CCH Tax Update

NEW DEVELOPMENTS Basis of the tax system Issue 36 18 April 2018 Government guidance: Devolution of powers to Scotland, Wales and Northern Ireland updated The Government has published updated guidance on the devolution of INSIDE THIS ISSUE powers to Scotland, Wales and Northern Ireland explaining how the legislatures and administrations work. New Developments 1 Devolution of powers to Scotland, Wales and Northern Ireland explains the Analysis 22 background to devolution and how the legislatures and administrations of Scotland, Wales and Northern Ireland work. The guidance includes commentary on the Memorandum of Understanding between the UK Government and the devolved administrations, how the devolved administrations are funded and the role of the Joint Ministerial Committee. View the updated guide at https://tinyurl.com/gwo5m7j. Management of taxes Financial sanctions: North Korea and ISIL (Da’esh) and Al-Qaida organisations HM Treasury has issued further financial sanctions notices against North Korea (Democratic People’s Republic of Korea) and ISIL (Da’esh) and Al- Qaida organisations. Guidance at Who is subject to financial sanctions in the UK? has also been updated. View the: • Latest HM Treasury notice 05/04/2018, North Korea (Democratic People’s Republic of Korea); • Latest HM Treasury Notice, 06/04/2018, ISIL (Da’esh) and Al-Qaida Organisations (Reg 2018/537).

WRA Charter published

Content feedback: The Welsh Revenue Authority (WRA) has published Our Charter, setting out shared values and behaviours to help deliver a fair tax system for Wales. [email protected] The WRA received more than 120 responses to its charter consultation which General enquiries: ended on 13 February 2018 and has now published the final version setting [email protected] out how it wants to work with taxpayers, their representatives and the Welsh 0844 561 8166 public to deliver a fair tax system for Wales. croneri.co.uk View the WRA charter at https://tinyurl.com/y9k3mho4. CCH Tax Update - Issue 36

HMRC Consultation: Tax avoidance involving profit fragmentation HMRC are inviting views on proposals to tackle avoidance schemes where profits of trades or professions are moved outside the charge to UK tax. HMRC have launched a consultation inviting views on proposals to tackle tax avoidance schemes designed to move UK profits outside the charge to UK tax, often using offshore trusts and companies. The new legislation, which is intended to take effect in April 2019, would bring these profits within the UK tax charge and require notification of the arrangements to HMRC and earlier payment of tax. HMRC are inviting comments on the proposals, to assist in the design of the legislation. This consultation closes at 11.45 p.m. on 8 June 2018. Responses can be submitted by e-mail to: [email protected] or in writing to: Profit Fragmentation Consultation HM Revenue and Customs Specialist Policy Team Room 3C/04 100 Parliament Street London SW1A 2BQ View the consultation at https://tinyurl.com/y93ja2g8.

HMRC Consultation: Capital gains tax payment window for residential property gains HMRC are inviting views on a new system for making payments on account of capital gains tax when disposing of residential property from April 2020. HMRC have launched a technical consultation on the calculation and administration of payments on account of capital gains tax to be made when a residential property is sold or otherwise disposed of, such as by giving it away, from April 2020. Payment will be due within 30 days of the completion of the disposal. The changes mainly affect those disposing of a second home or rental property and will not apply where the gains are not chargeable to capital gains tax, for example, where the gains are covered by private residence relief. The consultation is seeking views on: • how the amount payable will be calculated; • the administration of those payments; • changes to an existing capital gains tax payment on account system for non-residents who dispose of UK residential property. The consultation closes at 11.45 p.m. on 6 June 2018. Responses can be submitted by e-mail to: AsRes.Consult@ hmrc.gsi.gov.uk or by writing to: Alan McGuinness CGT Payment on Account Consultation HM Revenue and Customs Room G49 100 Parliament Street London SW1A 2BQ View the consultation at https://tinyurl.com/y92wx3sp.

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HMRC consultation: Tax abuse and insolvency HMRC are seeking views on how to tackle the small minority of taxpayers who abuse the insolvency regime to try to avoid or evade their tax liabilities. HMRC have launched a consultation to explore ways to tackle those who deliberately abuse the insolvency regime in trying to avoid or evade their tax liabilities, including through the use of phoenixism. HMRC are seeking views on how to tackle this abuse, looking at several behaviours related to the misuse of corporate insolvency – tax avoidance, tax evasion and repeated non-payment of tax – to identify potential solutions. These could include legislation, operational measures or other action. The consultation is only targeting corporate bodies that exploit insolvency in this way and is not aimed at any particular size or type. Companies that enter insolvency for genuine commercial reasons will not be affected. This consultation closes at 11.45 p.m. on 20 June 2018. Responses can be submitted by e-mail to: [email protected] or by writing to: Ellen Roberts, Counter Avoidance Directorate HM Revenue and Customs Room 3/41, 100 Parliament Street London SW1A 2BQ View the consultation at https://tinyurl.com/y9x92o9e.

HMRC guidance: Money laundering supervision for trusts or company service providers updated HMRC have updated their money laundering supervision guidance to explain who doesn’t need to register if supervised elsewhere. Money laundering supervision for trusts or company service providers explains which trusts and company service providers need to register for supervision with HMRC under the Money Laundering Regulations. The guidance has been updated to add information on who does not need to register if registered or supervised elsewhere. View the updated guidance at https://tinyurl.com/hn3oqzm.

HMRC collection: ISA managers guidance published HMRC have published a series of further guides for Individual Savings Account (ISA) managers. The collection contains 26 guides covering all aspects of ISA management for ISA managers, including how the ISA scheme works, how to become an ISA manager, information requirements, how to open accounts and manage subscriptions, different types of accounts, and making annual returns of information. View the full collection at https://tinyurl.com/ydb95mkj.

HMRC guidance: Genuine HMRC contact and recognising phishing e-mails and texts updated HMRC have updated guidance on recognising genuine HMRC contact to include e-mails being sent to online retail businesses and Help-to-Save Account holders. Genuine HMRC contact and recognising phishing emails and texts explains how to recognise when a contact from HMRC is genuine, and how to recognise phishing or bogus e-mails and text messages. New s. 1.1 and 1.2 have been added about e-mails being sent about selling goods in the UK through online marketplaces and paying into a Help-to-Save account. HMRC are contacting businesses who sell goods to customers in the UK through online marketplaces about their VAT obligations in the UK. From March 2018, HMRC may also contact some customers by

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e-mail who have opened Help-to-Save accounts to remind those who haven’t paid any money into the accounts about the benefits of using this service. View the updated guide at https://tinyurl.com/kn93ggf.

HMRC 2018 self-assessment forms and helpsheets published HMRC have released 2018 versions of the self-assessment tax return, supplementary pages and helpsheets. HMRC have also released 2018 versions of income tax repayment claim forms R40 Claim for repayment of Income Tax deducted from savings and investments and R43 Claim personal allowances and tax repayments. The personal tax return forms and helpsheets can be viewed and/or downloaded at https://tinyurl.com/zcnc89h and the income tax claim forms at https://tinyurl.com/qdvn9vw.

HMRC guidance: PAYE for Agents updated HMRC have updated guidance on their PAYE for agents services to highlight the online service and add guidance on how to get an agent code. PAYE for Agents: HMRC Online Services for reporting PAYE and CIS explains how to register and use the PAYE for agents online service to report clients’ PAYE for employers and Construction Industry Scheme information. The guidance has been updated at the section How to get an agent code to add guidance and a link to the online service to register as an agent for PAYE. View the updated guidance at https://tinyurl.com/y9ozgo4w.

HMRC PAYE forms updated for 2018 HMRC have released 2018 versions for their PAYE end of year reporting forms and updated a number of guides. Forms for reporting PAYE end of year expenses and benefits for the 2017–18 tax year have been released by HMRC. P11D working sheets and form P46(Car) have also been updated. HMRC have also updated the following guides: • P11D Guide 2017 to 2018; • Payrolling: tax employees’ benefits and expenses through your payroll; • Sending car data to HMRC: payrolling car benefit and car fuel benefit; • What payroll information to report to HMRC. View all PAYE forms at https://tinyurl.com/yc7lcfn9.

HMRC company tax return CT600 (2018) version 3 published HMRC have released an updated Company Tax Return (CT600 (2018) Version 3), new CT600 guide and supplementary pages CT600C. Company Tax Return CT600 (2018) Version 3 can be used to file a company tax return for accounting periods starting on or after 1 April 2015. A new CT600 guide (2018) version 3 has also been released. View all company tax return forms and the CT600 guide at https://tinyurl.com/klek43s.

HMRC Inheritance tax forms updated for 2018–19 HMRC have published 2018–19 versions of a number of inheritance tax forms and updated their guidance on reporting the value of an estate.

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Inheritance Tax: report the value of the estate to HMRC explains how to work out and report the value of the estate to HMRC. The guide has been updated to reflect rates, dates, allowances and duties for the tax year 2018–19. 2018–19 versions of the following inheritance tax forms have been released: • Inheritance tax: domicile outside the United Kingdom (IHT401); • Inheritance tax: business and partnership interests and assets (IHT413); • Inheritance tax: interest in another estate (IHT415); • Inheritance tax: debts owed by the deceased (IHT419); • Inheritance tax: reduced rate of Inheritance Tax (IHT430). All inheritance tax forms can be accessed at Collection: Inheritance Tax forms. View the updated guide at https://tinyurl.com/y9dwcunw.

HMRC agent talking points meeting: Making Tax Digital – Signing up to the income tax pilot HMRC will be hosting four sessions of an online agent talking points meeting: Making Tax Digital (MTD) – Signing up to the Income Tax Pilot on 26 and 27 April 2018. This webinar explains how to sign up for an Agent Services Account, sign up clients for the pilot and submit quarterly updates for income tax using MTD Software. • Thursday 26 April 2018 – midday to 1 p.m. Register now • Thursday 26 April 2018 – 2.30 p.m. to 3.30 p.m. Register now • Friday 27 April 2018 – 10 a.m. to 11 a.m. Register now • Friday 27 April 2018 – 12.30 p.m. to 1.30 p.m. Register now Questions for HMRC subject experts should be sent to [email protected] more than 24 hours prior to the meeting, including the title of the meeting in the ‘Subject’ line of the e-mail. Any questions that arise after this time should be submitted during the live meeting. Earlier meetings can be viewed online at https://tinyurl.com/ycdnynyu.

Income tax: principles

HMRC guidance: Charities – how the tax system operates updated HMRC have updated their detailed guidance notes on how the tax system operates for charities to include information about Scottish taxpayers. Charities: detailed guidance notes on how the tax system operates explains how to register a charity for tax, its obligations, and any reliefs or exemptions available. Chapter 3 Gift Aid has been updated to include further information at para. 3.5 about Scottish taxpayers. The guidance confirms that there is no change in the position for charities claiming Gift Aid on donations from Scottish taxpayers. Charities will continue to receive Gift Aid relief equal to the rest of the UK basic rate of tax. There is also no change in the position for a Scottish taxpayer who pays the new starter or basic rate tax. Donors who pay tax at the intermediate, higher or top rate Scottish tax rates can claim the difference between the rate they pay and the Gift Aid claimed by the charity on the donations. View the updated guidance at https://tinyurl.com/pkbbhgq.

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HMRC agent talking points meeting: Negligible value claims and Share Loss Relief HMRC will be hosting an online agent talking points meeting: Negligible value claims and Share Loss Relief on 10 May 2018. The meeting will look at certain conditions that must be met for clients to claim that an asset has become of negligible value. It will also give an overview of share loss relief. • 10 May 2018 – 11 a.m. to midday Register now Questions for HMRC subject experts should be sent to [email protected] more than 24 hours prior to the meeting, including the title of the meeting in the ‘Subject’ line of the e-mail. Any questions that arise after this time should be submitted during the live meeting. Earlier meetings can be viewed online at https://tinyurl.com/ycdnynyu.

Income tax: business profits

HMRC guidance: Tax-free allowances on property and trading income updated HMRC have updated their guidance on tax-free allowances on property and trading income to clarify the allowances and who qualifies. Tax-free allowances on property and trading income explains about annual tax-free allowances for property or trading income and who qualifies. Individuals can get up to £1,000 each tax year in tax-free allowances for property or trading income from 6 April 2017. Those with both types of income will get a £1,000 allowance for each. The guide explains the trading allowance, the property allowance, when the allowances can’t be used, implications for the self-employed, records to keep and how the allowances affect income for benefits and credits entitlement. View the updated guide at https://tinyurl.com/yb6c2x4x.

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Income tax: investment income

HMRC guidance: Income tax when you let property – work out your rental income updated HMRC have updated guidance on working out rental income from let property to include mileage rate deductions from 6 April 2017. Income Tax when you let property: work out your rental income explains a landlord’s tax obligations and how to work out rental income from renting out property. The guide has been updated with flat rate mileage deductions which, from 6 April 2017, may be claimed for the mileage travelled in connection with the rental properties instead of deducting actual running costs and claiming capital allowances. The mileage deductions are available to unincorporated property businesses carried on by individuals or in a partnership which is made up of only individuals. View the updated guide at https://tinyurl.com/yc3l4yvr.

Income tax: earnings

HMRC Consultation: Draft guidance: reform to workplace charging tax exemptions HMRC have launched a technical consultation seeking comments on workplace charging tax exemptions for electric and plug-in hybrid vehicles. HMRC have published Draft guidance: reform to workplace charging tax exemptions setting out draft updates to their Employment Income Manual for the expected changes to the Income Tax (Earnings and Pensions) Act (ITEPA) 2003 from Finance Bill 2018–19, which is expected to have retrospective effect from 6 April 2017. The guidance will be finalised and published in the Employment Income Manual following Royal Assent of Finance Bill 2018–19. The consultation closes at 11.45 p.m. on 5 July 2018. Responses can be submitted by e-mail to: employmentincome. [email protected]. View the draft guidance at https://tinyurl.com/y9sz38xy.

Insurance contributions termination payments: removal of foreign service relief for UK residents which sets out key commencement dates for changes to the treatment of termination payments including: • the introduction of employer NICs on termination payments above £30,000 from 6 April 2019; • from the tax year 2018–19 and applicable to termination payments received after 13 September 2017 for employments terminated on or after 6 April 2018, the foreign service exception and reduction is no longer available where the employee, or former employee, is UK resident for the tax year in which the employment is terminated; • from 6 April 2018, the PILON part of the termination payments is chargeable to income tax as general earnings and subject to Class 1 NICs. View the updated policy paper at https://tinyurl.com/y9ukmxxz.

HMRC press release: Employers need to provide details for all Benefits in Kind HMRC are reminding employers of the new rules for Optional Remuneration Arrangements that took effect from 6 April 2018. Employers need to report all Benefits in Kind (BiKs), including those under Optional Remuneration Arrangements (OpRAs), to HMRC on form P11D from 6 April 2018, unless they are registered to voluntarily payroll benefits. OpRAs are where an employee gives up the right to an amount of earnings in return for a BiK and includes flexible benefit packages with a cash option, cash allowances and salary sacrifice. The rules will cover all OpRAs, apart from

those for cars with emissions above 75g CO2/km, school fees and accommodation – these will be included from 6 April 2021. If a BiK is provided under OpRA rules, the taxable value is now the higher of the cash foregone or the taxable value under the normal BiK rules. This applies to all BiKs, including those that were previously exempt, such as workplace parking (but excluding pensions, pension advice, childcare, cycle-to-work schemes and cars with

emissions of 75g CO2/km or less). For more information, see https://tinyurl.com/y8p8b8qd.

ICAEW representation 40/18: Modern Working Practices and off payroll working The ICAEW is urging the Government to reconsider its decision not to address distortions between the rates of NIC payable by self-employed and employed workers. The Institute of Chartered Accountants in England and Wales (ICAEW) is urging the Government to reconsider the recommendation to remove distortions between the rates of National Insurance contributions (NICs) paid by and in respect of employees and those paid by the self-employed as it believes that the current position is unsustainable in the longer term because it continues to distort how workers are hired and causes considerable complexity for the tax system. The ICAEW also considers that the changes made to the off-payrolling regime for the public sector with effect from 6 April 2017 have identified a number of problems which need to be resolved before any similar change can be considered for the private sector. In particular, how to account for fees in workers’ personal service companies, how to distinguish ‘deemed’ employees from true employees in payroll submissions, and HMRC’s check employment status tool (CEST) which is not suitable for use in the private sector. View the letter at https://tinyurl.com/ybra8j9f.

HMRC Employer bulletin April 2018 HMRC have published their Employer bulletin: April 2018 – a bi-monthly magazine for employers and agents giving up-to-date information on payroll topics.

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The April 2018 edition includes: • reporting expenses and benefits in kind for the tax year ending 5 April 2018; • PAYE late filing penalties for the tax year ending 5 April 2018; • simplifying PAYE settlement agreements; • net of foreign tax credit relief scheme; • earlier year updates; • diesel supplement increase and introduction of the real driving emissions 2 standard; • Construction Industry Scheme – helpful reminders for contractors; • new rules for termination payments made on, or after, 6 April 2018; • pension contribution increase; • student loans; • new National Insurance number letter; • soft drinks industry levy; • Welsh taxes; • Scottish income tax; • childcare vouchers to remain open to new entrants for an additional six months; • Would you like to help us develop GOV.UK websites? • Benefits in kind with cash allowances, flexible benefit packages and salary sacrifice. View Employer bulletin: April 2018 at https://tinyurl.com/ycechcfh.

HMRC expenses and benefits from employment toolkit HMRC have updated their Expenses and benefits from employment toolkit for 2017–18 employers’ end of year forms and 2018–19 record keeping. HMRC expenses and benefits from employment toolkit provides guidance for tax agents and advisers on completing employer’s end of year forms. Whilst aimed at helping and supporting tax agents and advisers in completing employers’ end of year forms (P11D and P11D(b)) on behalf of their clients, the toolkit may also be of use to employers or anyone who is completing these forms and to tax agents and advisers who do not complete their clients’ end of year employer forms but wish to use it as a source of reference when advising their clients on expenses and benefits from employment matters. The toolkit should be used for expenses and benefits in kind for employer end of year forms 2017–18 and for record keeping 2018–19. Use of the toolkit is entirely voluntary. View the 2017–18 and earlier years’ toolkits at https://tinyurl.com/ybvgqaod.

HMRC agent talking points meeting: Disguised Remuneration: Addressing common issues HMRC will be hosting an online agent talking points meeting: Disguised Remuneration: Addressing common issues on 1 May 2018. This webinar will address some of the common issues that have been raised relating to Disguised Remuneration and the loan charge, including settlement with HMRC. • Tuesday 1 May 2018 – midday to 1 p.m. Register now Questions for HMRC subject experts should be sent to [email protected] more than 24 hours prior to the meeting, including the title of the meeting in the ‘Subject’ line of the e-mail. Any questions that arise after this time should be submitted during the live meeting. Earlier meetings can be viewed online at https://tinyurl.com/ycdnynyu.

HMRC agent talking points meeting: Statutory Maternity and Paternity Pay HMRC will be hosting an online agent talking points meeting: Statutory Maternity and Paternity Pay on 4 May 2018. This webinar has been designed to provide guidance on what payments can be made and how to work them out. HMRC subject matter experts will be online during the meeting to take questions. • Friday 4 May 2018 – midday to 1 p.m. Register now Questions for HMRC subject experts should be sent to [email protected] more than 24 hours prior to the meeting, including the title of the meeting in the ‘Subject’ line of the e-mail. Any questions that arise after this time should be submitted during the live meeting. Earlier meetings can be viewed online at https://tinyurl.com/ycdnynyu.

Pensions tax regime

HMRC pension schemes guidance updated HMRC have updated three pension scheme guides for information required by HMRC and relief at source for Scottish taxpayers. Information requirements for pension schemes sets out HMRC’s requirements of scheme administrators, insurance companies, members and employers to provide information. The guide has been updated to add the annual return of information to the list of information required by HMRC with its deadline of 5 July. The annual return can only be submitted electronically from 6 April 2018. Master trust schemes must also be reported to HMRC.

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Use relief at source to reclaim tax relief given to your pension scheme members explains relief at source is a way of giving tax relief on contributions a member makes to their pension scheme. The guide has been updated to add information to take account of the different rates of income tax for Scottish taxpayers and how this will affect claims for relief at source. Tell HMRC you’ve claimed too much relief at source for pension scheme members explains how to report and pay back excess tax relief claimed through relief at source as a pension scheme administrator. The guide has been updated to clarify that Scottish starter rate taxpayers who pay tax at 19% but have received relief at source at 20% don’t need to be reported to HMRC as part of the report by administrators who have claimed too much relief at source. View the updated guides: • Information requirements for pension schemes; • Use relief at source to reclaim tax relief given to your pension scheme members; • Tell HMRC you’ve claimed too much relief at source for pension scheme members.

Pension Schemes service newsletter – April 2018 HMRC have published their Pension Schemes service newsletter – April 2018 to update stakeholders on the new service to manage and register pension schemes. Pension Schemes service newsletter – April 2018 explains that HMRC are moving pension scheme registration and administration onto a new digital platform so that the service for pension scheme administrators can be improved. The new service is called Manage and Register Pension Schemes and will: • provide a new digital platform for you to manage and register your pension schemes; • provide a digital account for all pension schemes and reporting; • issue all HMRC notifications regarding registration through the new service; • hold details of existing pension schemes, pension scheme administrators and pension practitioners following migration from the existing Pension Schemes Online service. For more information, see https://tinyurl.com/ycscm4ky.

National Insurance contributions

HMRC press release: New rules for taxation of termination payments HMRC are reminding taxpayers that from 6 April 2018, employers will need to pay income tax and Class 1 NICs on the PILON element of all termination payments. HMRC have issued a press release highlighting that from 6 April 2018, employers will need to pay income tax and Class 1 National Insurance contributions (NICs) on an element of all termination payments, whether or not they are contractual payments. The element that is now chargeable is the amount of the termination payment that represents payment in lieu of notice (PILON). HMRC have also updated their policy paper Income Tax and National Insurance contributions termination payments: removal of foreign service relief for UK residents which sets out key commencement dates for changes to the treatment of termination payments including: • the introduction of employer NICs on termination payments above £30,000 from 6 April 2019; • from the tax year 2018–19 and applicable to termination payments received after 13 September 2017 for employments terminated on or after 6 April 2018, the foreign service exception and reduction is no longer available where the employee, or former employee, is UK resident for the tax year in which the employment is terminated; croneri.co.uk 11 CCH Tax Update - Issue 36

• from 6 April 2018, the PILON part of the termination payments is chargeable to income tax as general earnings and subject to Class 1 NICs. View the updated policy paper at https://tinyurl.com/y9ukmxxz.

HMRC National Insurance contributions and statutory payments toolkit HMRC have updated their agent toolkit for National Insurance contributions and statutory payments for the 2017–18 tax year. HMRC National Insurance contributions and statutory payments toolkit provides guidance for tax agents and advisers on National Insurance contributions and statutory payments in tax returns. The toolkit is aimed at helping and supporting tax agents and advisers who operate payroll functions for National Insurance contributions (NICs) and statutory payments on behalf of their clients and for completing employers’ end of year forms. It may also be of use to tax agents and advisors who do not operate payroll functions or complete their clients’ end of year employer forms but who wish to use the toolkit as a source of reference when advising their clients on NICs and statutory payment matters. It may also be helpful to employers or anyone operating payroll functions. It provides guidance on the NICs and statutory payments errors that commonly occur, and the steps that can be taken to reduce the risk of those errors. View the 2017–18 and earlier years’ toolkits at https://tinyurl.com/y8xpzk6m.

Tax credits

Tax credits factsheets updated HMRC have updated a number of tax credits factsheets for the 2018–19 tax year. The following factsheets have been updated: • COP26 Tax credits: what happens if you’ve been paid too much; • WTC2 Child Tax Credit and Working Tax Credit; • WTC5 Working Tax Credit: help with the costs of childcare; • WTC5/CP Working Tax Credit: childcare element; • WTC8 Child Tax Credit and Working Tax Credit: why overpayments happen;

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• WTC/FS1 Tax credits: enquiry; • WTC/FS2 Tax credits examinations; • WTC/FS6 Tax credits: leaving the UK; • WTC/FS9 Tax credits: suspension of payments; • WTC/FS10 Tax credits: checks. View all tax credits factsheets at https://tinyurl.com/maxhjyy.

Capital gains tax

HMRC Capital gains tax for shares toolkit HMRC have updated two agent toolkits: Capital Gains Tax for shares and Capital Gains Tax for land and buildings for the tax year 2017–18. HMRC Capital Gains Tax for shares toolkit and HMRC Capital Gains Tax for land and buildings toolkit provide guidance for tax agents and advisers on capital gains tax for shares and land and buildings respectively in self-assessment tax returns. The toolkits are aimed at helping and supporting tax agents and advisers by providing guidance on the errors HMRC find commonly occur in relation to capital gains tax. The 2017–18 toolkits are applicable for the tax year commencing 6 April 2017 for income tax self-assessment tax returns. Their use is entirely voluntary.

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View the 2017–18 and earlier years’ toolkits at: • HMRC Capital Gains Tax for shares toolkit; • HMRC Capital Gains Tax for land and buildings toolkit.

HMRC Inheritance tax forms updated for 2018–19 HMRC have published 2018–19 versions of a number of inheritance tax forms and updated their guidance on reporting the value of an estate. Inheritance Tax: report the value of the estate to HMRC explains how to work out and report the value of the estate to HMRC. The guide has been updated to reflect rates, dates, allowances and duties for the tax year 2018–19. 2018–19 versions of the following inheritance tax forms have been released: • Inheritance tax: domicile outside the United Kingdom (IHT401); • Inheritance tax: business and partnership interests and assets (IHT413); • Inheritance tax: interest in another estate (IHT415); • Inheritance tax: debts owed by the deceased (IHT419); • Inheritance tax: reduced rate of Inheritance Tax (IHT430). All inheritance tax forms can be accessed at Collection: Inheritance Tax forms. View the updated guide at https://tinyurl.com/y9dwcunw. Company tax

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Profit Fragmentation Consultation HM Revenue and Customs Specialist Policy Team Room 3C/04 100 Parliament Street London SW1A 2BQ View the consultation at https://tinyurl.com/y93ja2g8.

HMRC consultation: Tax abuse and insolvency HMRC are seeking views on how to tackle the small minority of taxpayers who abuse the insolvency regime to try to avoid or evade their tax liabilities. HMRC have launched a consultation to explore ways to tackle those who deliberately abuse the insolvency regime in trying to avoid or evade their tax liabilities, including through the use of phoenixism. HMRC are seeking views on how to tackle this abuse, looking at several behaviours related to the misuse of corporate insolvency - tax avoidance, tax evasion and repeated non-payment of tax - to identify potential solutions. These could include legislation, operational measures or other action. The consultation is only targeting corporate bodies that exploit insolvency in this way and is not aimed at any particular size or type. Companies that enter insolvency for genuine commercial reasons will not be affected. This consultation closes at 11.45 p.m. on 20 June 2018. Responses can be submitted by e-mail to: [email protected] or by writing to: Ellen Roberts, Counter Avoidance Directorate HM Revenue and Customs Room 3/41, 100 Parliament Street London SW1A 2BQ View the consultation at https://tinyurl.com/y9x92o9e.

HMRC agent talking points meeting: A guide to claiming creative tax reliefs HMRC will be hosting an online agent talking points meeting: A guide to claiming creative tax reliefs on 24 April 2018. This meeting will provide an overview of the corporation tax reliefs available to production companies in the creative industry sector, concentrating on eligibility, the calculation of the relief itself and importantly how to claim and what information to supply to ensure a complete claim that HMRC can review promptly. • Tuesday 24 April 2018 – midday to 1 p.m. Register now Questions for HMRC subject experts can be sent to [email protected] more than 24 hours prior to the meeting, including the title of the meeting in the ‘Subject’ line of the e-mail. Questions that arise after this time should be submitted during the live meeting. Earlier meetings can be viewed online at https://tinyurl.com/q6zzty4. croneri.co.uk 15 CCH Tax Update - Issue 36

HMRC agent talking points meeting: Corporation tax loss reform HMRC will be hosting an online agent talking points meeting: Corporation Tax loss reform on 9 May 2018. The meeting will be covering the reform of corporation tax loss relief that took effect from 1 April 2017. The focus is on the relaxation of relief for carried-forward losses, which can affect companies of any size. HMRC will explain what companies can and cannot do with carried-forward losses under the new rules, with some examples and a question and answer session at the end. • 9 May 2018, 1.30 p.m. to 2.30 p.m. Register now Questions for HMRC subject experts should be sent to [email protected] more than 24 hours prior to the meeting, including the title of the meeting in the ‘Subject’ line of the e-mail. Any questions that arise after this time should be submitted during the live meeting. Earlier meetings can be viewed online at https://tinyurl.com/ycdnynyu.

International tax

OECD releases 14 additional country profiles containing key aspects of transfer pricing legislation The Organisation for Economic Co-operation and Development (OECD) has published transfer pricing country profiles for 14 countries reflecting their current transfer pricing legislation and practices. The OECD has published new transfer pricing country profiles for Australia, China (People’s Republic of), Estonia, France, Georgia, Hungary, India, Israel, Liechtenstein, Norway, Poland, Portugal, Sweden and Uruguay respectively. These new profiles reflect the current transfer pricing legislation and practices of each country. The profiles of Belgium and the Russian Federation have also been updated. The country profiles are now available for 44 countries. For more information, see https://tinyurl.com/y8kqs8nz.

OECD reports: Taxation of Household Savings and the Role and Design of Net Wealth Taxes The Organisation for Economic Co-operation and Development (OECD) has published reports examining the taxation of household savings and role and design of net wealth taxes. Taxation of Household Savings provides a detailed review of the way savings are taxed in the 35 OECD countries and five key partner countries (Argentina, Bulgaria, Colombia, Lithuania and South Africa). It finds large differences within countries in the tax treatment of a range of assets, such as bank accounts, bonds, shares, private pensions and housing, and points out that tax rules, rather than pre-tax rates of return, are likely driving some savings decisions. The Role and Design of Net Wealth Taxes examines the use of net wealth taxes, both currently and historically, across the OECD. It assesses the case for and against the use of net wealth taxes to raise revenue and reduce inequality but does not call for their introduction. The report suggests that there is little need for net wealth taxes in countries with broad-based personal capital income taxes, including capital gains taxes, and well-designed inheritance and gift taxes. It finds there may be scope for such taxes in countries where the taxation of capital income is low or where inheritance taxes are not levied. View the reports: • Taxation of Household Savings; • The Role and Design of Net Wealth Taxes in the OECD.

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CFE Global Tax Top 5 Issue 3 2018 The Confédération Fiscale Européenne (CFE) has published its monthly CFE’s Global Tax Top 5 round-up of international tax policy news for tax advisers. This month’s edition looks at the following: • Organisation for Economic Co-operation and Development (OECD) interim report on tax challenges arising from digitalisation; • EU Commission proposals for taxation of the digital economy; • US impose import tariffs; • EU ‘Blacklist’ of non-cooperative jurisdictions; • Base Erosion and Profit Shifting (BEPS) updates. View the CFE Global Tax Top 5 Issue 3 2018 https://tinyurl.com/yb3fza28.

CFE Tax Top 5 – Round-up of EU & International Tax Policy News The Confédération Fiscale Européenne (CFE) has published two editions of its weekly Tax Top 5 – Round-up of EU and International Tax Policy News (3 and 9 April 2018). The 3 April 2018 edition looks at the following: • TAX3 inquiry committee on financial crimes, tax evasion and tax avoidance; • EU Commission published IKEA State aid investigation letter to the Netherlands; • European Council leaders discuss digital taxation; • US to amend Country-by-Country reporting regulations; • CFE Forum ‘Fair Taxation of the Digital Economy’ in Brussels on 19 April. This 9 April 2018 edition looks at the following: • CFE Tax Advisers Europe rebranding and new website launch; • OECD: Global Forum tax transparency update; • new Common Reporting Standard (CRS) implementation handbook released by the Organisation for Economic Co-operation and Development (OECD); • OECD reports on taxation of personal savings and wealth. View the: • CFE Tax Top 5 – 3 April 2018; • Tax Top 5 – 9 April 2018.

Charities

charities claiming Gift Aid on donations from Scottish taxpayers. Charities will continue to receive Gift Aid relief equal to the rest of the UK basic rate of tax. There is also no change in the position for a Scottish taxpayer who pays the new starter or basic rate tax. Donors who pay tax at the intermediate, higher or top rate Scottish tax rates can claim the difference between the rate they pay and the Gift Aid claimed by the charity on the donations. View the updated guidance at https://tinyurl.com/pkbbhgq.

Stamp taxes

WRA guidance: Land transaction tax published The Welsh Revenue Authority (WRA) has published a number of technical guides on land transaction tax for trusts, on leases and various reliefs. The WRA has published the following technical guides on land transaction tax which came into force in Wales from 1 April 2018: (1) Land Transaction Tax trusts: Technical guidance; (2) Land Transaction Tax leases: Technical guidance (3) Land Transaction Tax group relief: Technical guidance; (4) Land Transaction Tax alternative property finance reliefs: Technical guidance; (5) Land Transaction Tax charities relief: Technical guidance; (6) Land Transaction Tax open-ended investment company reliefs: Technical guidance; (7) Land Transaction Tax relief for acquisitions by public bodies and health bodies: Technical guidance; (8) Land Transaction Tax compulsory purchase relief and planning obligations relief: Technical guidance; (9) Land Transaction Tax miscellaneous reliefs: Technical guidance; (10) Land Transaction Tax interpretation provisions: Technical guidance.

Value added tax

Case: No supplies made for VAT purposes In Quality Engines Direct Ltd [2018] TC 06403, the First-tier Tribunal (FTT) allowed the appeal against HMRC’s decision that the company had supplied bars of silver scrap. The facts were unusual, as the appellant successfully claimed that the silver arrived at its premises unsolicited, having been sent there by a mere prospective buyer of the company’s shares. First-tier Tribunal Decision released 21 March 2018 Comment by Stan Dencher, tax writer The burden of proof was on QEDL to establish that it had not supplied the silver. The standard of proof was that of the balance of probabilities. The FTT did not criticise HMRC for making the assessment on the available facts. However, the FTT had the benefit of hearing oral evidence and reaching its conclusions on the submissions from HMRC and the appellant. The question of best judgment was not in issue and was, in any event, superseded by the FTT’s decision that there were no supplies of the silver by QEDL. For commentary on the meaning of supply for VAT purposes, see the Indirect Tax Reporter at ¶10-000. See https://tinyurl.com/y8277vxc for full details.

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VAT Notice 700/1: should I be registered for VAT? updated HMRC have updated VAT Notice 700/1: should I be registered for VAT? to include guidance on online marketplace seller checks and add a Chinese translation. VAT Notice 700/1: should I be registered for VAT? (13 April 2018) explains the requirement to register for VAT and how to do it. The notice has been updated at s. 13.2 If you don’t meet all of your UK VAT requirements to link to the new VAT: online marketplace seller checks guidance and a Chinese translation of parts of the notice has also been added. The notice cancels and replaces the version last updated on 1 April 2018. View the updated notice at https://tinyurl.com/om72e98.

VAT Notice 700/12: how to fill in and submit your VAT Return updated HMRC have updated VAT Notice 700/12: how to fill in and submit your VAT Return to add a Chinese translation of parts of the Notice. VAT Notice 700/12: how to fill in and submit your VAT Return (13 April 2018) provides guidance on completing a VAT return. The notice has been updated to add a Chinese translation of parts of the Notice. This Notice cancels and replaces the version last updated June 2016. View the updated Notice https://tinyurl.com/lwq22pu.

Environmental tax

WRA Landfill disposals tax guidance published The Welsh Revenue Authority (WRA) has published a series of guides on landfill disposals tax which came into effect in Wales from 1 April 2018. The WRA has published the following new guides: • How Landfill Disposals Tax works; • Determining whether Landfill Disposals Tax is payable; • Determining the amount of Landfill Disposals Tax payable; • Accounting for Landfill Disposals Tax; • Unauthorised disposals and Landfill Disposals Tax; • Landfill Disposals Tax: Disclosure of information to third parties.

Customs and excise duties

HMRC consultation: Gaming duty – review of accounting periods HMRC are consulting on how to reform gaming duty accounting periods and bring its administration more into line with that of other gambling duties. HMRC have launched a consultation on options to rationalise Gaming Duty accounting periods to bring the administration of gaming duty more into line with other gambling duties. The consultation seeks views on whether to move to three month, six month or 12 month accounting periods; removing the requirement to make payments on account; and allowing losses to be offset against future liabilities. The consultation closes at 11.45 p.m. on 4 June 2018. Responses can be submitted by e-mail to: [email protected] or in writing to:

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Gaming Duty return periods consultation Gambling Duties Team HM Revenue and Customs 3w Ralli Quays 3 Stanley Street Salford M60 9LA For more information, see https://tinyurl.com/ydys73kr.

HMRC guidance: Report excise duty on fuel removed from warehouse published HMRC have issued a new online guide highlighting the online service to report excise duty on fuel removed from warehouse. Report excise duty on fuel removed from warehouse (HO10) explains how to use the online service to report the amount of excise duty that needs to be paid for fuel removed from warehouse. View the new guide at https://tinyurl.com/y8yb2l8g.

Excise Notice 76: excise duty on gas for use as fuel in road vehicles updated HMRC have updated Excise Notice 76 to provide up to date information, bank details and addresses. Excise Notice 76: excise duty on gas for use as fuel in road vehicles (9 April 2018) explains about excise duty charged on gas for use as road vehicle fuel. The notice has been updated to make changes to s. 3.1 Notification giving up to date information, bank details and addresses. This notice cancels and replaces Notice 76 of August 2015. View the updated notice at https://tinyurl.com/zuy7fdn.

Excise Notice 179e: biofuels and other fuel substitutes updated HMRC have updated Excise Notice 179e for latest contact details and information about submitting returns and payments – earlier versions should no longer be used. Excise Notice 179e: biofuels and other fuel substitutes (6 April 2018) explains the legal definitions of biofuel products, excise duty rates and the roles and responsibilities of producers (and in some cases, users) of these products. The notice has been updated for current contact details and information about submitting returns and payment – see s. 4 Accounting for Excise Duty in particular, and also para. 2.5 Making entry (registering your production) and 5.13 Biofuels and electricity generation. There have been other clarifications throughout and HMRC are requesting that any old versions of this notice are not used. This notice replaces the June 2014 version. View the updated notice at https://tinyurl.com/yapxvd8c.

On the GOV.UK website The following items have recently appeared on the GOV.UK website (http://tinyurl.com/pzdz54j). • HMRC consultations: (i) Capital gains tax: Payment window for residential property gains (11 April 2018) (ii) Draft guidance: reform to workplace charging tax exemptions (12 April 2018) (iii) Gaming duty: review of accounting periods (9 April 2018) (iv) Tax avoidance involving profit fragmentation (10 April 2018) (v) Tax abuse and insolvency (11 April 2018)

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• HMRC forms: (i) HMRC disclosure service – online form (updated 9 April 2018) (ii) Tell HMRC about an option to tax land and buildings – online form (updated 10 April 2018) (iii) Rents and other payments arising from land – statutory return (ROPL-01) – template (updated 11 April 2018) • HMRC guidance, published lists and rates: (i) Corporate Interest Restriction on deductions for groups (updated 9 April 2018) (ii) Employer bulletin: April 2018 (11 April 2018) (iii) Help and support for tax agents and advisers (12 April 2018) (iv) How HMRC works with large businesses (updated 9 April 2018) (v) Inheritance tax: transferring unused tax-free thresholds (updated 10 April 2018) (vi) Inheritance tax thresholds and interest rates (updated 11 April 2018) (vii) Money laundering supervision for trusts or company service providers (updated 13 April 2018) (viii) Negligible Value agreements (updated 10 April 2018) (ix) Offshore funds: list of reporting funds (updated 9 April 2018) (x) PAYE for Agents: HMRC Online Services for reporting PAYE and CIS (updated 10 April 2018) (xi) Pension schemes Manage and Register Pension Schemes service newsletter – April 2018 (12 April 2018) (xii) Register a warehouse for the Soft Drinks Industry Levy (11 April 2018) (xiii) Register for the soft drinks industry levy (11 April 2018) (xiv) Report excise duty on fuel removed from warehouse (HO10) (9 April 2018) (xv) VAT MOSS exchange rates for 2018 (updated 12 April 2018) • HMRC guidance for software developers: (i) Construction Industry Scheme (CIS): commercial software suppliers (updated 10 April 2018) (ii) Corporation Tax technical specifications: CT600 RIM artefacts (updated 13 April 2018) (iii) Self Assessment technical specifications (2018): individual returns (updated 11 April 2018) (iv) Self Assessment technical specifications (2018): trust and estate returns (updated 11 April 2018) • HMRC Notices: (i) Annual tax on enveloped dwellings returns Notice (updated 11 April 2018) (ii) Excise Notice 76: excise duty on gas for use as fuel in road vehicles (updated 9 April 2018) (iii) Notice 117: Authorised Economic Operator (updated 13 April 2018) (iv) Notice 340: importing scientific instruments free of duty and VAT (updated 12 April 2018) (v) Notice 341: importing donated medical equipment free of duty and VAT (updated 12 April 2018) (vi) Notice 342: importing miscellaneous documents and other related articles free of duty and VAT (updated 12 April 2018) (vii) Notice 361: importing museum and gallery exhibits free of duty and VAT (updated 10 April 2018) (viii) Notice 366: importing biological and chemical substances for research free of duty and VAT (updated 12 April 2018) croneri.co.uk 21 CCH Tax Update - Issue 36

(ix) Notice 371: importing goods for disabled people free of duty and VAT (updated 12 April 2018) (x) VAT Notice 700/12: how to fill in and submit your VAT Return (updated 13 April 2018) (xi) VAT Notice 700/1: should I be registered for VAT? (updated 13 April 2018) • HMRC toolkits: (i) Capital gains tax for shares toolkit (updated 11 April 2018) (ii) Capital gains tax for land and buildings toolkit (updated 11 April 2018) (iii) Expenses and benefits from employment toolkit (updated 11 April 2018) (iv) National Insurance contributions and statutory payments toolkit (updated 11 April 2018) • UK trade tariff: (i) Tariff Notice 13 (2018): food preparations (10 April 2018) ANALYSIS VAT on building clawed back Contributed by Stan Dencher In order to protect the Public Purse, the law sometimes provides that: • a transaction will be deemed (treated) as not amounting to a supply for VAT purposes (e.g. a transfer of a business as a going concern (a TOGC)); or • an event may be treated as generating a VATable supply (e.g. de-registering for VAT). Such deeming provisions can trap innocent persons. In summary, if zero-rating applied to the construction of a building, due to it being used for a relevant residential purpose or a relevant charitable purpose, the law on deemed supplies may apply if there is a change of use and a disposal within the first ten years of the use of the building. Where a building ceases to be used for a non-commercial purpose (except where it ceases to be used as a dwelling) within ten years of its completion, VAT becomes chargeable at the standard rate. Where the change of use is other than by way of a disposal (or after a disposal, but not to the seller’s knowledge), there is a self-supply by the person with the interest at the time of the change, so that he must account – broadly at the time the use changes – for VAT on the value of the building as determined at completion. Again, the self-supply charge only applies to that part of the building caught by the change of use provisions, and the value of the self- supply is apportioned accordingly. If the change of use arises from a disposal of the building, no self-supply arises, but VAT is chargeable on the proceeds of that disposal. As the change in use generates a self-supply charge, output tax is due, but input tax can also be reclaimed if the change in use creates a taxable supply. For example, if the change in use is the taxable letting of part of the building (following an option to tax being made) then, although output tax is charged on the supply, a corresponding input tax credit can be claimed. There are few cases on self-supply charges arising on the disposal of relevant residential properties, so the decision in R & C Commrs v Balhousie Holdings Ltd [2017] BVC 534 is useful. The company sold such a building, but immediately leased it back. There was no prospect of the company leaving the building. However, HMRC argued that there was a deemed supply on the basis that the company had disposed of its ‘entire interest’. The First-tier Tribunal (FTT) had upheld the company’s appeal, but the Upper Tribunal (UT) allowed HMRC’s appeal. Thus, despite the company continuing to use the building solely for a relevant purpose, for which arguably zero- rating is intended to apply, there was a deemed and standard-rated supply, with sticking input tax.

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The FTT had held that there was no self-supply charge applicable and HMRC appealed against this decision. Balhousie operated a number of care homes. It sold a care home to a third party (a company called Target Healthcare REIT (Target)). Target then leased the property back to Balhousie. The care home had been zero-rated when supplied to Balhousie. A self-supply charge applied if various conditions applied; pertinent to this appeal was VATA 1994, Sch. 10, para. 36(2) which states that the self-supply charge applies when the interest in the property is disposed of. Balhousie argued that they had not disposed of a full interest in the property, as they had leased it back, so, the self-supply did not arise. The transaction was to be treated, according to Balhousie, as a composite transaction as the sale and subsequent sale-back were governed by various missives that ensure that the lease back would occur and it did occur on the same day as the sale. HMRC wanted to look at each transaction separately and argued that the initial sale (supply) to Target was a disposal and so a self-supply charge was to be applied. The FTT agreed with Balhousie’s approach that the sale and lease back had to be regarded as forming a commercial unity, the sale would not have taken place without there being a lease back. As such, there was not a disposal of the entire interest and the self-supply did not apply. Although the FTT found that Balhousie had a period of no interest in the property, it still had an interest, as it was the tenant of the lease in the transaction. It also was not irrelevant that this was a different interest from the one it originally held. After a significant discussion of statutory interpretation and several cases, the UT found that the entire interest had been disposed of and it was relevant that there was a linked transaction that gave it an interest in the property.

Concluding comments Some struggle to cope with the concept of deemed supplies; the effect of such legal fiction is important. Eternal vigilance is needed when advising on the VAT treatment of deemed transactions involving land and buildings in the UK. The VAT at stake is usually significant. The law on land and property is complex, although probably not as complex as the negotiations on leaving the EU. The tribunals and courts have rarely considered the deemed self-supply made on disposing of a relevant residential building, so this case is important. Advisers need clarification of the scope of the ‘clawback’ under VATA 1994, Sch. 10, where a building, the purchase of which was certificated as being zero-rated, is subject to a sale and lease back. However, arguably the UT has interpreted the law too narrowly in this case. Stan Dencher BCom is a Specialist Tax Writer with Croner-i.

Publisher Croner-i Ltd, 145 London Road, Kingston upon Thames KT2 6SR, United Kingdom. Editorial and subscription enquiries 0844 561 8166 [email protected] Disclaimer Every effort is made to ensure the accuracy of the information contained in this publication. Subscribers entering into transactions on the basis of such information should seek the services of a competent professional adviser as this publication is sold with the understanding that the publisher is not engaged in rendering legal or accounting advice or other professional services. The publisher, and the authors, consultants and editors, expressly disclaim all and any liability and responsibility to any person, whether a purchaser or reader of this publication or not, in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this publication. © 2018 Croner-i Ltd. Previously published by Wolters Kluwer (UK) Limited. All rights reserved. No part of this publication may be produced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the publishers. ISSN: 2515-8791

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