Weekly Tax Update - Monday, 9th May 2011

1. GENERAL NEWS

   1.1. Compliance checks and penalties

   HMRC has published links to a video and various documents for learning about compliance checks and penalties, particularly on penalties for inaccuracies in documents and returns.

   www.hmrc.gov.uk/agents/lt-training.htm

   1.2. Agent Update

   HMRC has issued the latest Agents Update.

   www.hmrc.gov.uk/agents/update23.pdf

   1.3. HMRC: Complaint Handling Guidance

   HMRC's Complaint Handling Guidance (CHG) has been completely restructured and rewritten. With regard to delayed tax refunds paragraph CHG810 now reads as follows:

   "If there is a complaint about a delayed repayment, liaise with the relevant business area to see whether the repayment claim can be dealt with in the same timescale as the complaint. The business area may conclude that a provisional repayment may be appropriate in some limited cases, but remember that our aim is to settle the complaint fully within 15 working days."

   www.hmrc.gov.uk/manuals/chgmanual/CHG810.htm

   1.4. HMRC Complaints and Remedy Manual

   HMRC has published its financial redress guidance to staff. The introduction sets out the purpose of the guidance as follows:

   "This guidance (referred to as CRG) is aimed at all HMRC staff involved in considering complaints under our departmental complaints procedures. Those staff will usually, but not always, be located in Business Unit Complaint Teams.

   CRG should be read in conjunction with its sister volume, CHG Complaints Handling Guidance which sets out our general policy on and approach to complaints. CRG takes you through the process of considering whether we have made a mistake or given poor service and, where so, what the appropriate remedy might be. Where CRG talks of financial redress, it covers only what we might pay under our ex gratia discretionary complaints scheme. Where reference is made to statutory compensation, such as repayment supplement or statutory interest, there are links to the appropriate guidance.

   CRG explains in some detail our policy on financial redress and gives details of the rules under which we make financial redress payments. It also gives practical advice on how to decide whether those rules have been satisfied in a particular case. However, because the work of HMRC is so wide and diverse, it is not possible to cater for every situation that might arise. You should always look to apply the broad principles of our policy to any given situation, and use your judgment and discretion to arrive at a reasonable decision.

   CRG aims to be fully compliant with the Ombudsman's Principles for Remedy. Please take the time to follow the link and familiarise yourself with the helpful guidance."

   www.hmrc.gov.uk/manuals/crgmanual/index.htm

2. PAYE AND EMPLOYMENT MATTERS

   2.1. HMRC Employers Bulletin

   HMRC has published Employers Bulletin 38. It has items covering 2011 Budget announcements, Employer Annual Returns, electronic P60s, paper P14 forms, withdrawal of National Insurance number cards, Limited Company subcontractors in the Construction Industry, Regional Employer National Insurance contributions (NICs) holiday for new businesses, penalties for not filing starter and leaver information online, National Minimum Wage consultation, PAYE information now online, important news for PAYE Desktop Viewer (PDV) users, National Insurance and Statutory Payment Toolkit, Paying HMRC, reminders, reporting expenses and benefits, paying Class 1A National Insurance Contributions, Business Education and Support Teams, State Pension age for women is changing, online VAT returns, Employers' Liability Insurance changes, relevant motoring expenditure, Student Loan deductions, changes to Employer Helpbooks, Tax Credit renewal campaign, Employer diary and Helpline & Orderline numbers.

   www.hmrc.gov.uk/paye/employer-bulletin/bulletin38.pdf

   2.2. HMRC Employee Shares Schemes manual

   HMRC has updated its employee share schemes manual with specimen agreements for SIP (share incentive plan) 'free share' and 'partnership share' agreements.

   www.hmrc.gov.uk/manuals/essum/ESSUM29715.htm

3. BUSINESS TAX

   3.1. Status of financial statement to accompany a corporation tax return

   Codu Computer Limited filed its first tax returns with accompanying financial statements supporting the computations, where those financial statements were unsigned. The tax returns were filed within the required time limit, but were rejected by HMRC as being incomplete, because the accompanying financial statements were unsigned. The tax returns were eventually accepted just over two months late, but a late filing penalty was imposed.

   The company appealed against the late filing penalty. The notice to deliver the tax return was not available to the Tribunal. However they noted the legislative requirements (FA98 Sch18 para 3(1)) say nothing about the required documents having to be signed.

   As it was HMRC who had the initial obligation to demonstrate the return was filed late, and there was nothing to say that submitting the return with unsigned accounts was unacceptable, and bearing in mind the small amount at issue in the appeal (a total of £200), the Tribunal determined the case in favour of the taxpayer, striking out the penalties.

   The key point to note here is that unless stated in the notice to deliver the tax return, there is nothing to say that accompanying financial statements need to be signed.

   www.bailii.org/uk/cases/UKFTT/TC/2011/TC01055.html

   3.2. OECD Model Tax Convention and definition of Beneficial Owner

   The concept of "beneficial owner" found in Articles 10, 11 and 12 of the OECD Model Tax Convention has given rise to different interpretations by courts and tax administrations. Given the risks of double taxation and non-taxation arising from these different interpretations, the OECD Committee on Fiscal Affairs, through its Working Party 1 on Tax Conventions and Related Questions, has worked on proposals aimed at clarifying the interpretation that should be given to that concept in the context of the OECD Model Tax Convention. These proposals are open for consultation until 15 July.

   www.oecd.org/dataoecd/49/35/47643872.pdf

   3.3. Penalties under the Money Laundering Regulations

   The First Tier Tax Tribunal has reduced a penalty issued under the Money Laundering Regulations (MLR) on the grounds that it was not appropriate meaning effective, proportionate and dissuasive and was not proportionate to the breach...