Weekly Tax Update - Monday 4 November 2013


1.1 Forms 64-8

Where a hard copy authority form 64-8 is being filed with forms SA1, CWF1, SA 400 or SA 402, HMRC has asked that the forms should be stapled together on submission to HMRC, where a specialist team will deal with them.

1.2 Judicial review of HMRC's disclosure of taxpayers' names in an off the record conversation with journalists

The High Court has concluded that the release of taxpayer names to journalists by the then Chairman Mr Hartnett in an off the record conversation was not in contravention of s18 of the Commissioners for Revenue and Customs Act 2005. This provides:

Revenue and Customs officials may not disclose information which is held by the Revenue and Customs in connection with a function of the Revenue and Customs. But subsection (1) does not apply to a disclosure: Which; is made for the purposes of a function of the Revenue and Customs; and does not contravene any restriction imposed by the Commissioners. Section 51 of the 2005 Act is an interpretation provision. Section 51(2) provides:

"In this Act;

'function' means any power or duty (including a power or duty that is ancillary to another power or duty); and a reference to the functions of the Commissioners or of officers of Revenue and Customs is a reference to the functions conferred; by virtue of the Act; or by or by virtue of any enactment passed or made after the commencement of this Act." The Court concluded the comments were in line with the law and HMRC's guidance on its application in view of the tax function of HMRC, permitting Mr Hartnett to make the disclosures in the context of the meeting to maintain good relations with the press, and to encourage them to understand and convey to the public the negative attitude which HMRC had to participation by taxpayers in film investment schemes.

Questions on Human Rights were also discussed and determined in favour of HMRC.


1.3 Potential changes to the CGT treatment of non-UK residents selling UK residential property

There have been reports in the national press that HM Treasury is considering broadening the scope of CGT to gains made by non-UK residents on the disposal of UK property. The reports so far focus on disposals of residential property with the apparent aim of the policy being the influence of foreign buyers on UK house prices. So far there have been no reports this will extend to holdings of UK non-residential or commercial property.

CGT at a rate of 28% has already been extended to certain non-natural persons (whether UK resident or not) where they hold high value residential property, by applying CGT on gains deemed to accrue since 5 April 2013 under the Additional Tax on Enveloped Dwelllings (ATED) regime.

It is possible for individuals to elect which of two or more houses is their main residence for the purpose of the main residence election to exempt any gain from CGT on disposal.

The election must be made within two years of the date of a change in the number of residences occupied by the individual. Each residence would need to meet the definition of a residence, which requires the ownership of an interest sufficient to make it a residence and actual use of the interest as a home for the individual concerned.

The GAAR guidance includes an example of a UK resident and a non-domiciled but UK resident person making use of such an election in the examples of acceptable transactions included at section D18.

If any changes are made to the current rules, it is expected they will be announced in the Autumn Statement on 4 December 2013.


2.1 Penalty for negligent submission of a tax return

The First-tier Tribunal has considered the case of Mr Peter Stratton.

The substantive point was whether a gain made by the Appellant on a disposal of shares in that tax year was taxable as employment income or whether it was chargeable to capital gains tax.

Mr Stratton also appealed against a penalty notice (£340) dated 13 February 2009 issued under section 97 AA (1) (b) Taxes Management Act 1970 ("TMA") in respect of an alleged failure to produce documents and a penalty determination (£23,650) under section 95 TMA in respect of the alleged negligent submission of an incorrect tax return for 2006/7.

In 2001 Mr Stratton acquired 250 shares in his employer company. In 2006 the company was taken over by a consortium. Mr Stratton surrendered the shares to the company, receiving payment of £382,748, from which the company deducted PAYE. In his 2006/07 tax return, he claimed a refund of the tax deducted under PAYE.

Following an enquiry, HMRC rejected his claim for a refund and imposed a penalty under TMA, s 95, at the rate of 20% of the potential lost revenue.

The First-tier Tribunal dismissed Mr Stratton's appeal, holding that the sale of the shares was liable to income tax under ITEPA 2003, s 423, as follows:

"We considered that it was plain on the facts of this appeal that the Appellant had acquired the shares in GHG pursuant to an opportunity offered to him by reason of his employment. The letter from the Chief Executive of GHG dated 29 June 2001 makes it clear that the Appellant was offered the opportunity to acquire shares because he had completed six months employment. The Appellant, in his evidence, stated that he understood the shares in GHG to be freely transferable and could be held by persons other than employees. We have to say that we considered the Appellant's evidence on this point be very vague and unspecific. Whatever the circumstances of the acquisition of shares by other persons may be, it is clear to us from the evidence of the letter of 29 June 2001 that the Appellant acquired his shares by reason of his employment with GHG."

The Tribunal also dismissed Mr Stratton's appeal against the penalty under s 95 holding that he had acted negligently when submitting his return claiming a repayment.

"73. The issue, therefore, was whether the Appellant had been negligent in making a return which showed the proceeds from the sale of the GHG shares as a capital gain rather than as an amount chargeable to income...

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