Tax Update - Monday 6 September 2010

1. General news

   1.1. HMRC complaints handling

   HMRC has published online guidance on their complaints handling procedure, covering Preventing Complaints, Standards for Dealing with Complaints, Recognising and Defining a Complaint, Avenues for Complaints Recording Complaints, Dealing with Complaints, Cross Business Complaints, Complaints about Staff Conduct, Persistent and Vexatious Complaints, Complaints received via Elected Representatives, Complaints to the Chairman or Ministers, Complaints to the Adjudicator's Office, Complaints to the Parliamentary Ombudsman, Financial Redress and Learning from Complaints.

   www.hmrc.gov.uk/manuals/chgmanual/CHG200.htm

   The section on dealing with complaints set out below contains an interesting comment (highlighted) on complaints regarding delayed repayments.

   "Recognise that taking the trouble to explain well and apologise is good customer service. It is not "being soft", "letting the side down" or "wasting time".

   Customers complain because they are unhappy with our service. This may be because:

   something has gone wrong; someone did not follow the correct procedures; the correct procedures were followed, but the customer thinks otherwise; the customer may be unhappy with the law or our policy; the customer may not have understood a form or letter; there may have been a breakdown in communication; the customer feels that they have been treated unfairly by our systems or procedures; the customer feels that they have been treated badly or unfairly by someone in the department. Complaints should be acknowledged promptly and courteously.

   Put yourself in the customer's shoes. Try to see the problem from their point of view. Accept that the customer is concerned about something and see what you can do about it.

   Make sure that you fully understand what the customer is unhappy about before you respond. It is a good idea to summarise the complaint in your own words. This shows that you understand the customer's concern and focuses your response.

   Your aim should always be to settle the complaint as thoroughly and quickly as possible. Whether you find anything wrong or not your reply should acknowledge and address the customer's concerns. If there is something wrong you should apologise, explain where we went wrong (and why, if we know why) and what we are doing to correct matters. If you find that there is nothing wrong you should nonetheless acknowledge the customer's concerns but explain that we have acted correctly. Ensure that your response covers all the customer's concerns and check that it is accurate and technically correct.

   Be aware that sometimes customers say they want to "appeal" against a decision when what they really mean is they want to have their case reviewed by a higher authority. Also customers may say they want to complain when really the appropriate avenue is an appeal or review. Ensure that you direct the customer to the correct route.

   If there is a complaint about a delayed repayment, aim to deal with the repayment claim at the same time as the complaint. A provisional repayment may be appropriate in some, limited, cases but remember that our aim is to settle the complaint completely within 15 working days. You should not offer a provisional repayment as a matter of course.

   Check that similar mistakes in the past have not been overlooked. Ensure that you carry out a thorough examination of the case. Your examination may disclose errors on the customer's part. If you do discover customer's errors:

   point them out only if they are material; do not attempt to counterbalance our mistakes by pointing out small errors by the customer; do not use them to "score points" off the customer; remember that any mistakes by the customer cannot be used to justify ours; say sorry for errors on our part. Finally, you should give the customer the appropriate escalation route should they remain unhappy with our response. That may be to a further independent review within HMRC or, if you are responding following a second review, the Adjudicator."

   www.hmrc.gov.uk/manuals/chgmanual/CHG700.htm

2. Private Clients

   2.1. HMRC Brief 38/10: Prior year eligibility to dividend tax credits

   HMRC has re-issued guidance on the eligibility of Finnish, Greek and Irish dividends to dividend tax credits, as originally set out in its Brief 73/09, in respect of claims by individuals for dividend tax credits in respect of dividends received before 5 April 2008.

   If you receive dividends from a foreign company, for the 2008-09 tax year and subsequent tax years UK law entitles you to a dividend tax credit equal to one ninth of the amount of the dividend in certain prescribed circumstances.

   An argument had been put forward, based on judgements of the EU Court of Justice, for dividend tax credits for earlier years in respect of foreign dividend income in relation to the systems of dividend taxation in some other Member States under the EC Treaty because the UK law treated UK and foreign dividends differently.

   HMRC does not accept this argument in general. However, based on legal advice, HMRC will accept claims for some earlier years in relation to dividends from Finland and Greece, and certain Irish dividends.

   In these cases a form of Corporation Tax is paid in the other country and there is no withholding tax on outbound dividends. If such dividends were received, double taxation due to the underlying tax on profits payable by the company and then again from the UK Income Tax you paid on the dividend was potentially suffered. However, unlike UK dividends there was no dividend tax credit to give partial relief from the double taxation. Also, there was no foreign withholding tax which, after credit for foreign tax credit relief is given, has the effect of removing or significantly reducing any liability there might have been to UK Income Tax.

   This guidance sets out the change of approach and its effects.

   In short, if dividends from a...