deferred tax expense in its next interims after changes to New Zealand's tax rules.

Changes introduced in New Zealand's May Budget, including a reduction in the corporation tax rate from 30% to 28%, and removing the ability to depreciate buildings for tax purposes, will lead to the expense.

Its New Zealand company will take on an increase of $26m (£16.7m) in its deferred tax liability, pushing the subsidiary into an after-tax loss for the period.

Further reading:

Controlled foreign companies talks kick off

Cable warns banks must lend or face tax

William Hill driven offshore by tax

Controlled foreign companies rules must keep UK commercial

David Jetuah — 2010-07-28T11:48:00.000Z

David Jetuah, Accountancy Age, Wednesday 28 July 2010 at 11:48:00

Advisers say proposed changes to the taxation of overseas subsidiaries show commitment to keeping the UK commercial

Leading tax advisers are hoping talks with the government on how overseas arms of multinationals are taxed will end up keeping the UK an attractive place to do business.

The coalition has started an informal consultation on how controlled foreign companies should be taxed but has stressed that the UK's tax base will be protected at the same time.

Anneli Collins head of tax policy at KPMG said:

"The government is making all the right noises where business is concerned so it’s crucial that UK plc remains engaged in the dialogue and fully participates in the debate over the next few weeks.

"What is really key is that the announcement further indicates that the current government’s approach is to really try to be commercial and make the UK more business friendly."

Under the timetable proposed, interim improvements to the CFC regime will be introduced in Spring 2011 to make the existing rules easier to operate, making the UK more competitive.

Full CFC reform is planned for Spring 2012.

Chris Sanger, head of tax policy at Ernst & Young, welcomed the government settling on a course of action instead of bringing out new proposals to further cloud the issue.

"Finally, the controlled foreign companies consultation represents more of an update and timetable for the rest of the fiscal year, rather than any new proposals."

Further reading:

IoD issues controlled foreign companies call

Pensions tax talks welcomed by advisers

David Jetuah — 2010-07-28T09:49:00.000Z

David Jetuah, Accountancy Age, Wednesday 28 July 2010 at 09:49:00

Moves to work out pensions tax relief welcomed by advisers, but there is still a long way to go

Accountants and employee benefits experts have welcomed the government's efforts to reach a compromise on taxing high earners' pensions contributions.

HM Revenue & Customs and the Treasury are jointly handling a consultation on pension tax reliefs, after plans floated by the last government were roundly criticised for being highly complicated and expensive.

Vincent Oratore, president of the CIoT said: "The review of the proposed changes to pensions tax relief is especially welcome.

We all understand that pensions tax relief is going to be curtailed, but there has to be a simpler way than the complex and costly system previously legislated for."

Joanne Segars, chief executive of the National Association of Pension Funds said:

"Many details still need to be resolved, but we are pleased the government is taking our proposals on board."

Further reading:

Cameron pledges tax reform to woo Lib Dems

Holiday let tax relief to be tightened

Paul Grant — 2010-07-28T09:44:00.000Z

Paul Grant, Accountancy Age, Wednesday 28 July 2010 at 09:44:00

Qualifying period for furnished holiday lets to be extended under Treasury plans

Owners of furnished holiday lettings could lose the tax relief available on their properties unless they are made available to let for longer.

Government plans would extend the amount of time that homes need to be let out and available to let for their owner to continue to qualify for currently available relief.

Currently, homes have to be let out for 70 days a year and available to let for at least 140 days to receive entrepreneurial relief on capital gains tax at 10% and rollover relief on the tax. Treasury plans would see the qualifying period raised so that homes have to be let out for 105 days a year and available to let for 210 days, according to the Times.

Controlled foreign companies talks kick off

David Jetuah — 2010-07-27T11:57:00.000Z

David Jetuah, Accountancy Age, Tuesday 27 July 2010 at 11:57:00

Government unveils latest attempt to keep multinationals in the UK, while ensuring the way company funds are used in low tax jurisdictions does not erode the UK's tax base

The coalition government has kicked off a raft of consultations in efforts to hammer out solutions to some of the UK's most contentious tax issues.

The way UK-based multinationals use income in low-tax jurisdictions has been a major sticking point for several years and the new government has made good on its promise to address the situation by starting an informal consultation about controlled foreign companies.

HM Revenue & Customs is jointly handling the consultation with the Treasury.

Senior figures from Anglo American, British American Tobacco, Xerox, IBM, Intercontinental Hotel Group, Rolls-Royce and Aviva have been drafted into a working group operating alongside the consultation.

However, a warning was also issued by the government that any proposed changes would not short-change the UK's tax coffers by eroding the tax base.

HMRC and the Treasury also opened a discussion document which proposed moving to a "territorial" treatment of foreign company taxation rather than basing it on ownership.

A working group including representatives from BG group, BP, HSBC Sony and Standard Chartered has been set up to discuss options and proposals in more detail.

In total, the Exchequer Secretary to the Treasury David Gauke MP published nine documents for discussion and consultation relating to tax, following commitments made in the June Budget.

In addition to the foreign branch taxation discussion and informal consultations on CFC interim improvements, issues being discussed include PAYE reform, furnished holiday lettings, pensions tax relief, associated company rules, disclosure of inheritance tax avoidance and modernisation of investment trust company rules.

Gauke said: "We want to make the tax system simpler and work better for the taxpayer.

"By reducing burdens, making the right choices and involving taxpayers, we are

sending a very clear signal that Britain is open for business."

"I want to encourage relevant parties to provide their feedback

on the tax consultations that we have published today."

Further reading:

Vodafone settles marathon case with taxman for £1.25bn

Battlelines drawn in CFC conflict

Cable warns banks must lend or face tax

David Jetuah — 2010-07-27T10:41:00.000Z

David Jetuah, Accountancy Age, Tuesday 27 July 2010 at 10:41:00

Business secretary Vince Cable says banks will be hit with another tax if they pay staff but hold back on lending to companies

Vince Cable has warned the banking sector it faces the prospect of another tax on profits or existing widening loans if vital lending to UK businesses fails to pick up.

In the 'Financing a Private Sector Recovery', green paper, Mr Cable set out a range of finance options for different sized businesses, but the business secretary has also warned the banking industry would need to do its part after the help it had received from the government.

Representatives of the insolvency profession are broadly in support of the plan if viable businesses gain access to much-needed funds.

R3’s vice-president Frances Coulson said: "Our feeling on the ground backs this up, with 70% of the UK’s insolvency practitioners surveyed saying they had come across a business they believed to have a viable future unable to obtain finance from a bank or other lender.

"We would support measures to ease lending to any business with a viable future, which of course is the key eligibility criteria in itself - the balance with responsible lending cannot be overridden."

Further reading:

Read the business department report here:

William Hill driven offshore by tax

Gavin Hinks — 2010-07-27T09:16:00.000Z

Gavin Hinks, Accountancy Age, Tuesday 27 July 2010 at 09:16:00

Gibraltar becomes new home for gaming company seeking competitive tax position

Betting shop chain William Hill is to move its telephone betting operations to Gibraltar in a bid to improve its tax position.

Chief executive Ralph Topping, said in a statement: “This significant change to our telephone business is a response to the challenge of competing with betting exchanges and offshore telebetting operators, all of whom have benefited from significant cost and tax advantages over UK bookmakers. This has made it impossible for our existing business to compete profitably from the UK.”

Last year William Hill paid £265m in tax.

Reports in the Daily Mail say the move could mean 160 redundancies with a further 200 jobs under threat as the business goes into a 90-day consultation period.

William Hill: Update on telephone business

Gibraltar completes taxregime overhaul

Threats to go ofmfshore beyonf bluster

Business insolvencies to surge from public sector cutbacks

Saffron Johnson — 2010-07-26T15:16:00.000Z

Saffron Johnson, Accountancy Age, Monday 26 July 2010 at 15:16:00

Credit professionals predict that the public sector's efficiency drive will push up business insolvencies

Credit managers expect business insolvencies to leap by more than 10% within the next 12 months.

Nearly two thirds (64%) of credit professionals think business failure rates will rise by more than 10%, with 13% of those predicting failure rates to exceed 20%, according to research by commercial credit reference agency Graydon UK.

Martin Williams, managing director, Graydon UK, said: “Despite the prospect of a commercial insolvency boulder gathering momentum as it rolls down the economic hillside, the potential dangers have not yet been recognised by other operational areas.”

Even with the warning from credit professionals, just one third of companies are monitoring their clients’ exposure to the public sector.

Williams said: “Firms need to heed this warning now and ensure they are fully equipped to monitor exposure to public sector based revenues across the entire length of their supply chains. The failure of a key supplier or customer dependent upon government contracts could inflict huge damage to business stability at very short notice.”

He added that the taxman was clamping down on companies’ requests to defer their tax under the Time to Pay scheme. Because of this, there is a risk that other credit lines will shut.

Further reading:

Overpaid tax could run to £3bn

Read Martin Williams' Blog