Weekly Tax Update - July 20, 2015

1 GENERAL NEWS

1.1 Summer Finance Bill 2015

The summer Finance Bill 2015 and explanatory notes have been published:

www.gov.uk/government/publications/summer-finance-bill-2015-legislation-and-explanatory-notes

www.publications.parliament.uk/pa/bills/cbill/2015-2016/0057/16057.pdf

1.2 Direct recovery of debts

A draft statutory instrument has been published concerning the implementation of the direct recovery of tax debts. It prescribes the information that must be provided by a deposit-taker to HMRC on receipt of an information notice or hold notice under the legislation that is due to become the second Finance Act 2015 Schedule 8. The prescribed information includes 'specified information' about persons with an interest in relevant accounts and 'account details' about relevant accounts.

It seems that neither the Bill nor the statutory instrument include the missing safeguards, such as face to face meetings between HMRC and the person. Whether this safeguard is to be watered down considerably and only included in guidance remains to be seen.

www.gov.uk/government/uploads/system/uploads/attachment_data/file/445204/Enforcement_by_Deduction_from_Accounts _Regulations_2015.pdf

1.3 DOTAS

The Treasury has issued draft regulations to refine the DOTAS rules by tightening certain existing standardised tax products and losses hallmarks, to introduce a new financial products hallmark and to reform the way inheritance tax avoidance schemes are disclosed by extending the scope of the confidentiality and premium fee hallmarks to include inheritance tax.

The revised standardised tax product hallmark applies where: A promoter makes the arrangements available for implementation by more than one person; and An informed observer could reasonably conclude that: the arrangements have standardised, or substantially standardised, documentation, determined by the promoter, enabling the user to implement the scheme and which is not tailored to any material extent to the user; a person implementing the arrangements must enter into a specific transaction or series of specific transactions; the transaction or series of transactions are standardised, or substantially standardised, in form; and either the main purpose of the arrangements is to enable a person to obtain a tax advantage, or the arrangements would be unlikely to be entered into but for the expectation of obtaining of a tax advantage. The new hallmark relating to financial products applies where: The arrangements include at least one financial product. A financial product includes: a loan, share, derivative contract, certain types of repo, stock lending arrangements within the meaning of TCGA 1992 s.263B, an alternative finance arrangement, a contract, which in substance represents the making of a loan, or the advancing or depositing of money, and falls to be accounted for on that basis. Financial products within ISAs are excluded; it would be reasonable to expect an informed observer to conclude that the main benefit, or one of the main benefits, of including a specified financial product in the arrangements, is to give rise to a tax advantage; and either a specified financial product included in the arrangements contains at least one term which is unlikely to have been entered into by the persons concerned were it not for the tax advantage; or the arrangements involve one or more contrived or abnormal steps without which the tax advantage could not be obtained. Arrangements are not prescribed financial products where: a promoter is a participating entity, or is part of a participating group with in the Code of Practice on Taxation for Banks; and HMRC has confirmed, or could reasonably be expected to confirm, to the promoter that the arrangements are acceptable transactions under that Code. The current IHT tax avoidance scheme regulations are to be revoked and replaced by a new disclosure requirement for IHT, that would arise where: the main purpose, or one of the main purposes, of the arrangements is that a person might reasonably be expected to obtain an advantage in relation to inheritance tax; and either: one or more elements of the arrangements would be unlikely to have been entered into but for the obtaining of the tax advantage; or the arrangements involve one or more contrived or abnormal steps without which the tax advantage could not be obtained. Arrangements are excepted from disclosure where any of the following apply: A person makes or amends his will or codicil. A person makes a disposition of property that becomes comprised in a settlement consisting of or including rights under contracts of insurance with limited rights to the property for the person making the disposition; A person makes a disposition of property which becomes comprised in a settlement, and there is an interest free, repayable on demand loan to the trustees. www.gov.uk/government/uploads/system/uploads/attachment_data/file/445964/DOTAS_hallmark_draft_regulations__2_.pdf

www.gov.uk/government/uploads/system/uploads/attachment_data/file/445966/DOTAS_IHT_hallmark_draft_regulations_iht.pdf

1.4 Welsh Tax Collection and Management Bill

As a result of the Wales Act 2014, certain taxes will be devolved to Wales from April 2018. The purpose of the Tax Collection and Management (Wales) Bill ('the Bill') is to put in place the legal framework necessary for the collection and management of the proposed new devolved taxes when these are introduced from April 2018.

The Bill establishes a specialist tax authority, the Welsh Revenue Authority (WRA), and confers powers and responsibilities (and corresponding responsibilities and rights on taxpayers and others) so that it can collect and manage the proposed devolved Welsh taxes.

The Bill is the first of three anticipated bills that together will establish devolved tax arrangements in Wales. It will be followed by legislation for the new devolved Welsh taxes: Land Transaction Tax (LTT) and Landfill Disposals Tax (LDT).

The 2014 consultation on devolution of taxes to Wales did indicate the Welsh Government's view that 'tax avoidance is unacceptable and will not be tolerated' and that a Welsh GAAR (whether an anti-avoidance, or anti-abuse' rule) could be used. It is understood that the form this takes for LTT and LDT is currently being considered prior to the issue of draft legislation for these taxes.

www.gov.wales/legislation/programme/assemblybills/tax-collection-and-management/?lang=en

www.cynulliad.cymru/laid%20documents/pri-ld10293/pri-ld10293-e.pdf

1.5 New DOTAS forms for employers

Finance Act 2015 introduced a new requirement on employers to provide the DOTAS Scheme Reference Number (SRN), which they receive from the scheme promoter on form AAG6, to any employees involved in the avoidance to which that number applies. New form AAG7 has been designed for this purpose.

The existing form AAG6, which is used by promoters to notify clients of the SRN has been revised to make it clearer how the client must report the SRN and other information on their tax return (or, in specified circumstances, on form AAG4); and that failure to report the SRN correctly will render the person liable to a significant penalty.

www.gov.uk/government/publications/disclosure-of-tax-avoidance-schemes-dotas-draft-forms-aag6-and-aag7

1.6 Tough new criminal sanctions for offshore tax evaders

On 16 July, the Government announced a new regime to crack down on offshore evaders with the launch of four new consultations on tackling offshore tax evasion.

There are four connected consultations that all run to 8 October 2015:

A new criminal offence for offshore evaders The consultation on the new criminal offence for offshore evaders contains responses to the...