Tax Bulletin: Current Rates: The Latest Rates Of Inflation And Interest

Originally published December 2008

Current Rates - December 2008

Indexation

Retail price index: November 2008

216.0

Inflation rate: November 2008

3%

Indexation factor from March 1982:

to April 1998

1.047

to November 2008

1.719

Interest On Overdue Tax

Income tax/CGT/NIC

5.5%

from

6 December 2008

Inheritance tax

3%

from

6 December 2008

VAT

5.5%

from

6 December 2008

Corporation tax

5.5%

from

6 December 2008

CTSA instalments

3%

from

15 December 2008

Repayment Supplement

Income tax/CGT/NIC

1.5%

from

6 December 2008

Inheritance tax

3%

from

6 December 2008

VAT

2%

from

6 December 2008

Corporation tax

2%

from

6 December 2008

CTSA instalments

1.75%

from

15 December 2008

Official Rate Of Interest

From 6 April 2007

6.25%

Residence And Domicile

HMRC have issued another list of Frequently Asked Questions.

Many of these questions and answers are entirely straightforward

and unremarkable, but the clarification of some points is extremely

helpful.

HMRC confirm that a valid alienation of income, even to a

relevant person, can be made in 2008/09 and will not be taxable

even if remitted to the United Kingdom, providing the relevant

income or gains arose prior to 6 April 2008. (This is particularly

helpful, as it is contrary to other views that have previously been

expressed – for example, in the guidance note issued last

month by the Tax Faculty).

HMRC confirm that they are introducing a form on which trustees

of nonresident trusts may make a rebasing election. The earliest

deadline for trustees to make such an election will be 31 January

2010 – which will apply when a capital payment (i.e., a

benefit of any kind) has been made to a UK resident beneficiary in

2008/09.

As far as offshore mortgages are concerned, a number of

uncertainties have arisen relating to the transitional provisions

for mortgages that existed as of 6 April 2008 and that were used to

acquire UK property. Any foreign income used to discharge the

mortgage or the interest since 5 April 2008 will be treated as a

remittance – unless the grandfathering provisions apply;

that is to say the terms of the loan has not been varied, there has

been no further advance and the identity of the property has not

changed. However, in situations in which a further advance has been

made, the advance will not disqualify the whole loan from the

benefit of the transitional provisions. The payment of interest on

the part of the loan received before 12 March will continue to not

be regarded as a remittance.

Dividend Waivers

The recent Special Commissioner's decision in Buck v

HMRC SpC 716 examined whether a dividend waiver represented a

settlement for the purposes of income tax.

Mr Buck had 9,999 shares in an unquoted trading company and one

share was owned by his wife. Shortly before the year end, Mr Buck

waived his dividend entitlement and a dividend was subsequently

paid of £35,000 per share for the year, all of which was paid

to his wife. The same occurred in the following year.

HMRC argued that the dividend waivers and the subsequent

dividends represented an arrangement for the purposes of Section

660G Taxes Act 1988 (now Section 620 ITTOIA 2005) and, therefore, a

settlement within Section 660A TA1988 (now Section 625 ITTOIA

2005). They did not consider that exemption in Section 626 ITTOIA

2005 applied, because the arrangement did not represent an outright

gift by one spouse to another of property from which income arises.

Also, in any event, the subject matter of the gift was wholly or

substantially right to income. The taxpayer claimed that there was

no arrangement; it was in the company's interest to pay out

maximum dividends, and he had not wanted to receive them.

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