Weekly Tax Update - Monday 20 May 2013

1 GENERAL NEWS

1.1 Chancellor's letter to EU Finance Ministers on fighting tax avoidance and evasion

George Osborne has written to Michael Noonan (The Irish Minister of Finance) in preparation for the G7 Meeting on 14 May in Dublin, concerning the shared agenda on tackling global tax evasion and avoidance. The letter comments that:

The current proposals for amending the Savings Tax Directive and associated negotiating mandate should be agreed. There should be a quick move to embed multilateral automatic exchange of information as a new global standard, based on the agreements with the US. The proposal is to pilot such processes between the G5 European countries basing the model on that agreed with the US. The British overseas territories and the Isle of Man have committed to join the pilot and Guernsey is expressing an interest. Work should be undertaken to improve the availability of information on beneficial ownership. The comment is made that the British overseas territories have committed to review legal and enforcement arrangements on beneficial ownership and produce appropriate action plans. Effort should be made to send a strong political signal that artificially shifting profits to very low tax jurisdictions is not appropriate behaviour and that updating of the international tax framework where it is not working should be encouraged. www.gov.uk/government/uploads/system/uploads/attachment_data/file/198568/Chancellor_s_letter_to_ EU_finance_ministers_on_tax_evasion.pdf

1.2 OTS and its comments on tax avoidance to the public accounts committee

On 1 May the Chairman of the OTS, Rt. Hon. Michael Jack, wrote to the Chair of the Public Accounts Committee, Margaret Hodge MP, about the recent PAC report 'Tax avoidance: the role of large accountancy firms'.

Although the report focused on tax avoidance, it also made some references to the work of the OTS. Michael Jack's letter sets out a more accurate picture of the work of the OTS than that contained in the report.

www.gov.uk/government/publications/tax-avoidance-the-role-of-large-accountancy-firms

www.gov.uk/government/uploads/system/uploads/attachment_data/file/199769/Letter_from_Rt_Hon_Michael_Jack_ to_Margaret_Hodge_MP_Chairman_of_PAC.pdf

1.3 Tabled amendments to Finance Bill 2013

Amendments proposed for Finance Bill 2013 cover the following:

Transfer of Assets Abroad

This amendment introduces an additional change to the definition of a 'person abroad' so that a person abroad is either:

a person who is resident outside the United Kingdom; or an individual who is domiciled outside the United Kingdom. www.gov.uk/government/uploads/system/uploads/attachment_data/file/200052/001_Government_amendments_21-22_Transfer_of_assets_abroad_clause_26_Schedule_1_published_16_May_2013.pdf

Above the line credit

Under the current wording of the Bill the net benefit to a company of the credit could be different depending on whether the credit was used to discharge a corporation tax liability or was a payable amount. A new clause is therefore introduced to ascertain the net benefit. The net benefit of the credit to a company is intended to be consistent irrespective of any corporation tax liability.

www.gov.uk/government/uploads/system/uploads/attachment_data/file/200053/002_Government_amendments_23-38_Above_the_line_credit_for_research_and_development_clause_34_Schedule_14_published_16_May_2013.pdf

Video games relief

In response to enquiries as a result of the need to comply with EU state aid requirements, new clauses are introduced to permit a specified date for the introduction of the regime and for any necessary amendments.

www.gov.uk/government/uploads/system/uploads/attachment_data/file/200054/003_Government_amendments_39-49_tax_relief_for_video_games_development_clause_35_Schedule_16_and_17_published_16_May_2013.pdf

Tax advantaged share schemes

Part 6 of Schedule 2 is concerned with the Share Incentive Plan (SIP) code in Schedule 2 ITEPA. It implements the OTS recommendation to abolish the current statutory limit on the reinvestment of cash dividends arising on shares held under SIPs into further SIP 'dividend shares'.

Companies may, however, apply their own limit for this purpose. It is reasonable that they should be allowed this flexibility, for example to control the number of shares held by employees. Amendments are therefore included in response to representations that the current wording of the Bill concerning the way companies may apply this limit is unnecessarily restrictive.

www.gov.uk/government/uploads/system/uploads/attachment_data/file/200055/004_amendments_17_19.pdf

www.gov.uk/government/publications/finance-bill-2013

2 PRIVATE CLIENT

2.1 Consultation on the transfer of savings from a Child Trust Fund to a Junior ISA

At Budget 2013 the Government announced that it would consult on allowing the transfer of savings from Child Trust Fund (CTF) accounts into Junior ISAs.

The consultation document has now been published.

The Government acknowledges that in the interest of fairness, children with CTFs should not be prohibited from holding a Junior ISA if this account would better suit their long- term interests than a CTF. However, it recognises that there are a range of factors to be considered before making any changes to the current rules, including any impact on the viability of the CTF market as a whole, and the interest of the wider CTF holding population.

The stated aim of the consultation is to gather views on whether it should be possible to transfer funds held in a CTF into a Junior ISA and also welcomes views and evidence on the proposals for how transfers should take place. The Government believes that for reasons of simplicity and fairness in terms of the distribution of tax advantages, a child...