CGT – Major Changes announced

Chancellor Darling has announced major changes to his Pre-Budget proposals for Capital Gains Reform by introducing:

A new entrepreneur’s relief,

A new lower tax rate (10%) on entrepreneur's gains, and

A new £1 million lifetime allowance for gains made by entrepreneurs.

In a ministerial statement in the House of Commons today he introduced a £1 million lifetime allowance in respect of any chargeable gains, which forms the basis of a new CGT entrepreneurs relief. Gains which exceed the annual CGT exemption and do not exceed £1 million will be taxed at 10%. Any gains in excess will be taxed at the mainstream CGT rate of 18%.

The relief will apply to entrepreneurs who dispose of all or part of a trading business, trading partnership, or shares in a trading company providing that they are a director or employee and hold a stake of at least 5% in the business. It will also apply to disposals of business assets after the cessation of a business.

The chancellor said that the measure will also benefit venture capitalists, business angels and all those who take a stake of 5% of more.

No changes will be made the to the CGT annual exemption. No changes have been made to EIS, VCT and rollover reliefs. Employee tax advantaged share schemes remain intact such as EMI, etc and employees will pay tax at 18% if their shareholding is less than 5%.

He added that anti-avoidance measures are in the pipeline to ensure that income cannot be disguised as capital.

Accountants and Lawyers to join forces in Scotland

The Office of Fair Trading (OFT) first called for lawyers and accountants to be allowed to work in partnership six years ago, but despite assurances the Law Society would be given sole responsibility for all parties, its practice rules continue to forbid its members from working in multi-disciplinary parterships (MDPs). However, a new ruling form the OFT has prompted the Institute of Chartered Accountants of Scotland (ICAS) to launch a Scotland-specific campaign backing the proposed “one-stop shop” this week.

Pending a super-complaint last year from consumer group which? about restrictions and access in the Scottish legal profession, the OFT has again weighed in on the side of the MDP.

“We have long been in favour of the removal of restrictions on the formation of MDPs, which would allow non-lawyers to become partners in legal firms,” the OFT said. It pointed out that examples of Scottish MDPs already existed, to the extent that firms of solicitors often employed accountants but did not permit them to become partners.  

“We believe that many consumers would welcome a ‘one-stop shop’ in relation to house purchase, for example, where they could receive all of the various professional services required under one roof,” argued the OFT report. “In addition to convenience, this should benefit consumers financially as a result of the cost savings made by the partnership in reduced overheads.”

New CGT Rules could break EU Law

European regulations which rule that changes to tax legislation must provide taxpayers with a reasonable period of time to assert their right to claim reliefs means the government's capital gains tax (CGT) reforms could be breaking the law, accountants have claimed.

Responding to the chancellor's readjusted CGT changes announced last Thursday, the Institute of Chartered Accountants of Scotland (ICAS) said the reforms go against previous legal decisions which indicate that a transitional period of 90 days, more than the time period proposed by Darling, is insufficient.

ICAS' Derek Allen said: "Taxpayers now have less than 10 weeks to rearrange their assets and, if necessary, try to arrange a disposal to protect some of the indexation relief which may have accrued because of inflation between 1982 and 1998.

"It is wrong to tax inflationary gains and it would be contrary to European Law to deny taxpayers sufficient transitional time to rearrange their affairs before the new legislation is enacted.

"At the very least, the chancellor should defer the implementation of this legislation for up to two years. If this is not possible, he should still allow taxpayers who owned assets at 6 October 2007 a period of up to two years to sell those assets and gain the benefit of indexation allowance."

Tower Mcashback LLP1, Tower Mcashback LLP2 v The Commissioners For Her Majesty's Revenue & Customs Sp C 619
Capital expenditure on software - whether HMRC can raise additional contentions in an appeal beyond those indicated in the Closure Notice - whether expenditure was incurred pursuant to an unconditional contract - whether the expenditure paid 10 months after the date of the contract was still paid under a contract that required payment within a four month period, or whether the eventual payment was under a varied contract - whether one of the Appellants had commenced trading before the end of the tax year 2003/2004 - whether the value of the software was broadly in line with the capital expenditure ostensibly given by the LLPs in which the Appellants were members - how to analyse the transaction for capital allowance purposes if the value of the acquired asset was materially lower than the price paid initially for the asset with the support of non-recourse loans - Appeal by LLP1 dismissed and appeal by LLP2 dismissed in part

Guidance on the New Management Expenses Anti-Avoidance Provision
For the purposes of Corporation Tax a deduction is allowed under S75 ICTA 88 where a company has incurred expenses of management in respect of managing its investment business. The legislation was introduced in 1915 and remained largely unchanged until 2004 when changes were made to reflect a more modern business climate. Those changes included, amongst other things, an unallowable purpose rule.

Sempra Metals Ltd (formerly Metallgesellschaft Ltd) v IR Commrs & Anor [2007] UKHL 34
Income tax – corporation tax – advance corporation tax – taxpayer UK resident subsidiary of non-resident parent – taxpayer paid advance corporation tax on profits distributed to parent – UK tax law refusing group income election contrary to freedom of establishment under Community law – action for restitution or compensation – payment of interest – High Court held that interest should be calculated on compound basis for period from premature payment of ACT until set-off against mainstream corporation tax – Court of Appeal upheld that decision – Revenue appealed to House of Lords – whether calculation of award required by Community law effected on basis of compound or simple interest.

IFRIC DRAFT INTERPRETATION D22 Hedges of a Net Investment in a Foreign Operation
1 Many reporting entities have investments in foreign operations (as defined in IAS 21 paragraph 8). Such foreign operations may be subsidiaries, associates, joint ventures or branches. IAS 21 requires an entity to determine the functional currency of each of its foreign operations as the currency of the primary economic environment of that operation. When translating the financial statements of a foreign operation into a presentation currency, the entity is required to recognise foreign exchange differences in equity until it disposes of the foreign operation. 2 In individual or consolidated financial statements, an entity may apply hedge accounting to the foreign currency risk arising from its net investment in a foreign operation. Hedge accounting of the foreign currency risk arising from a net investment in a foreign operation will apply only when the net assets of the foreign operation are included in the financial statements.* The item being hedged with respect to the foreign currency risk arising from the net investment in a foreign operation may be an amount of net assets equal to or less than the carrying amount of the net assets of the foreign operation.

Statement of Practice 1/01 as revised on 20 July 2007 Treatment of Investment Managers and their Overseas Clients
There are two policy objectives underlying the tax treatment of UK resident investment managers and their overseas clients. These objectives are that overseas investors should not be charged to UK tax in relation to investment transactions conducted on their behalf and that any fees earned by a UK resident investment manager for services performed for the non-resident should be fully chargeable to UK tax.

Société thermale d'Eugénie-les-Bains v Ministère de l'Économie, des Finances et de l'Industrie (Case C-277/05)
Value added tax – supply of services – hotel – reservation of rooms – payment of deposit – deposit retained by provider in event of cancellation – application of VAT in those circumstances - w hether deposit consideration for supply of reservation service subject to VAT or fixed compensation for cancellation - Council Directive 77/388, art. 2(1), 6(1).

Mobile Export 365 Ltd & Anor v R & C Commrs [2007] EWHC 1737 (Ch)
Value added tax - input tax - repayment - procedure - Customs refusing claim for repayment and tax credit - taxpayers alleging Customs failing properly to serve documents and witness statements - tribunal refusing summary judgment in taxpayers' favour - appeal dismissed - Value Added Tax Tribunals Rules 1986 (SI 1986/590), r. 19(4), (5).

Hutchison 3G UK Ltd & Ors v C & E Commrs v C & E Commrs (Case C-369/04)
Value added tax - taxable transactions - economic activity - allocation of licences making it possible to use defined part of radio-frequency spectrum reserved for telecommunications services - whether such allocation economic activity - Council Directive 77/388, art. 4(2).

Oriel Support Limited v The Commissioners For HMRC Sp C 615
COSTS - whether the Revenue acted wholly unreasonably in not particularising its submissions on the Appellant's failure to comply with compliance testing relation to a sub-contractors' certificate – yes

Taxation of the foreign profits of companies: a discussion document
Budget 2007 announced a major set of reforms to modernise the domestic corporation tax base, marking a further milestone in the Government's objective to maintain a competitive tax system for business. Alongside domestic reform, the Government also committed to consult on reforming the taxation of foreign profits.

Underwood v The Commissioners For HMRC Sp C 614
CAPITAL GAINS TAX - time of disposal - sale of land - Appellant contracted to sell land and on same day purchaser gave Appellant option to re-purchase - before sale to original purchaser completed Appellant exercised option to re-purchase - Appellant then contracted to sell to a company connected with Appellant - only transfer executed by Appellant was transfer to connected company - whether a disposal of land to, and acquisition by, original purchaser - no - if so, whether date of disposal and acquisition of land for purposes of capital gains tax was date of contract to sell to original purchaser as argued by Appellant - no -appeal dismissed - TCGA 1992 s 28

Haderer v Finanzamt Wilmersdorf (Case C-445/05)
Value added tax - supply of goods or services - exemptions - tuition given privately by teachers and covering school or university education - education provided in context of courses organised by adult education centres - no direct contractual link with pupils - whether activities exempt from VAT - Council Directive 77/288, art. 13A(1)(j).

Standards for Investment Reporting 5000 - Investment Reporting Standards Applicable To Public Reporting Engagements On Financial Information Reconciliations: Exposure Draft
Standard for Investment Reporting (SIR) 1000 "Investment Reporting Standards applicable to all engagements in connection with an Investment Circular" establishes the Investment Reporting Standards applicable to all engagements involving investment circulars. The purpose of SIR 5000 is to establish specific additional Investment Reporting Standards and provide guidance for a reporting accountant engaged to report publicly on reconciliations of the financial information of targets1 to the accounting policies of an issuer (financial information reconciliations) to be included in a Class 1 circular under the Listing Rules.

Maco Door & Window Hardware (UK) Ltd v R & C Commrs [2007] EWCA Civ 545
Corporation tax - capital allowances - industrial buildings allowance - storage - part of a trade - taxpayer imported and sold hardware for PVC windows and doors manufactured by Austrian parent company - building used to warehouse goods for sale to UK distributors - special commissioner holding that part of taxpayer's trade consisted in storage - High Court allowing Revenue's appeal requiring storage to be in itself in the nature of a trade - Court of Appeal allowing taxpayer's appeal and restoring special commissioner's decision (by a majority) - Capital Allowances Act 1990, s. 18(1)(f)(i), (2).

Midlands Co-operative Society Ltd v R & C Commrs [2007] EWHC 1432 (Ch)
Value added tax - output tax - overpayment of tax - claim for refund - industrial and provident societies - transfer of engagements by statute - transferee society claimed refund of VAT - whether right to claim refund of overpaid tax transferred - Industrial and Provident Societies Act 1965, s. 51(1) - Value Added Tax Act 1994, s. 80.

The Royal Bank of Scotland Group plc - Special method considered
The tribunal considered whether the commissioners had correctly rejected the revised partial exemption special method proposed by the taxpayer.

HIBT Ltd - Exemption applied to supply of education
The tribunal considered whether the company's supplies were exempt as education.

Momin & Ors v R & C Commrs [2007] EWHC 1400 (Ch)
Income tax - assessment - appeal - Revenue raising assessments in respect of income suppressed by taxpayers - general commissioners upheld decision in principle but reduced amount of assessments - taxpayers appealed by way of case stated - whether assessments valid on facts found - whether quantum of assessments reasonable - appeal dismissed - Taxes and Management Act 1970, s 29(1).

Weald Leasing Ltd
The tribunal considered whether HMRC could refuse a claim for repayment of VAT paid since 1973 concerning sales of cars by HP where the customer had failed to pay all amounts due under the HP agreement.

General Motors Acceptance Corp (UK) plc - Second VAT directive had no direct effect
The issue was whether the commissioners were entitled to refuse a claim by the appellant for repayment of VAT paid since 1973 which, it was agreed, was not payable.

R & C Commrs v Church of Scientology Religious Education College Inc [2007] EWHC 1329 (Ch)
Value added tax - practice - VAT and Duties Tribunal - appeal - time limit - Customs applying for extension of time to appeal - whether extension of time appropriate in all circumstances - application dismissed - Civil Procedure Rules 1998 (SI 1998/3132), r. 3.9, 52PD, para. 23.8(2)(b).

Michael Peter Forbes v The Commissioners For Her Majesty's Revenue & Customs Sp C 613
PROCEEDS OF CRIME - Review of Tribunal's decision - Appellant failed to attend hearing - Decision given in his absence - Appellant applied for review of decision - Whether Appellant had good and sufficient reason for failing to appear - No - Application dismissed - Special Commissioner (Jurisdiction and Procedure) Regulations, reg 19(1)(b)
PROCEEDS OF CRIME - Order for costs - Appellant requested application hearing and failed to attend - Whether behaviour wholly unreasonable in connection with application hearing - Before Commissioners (Jurisdiction and Procedure) Regs, RD1 - Costs awarded against Appellant

Limitgood Ltd And Prizedome Limited v The Commissioners For Her Majesty's Revenue & Customs Sp C 612
CAPITAL GAINS - corporation tax - groups - pre-entry losses - restriction on set-off against group gains - relevant group - whether gains pre-entry gains - whether assets held immediately before joining relevant group - TCGA 1992 Sch 7A - appeals allowed (by Chairman's casting vote)

Morris & Anor v R & C Commrs [2007] EWHC 1181 (Ch)
Capital gains tax - self assessment - penalties - closure notices - burden of proof - disposal of shares giving rise to capital gain - taxpayers claiming residence outside UK - enquiry - Revenue power to raise assessments - whether statutory time limit for assessments applied to closure notices served by Revenue to amend taxpayers' returns containing self-assessment of CGT liability - whether European Convention altered the burden of proof for appeals against other assessments and notices listed for hearing at same time as penalty appeals - Taxes Management Act 1970, s. 34 - Taxes Management Act 1970, s. 28A(2).

DCC Holdings (UK) Limited v The Commissioners For HMRC Sp C 611
Gilt repo - purchase and resale of gilts - interest paid to interim holder not required to be paid to original holder but recognised in repurchase price - application of paragraph 15 Schedule 9 FA 96 - related transaction - effect of section 737A to 737C and 730A TA 88 - effect of section 97 FA 96 - approach to section84 FA 96 - section 86 FA 96 determining which authorised accounting method to use.

Boake Allen Ltd & Ors (including NEC Semi-conductors Ltd) v R & C Commrs [2007] UKHL 25
Corporation tax - taxation of dividends - parent and subsidiary companies - advance corporation tax (ACT) required to be paid by subsidiaries of non-UK holding company - requirement subsequently held to be contrary to freedom of establishment under Community law - taxpayer subsidiaries of parent established outside EU claimed compensation or restitution in respect of past payments of ACT - whether denial of right of election infringed non-discrimination article in double tax agreements - Income and Corporation Taxes Act 1988, s. 247 - United Kingdom/Japan Double Tax Agreement, art. 25(3) - United Kingdom/United States Double Tax Agreement, art. 24(5).

Barclays Bank plc v R & C Commrs [2007] EWCA Civ 442
Income tax - employment - benefits under non-approved retirement benefits scheme - relevant benefits given in connection with past service - bank made payments to pensioners to compensate for withdrawal of concessionary benefit - Revenue considered payments taxable as benefits under non-approved scheme - Revenue made determination on pension fund trustees - whether payments given 'in connection with past service' - Income and Corporation Taxes Act 1988, s. 569A, 612(1).

CMS Peripherals Ltd v C & E Commrs [2007] EWHC 1128 (Ch)
Value added tax - return - default - surcharge - reasonable excuse - payments on account - taxpayer sent payment with return - taxpayer in default by failing to pay to Customs amount shown on return as payable - taxpayer entering incorrect figure on return for net VAT due to Customs - taxpayer entering calculations on return in manuscript to explain payment made - Customs imposing surcharge because taxpayer in default - VAT tribunal deciding taxpayer had no reasonable excuse for default - High Court held tribunal's decision wrong in law - reasonable for someone who had made mistake that would lead to large overpayment to correct it by manual amendment to return - appeal allowed - Value Added Tax Act 1994, s. 59A(1), 59(1), 59(7)(b).

R & C Commrs v Decadt
Income tax - employment - deduction - expenses wholly, exclusively and necessarily incurred in performance of duties of employment - taxpayer surgeon - contract of employment required specific training certificate - taxpayer sought to deduct examination fees and related expenses - whether expenses deductible from earnings - Income Tax (Earnings and Pensions) Act 2003, s. 336.

Allnutt & Anor v Wilding & Ors [2007] EWCA Civ 412
Inheritance tax - settlement - trustees - potentially exempt transfer - settlor creating settlement to avoid inheritance tax - tax saving purpose not achieved as sum transferred to settlement was chargeable transfer - executors applied to rectify settlement by redrafting - High Court found no error in drafting requiring correction - Court of Appeal upheld that decision - appeal dismissed.

R (on the application of Software Solutions Partners Ltd) v R & C Commrs [2007] EWHC 971 (Admin)
Value added tax - supply of goods and services - exemption - Customs publishing ruling that services might be VAT exempt where taxpayer authorised to accept risk on insurer's behalf - Customs taking view that taxpayer's services not exempt - Customs notifying taxpayer of decision before issuing assessment - taxpayer subsequently assessed to VAT in default of proper returns - taxpayer seeking judicial review - whether taxpayer's activities covered by Customs' ruling - whether taxpayer could wait for assessment before seeking judicial review.

Discussion Paper - Preliminary Views on Insurance Contracts
This discussion paper presents the preliminary views of the International Accounting Standards Board on the main components of an accounting model for insurance contracts. The Board formed those views in phase II of its project on insurance contracts.

Telent plc - Tripartite transaction considered
The tribunal considered whether legal services concerning corporate restructuring were supplied to the appellant company as well as to the solicitors' clients.

Discounted Gift Schemes (DGSs)
Following recent press interest, this is an opportune moment to set out HMRC's approach to Discounted Gift Schemes (DGS) and their interaction with the Inheritance Tax (IHT) legislation. This note is particularly about valuation of lifetime transfers and the underlying valuation methodology.

David Peter Herman, Barbara Herman v The Commissioners For HMRC Sp C 609
CAPITAL GAINS TAX - Non-resident settlement - Capital payment - Indirect receipt - Implementation of Mark II flip-flop scheme - Non-resident trust with stockpiled gains transfers trust fund to resident trust created by settlor of former trust - Trustees of resident trust appoint entire trust fund to settlor and wife - Whether capital payments received indirectly by settler and wife - Yes - TCGA 1992 ss 87(4)and 97(5)

Bank of Ireland Britain Holdings Ltd v R & C Commrs [2007 EWHC 941 (Ch)
Corporation tax - loans - manufactured dividends - tripartite 'repo' transaction with two non-resident parties - whether resident party deemed in receipt of interest on deemed loan - whether deemed annual payment representing deemed manufactured overseas dividends deductible - special commissioners finding in favour of taxpayer - Revenue's appeal to High Court dismissed - Income and Corporation Taxes Act 1988, s. 730A, 737A.

R (on the application of R & C Commrs) v General Commissioners of Income Tax for Berkshire [2007] EWHC 871 (Admin)
Income tax - investigation - agreement - Revenue commencing investigation into taxpayers' affairs - Revenue and taxpayers reaching agreement - taxpayers agreeing to pay specified amount in respect of tax, interest and penalties in return for Revenue agreeing not to take proceedings against them - issues as to proper construction of agreement - whether Revenue precluded from raising enquiries and serving notices in respect of specific tax year - Taxes Management Act 1970, s. 9A, 19A.

Changes to Clearance Processes for Financial Transactions
The 2007 Budget Report contained an announcement concerning thin capitalisation. Paragraph 5.92 of the Economic and Fiscal Strategy Report stated that the Government has agreed that HMRC can expedite its procedures for agreeing relief from UK tax on loan interest paid to non-residents, and extend the circumstances in which UK residents can enter into thin capitalisation agreements. A detailed announcement will be made later this spring.

Practice Note 24 The Audit Of Friendly Societies In The United Kingdom (Revised)
This Practice Note contains guidance on the application of auditing standards issued by the Auditing Practices Board (the APB) to the audit of friendly societies in the United Kingdom. It also contains guidance on auditors' reports in connection with regulatory returns and the auditors' duty to report to the Financial Services Authority (FSA). This guidance applies to friendly societies carrying on insurance business.

Practice Note 19 The Audit Of Banks And Building Societies In The United Kingdom (Revised)
This Practice Note contains guidance on the application of auditing standards issued by the Auditing Practices Board ('the APB') to the audit of banks and building societies in the United Kingdom (UK). The term 'deposit taker' in this Practice Note should be taken to refer to both banks and building societies. A deposit taker is also referred to as an 'authorised firm' in the context of regulation under the Financial Services and Markets Act 2000.

Stamp Duty Reserve Tax: exchange traded funds
The regulations that exempt from stamp duty reserve tax (SDRT) certain Depositary Interests relating to companies incorporated outside the UK will be amended so that ETFs may also qualify.

R (on the application of Cook) v General Commissioners of Income Tax & Anor
Income tax - assessment - appeal - taxpayer failed to pay PAYE and NIC on employees' behalf - Revenue made determinations of amounts due - taxpayer failed to appeal against determination within time limit - application to lodge late appeal - tax inspector found no reasonable excuse for delay - general commissioners refusing taxpayer's appeal - taxpayer had no reasonable excuse for appealing out of time - taxpayer applied for judicial review - High Court held commissioners erred in failing to consider merits of case - application granted - Taxes Management Act 1970, s. 49(1) - Social Security Contributions (Transfer of Functions, etc.) Act 1999, s. 8 - Income Tax (Pay As You Earn) Regulations 1993, reg. 49.

R (on the application of Cooke) v R & C Commrs [2007] EWHC 81 (Admin)
Income tax - liability - inquiry - production of documents - Board of Revenue and Customs requiring solicitor to produce documents relating to taxpayer's affairs - whether Revenue required to provide reasons - High Court holding that Board's exercise of powers not subject to same conditions as tax inspector - application dismissed - Taxes Management Act 1970, s. 20(3), 20B.

Hudson Contract Services Ltd v R & C Commrs [2007] EWHC 73 (Ch)
Income tax - construction industry scheme - certificate - contractor of hired in labour - Revenue refusing to renew construction industry certificate - special commissioner deciding that taxpayer's business consisted of or included furnishing or arranging for furnishing of labour in carrying out construction operations -Revenue's cross-appeal against that decision dismissed - Income and Corporation Taxes Act 1988, s. 562(2), 565(4), (8).

RIA: VAT: Liability treatment of medical services
This is a Regulatory Impact Assessment (RIA) on amendments to the VAT exemption for the supply of medical services provided by registered health professionals, following the decision of the European Court of Justice (ECJ) in the case of Dr Peter D'Ambrumenil (C-307/01).

Tumble Tots UK Ltd v R & C Commrs [2007] EWHC 103 (Ch)
Value added tax - supply - single or multiple supplies - fees - nature of supply by franchisor of children's activity play groups in return for payment by parent - Whether several supplies of goods or single supply of membership - payment of fee precondition of admittance by franchisee - Whether supply related to admission.

Financial Reporting Standard For Smaller Entities (Effective January 2007)
The Financial Reporting Standard for Smaller Entities (effective January 2007) - the FRSSE - prescribes the basis, for those entities within its scope that have chosen to adopt it, for preparing and presenting their financial statements. The definitions and accounting treatments are consistent with the requirements of companies legislation and, for the generality of small entities, are the same as those required by other accounting standards or a simplified version of those requirements. The disclosure requirements exclude a number of those stipulated in other accounting standards.

Reporting Statement: Retirement Benefits - Disclosures
This document sets out a Reporting Statement 'Retirement Benefits - Disclosures'. The Reporting Statement builds on Financial Reporting Standard (FRS) 17 'Retirement Benefits' (as amended in December 2006) and sets out additional disclosures that complement the disclosure requirements of FRS 17. It is a best practice guide and is not mandatory.

2007/109 The Civil Partnership (Employee Share Ownership Plans) Order 2007
This Order amends the Employee Share Ownership Plans (Partnership Shares - Notice of Effects on Benefits Statutory Sick Pay and Statutory Maternity Pay) Regulations 2000 (S.I. 2000/2090: "the 2000 Regulations").

HMRC Technical Note: Possible New Repo Legislation for Companies
The Government announced in the Pre Budget Report that it would consult on introducing new legislation setting out a comprehensive corporation tax regime for sale and repurchase arrangements. These transactions are commonly referred to by market practitioners as "repos" and this term is used from now on. This document sets out the Government's detailed proposals for a new regime for companies. The direct tax legislation for non-corporate parties to repos is being rewritten in the Income Tax Bill 2007 and is not the subject of this Note.

Bennett v HMRC Sp C 576
INCOME TAX - Schedule E - whether expenses incurred by employee scaffolder in respect of temporary accommodation, subsistence, travelling from temporary accommodation to construction sites, and mobile phone costs allowable - no - appeal dismissed.
INCOME TAX - Schedule D - whether expenses incurred in respect of temporary accommodation, subsistence and travelling from temporary accommodation to construction sites deductible expenses in computing profits of self-employed scaffolder - no, except in relation to travelling expenses - appeal dismissed except in relation to travelling expenses
INCOME TAX - employer acting on instruction of Inland Revenue failed to deduct tax activity due under PAYE - whether employee liable for tax due - no - appeal allowed by consent.

AB (a firm) v R & C Commrs Sp C 572
Income tax - profession - partnership - time limit - taxpayer firm of solicitors acting for partner in connection with personal litigation - taxpayer paid costs of other party in case in which partner unsuccessful - taxpayer paid disbursements in other litigation - Revenue disallowing deduction of payments in computing taxable profits - returns amended outside ordinary time limit - taxpayer appealed to special commissioners - whether payments wholly and exclusively laid out for purposes of profession of taxpayer firm - whether negligent conduct on part of representative partner - appeal dismissed - Income and Corporation Taxes Act 1988, s. 74(1)(a) - Taxes Management Act 1970, s. 30B(5).

2007/46 The Finance Act 2004, Section 61(2), (Relevant Percentage) Order 2007
Chapter 3 of the Finance Act 2004 (c. 12) establishes the construction industry scheme which provides for certain payments under construction contracts to be made under deduction of sums on account of tax. This Order specifies the relevant percentage of the payment to be deducted. This Order imposes no new costs on business.

Rose v R & C Commrs Sp C 574
National Insurance contributions - credits - late payment - contributions and credits before 1975-76 - accuracy of records maintained by records branch of National Insurance Contributions Office (NICO) - credits and excused contributions during periods of education and training - entitlement to make late payment of excused contributions - power of Revenue to accept late payment of excused contributions - whether contributor in ignorance or error and failing to exercise due care and diligence.

Nason v HMRC Sp C 573
INCOME TAX - Relief available for AVCs paid by an employee - Contributions covering the intended contributions for more than 2 ½ years paid late because of administrative errors on the part of the employer and the pension provider - whether the contributions in excess of 15% of the taxpayer's salary in the year of payment were deductible - Appeal dismissed

HMRC Briefs 01/07 - Residence: Gaines-Cooper
The recently published decision of the Special Commissioners in Robert Gaines-Cooper v HMRC (SpC 568) has attracted some attention from tax practitioners and their clients. In particular, some commentators have suggested that the decision in Gaines-Cooper means that HMRC has changed the basis on which it calculates the '91-day test'. This is incorrect.

Changes to the Seasonal Agricultural Workers Scheme (SAWS)
On the 1 January 2007 Bulgaria and Romania joined the European Union.

Snell v R & C Commrs [2006] EWHC 3350 (Ch)
Capital gains tax - tax avoidance - exchange of shares for loan stock - taxpayer emigrating to Isle of Man - loan stock subsequently redeemed - taxpayer failing to declare gain on tax return - Revenue amending self-assessment to include tax in respect of gain - special commissioners finding exchange effected for bona fide commercial reasons but avoidance of CGT a main purpose of scheme or arrangements including exchange - appeal and cross-appeal dismissed - Taxation of Chargeable Gains Act 1992, s. 137.

Baxi Group Ltd v R & C Commrs [2006] EWHC 3353 (Ch)
Value added tax - supply of goods or services - input tax - reward scheme - single supply or separate supplies - taxpayer boiler manufacturer delegating reward scheme to marketing company - boiler installers earning points redeemable against items in company catalogue - whether taxpayer entitled to deduct VAT paid to company - only part of overall sums allowed by Customs as deductible - tribunal upholding Customs' decision - High Court treated reward scheme as single supply of marketing services - taxpayer entitled to treat all VAT paid under scheme as input tax.

St Helen's School Northwood Ltd v R & C Commrs [2006] EWHC 3306 (Ch)
Value added tax - input tax - partial exemption - special method for calculating proportion of deductible input tax - whether commissioners acted unreasonably in rejecting special method proposed by school - whether standard method override should be applied - Value Added Tax Act 1994, s. 26(1) - Value Added Tax Regulations (SI 1995/2518), reg. 107B.

Test Claimants in Class IV of the ACT Group Litigation v IR Commrs (Case C-374/04)
Corporation tax - dividend - tax credit - separate treatment of resident and non-resident shareholders - freedom of establishment - free movement of capital - separate treatment of resident and non-resident shareholders - bilateral double taxation conventions - Art. 43, 56, 57 and 58 EC.

Administration de l'enregistrement et des domains v Eurodental Sàrl (Case C-240/05)
Value added tax - exemptions - right to deduct - manufacture and repair of dental prostheses - intra-Community transactions relating to transactions exempt within member state - effect of derogating and transitional arrangements - principle of fiscal neutrality - partial harmonisation of VAT - Council Directive 77/388, art. 13A(1)(e), 17(3)(b) and 28cA(a).

VDP Dental Laboratory NV v Staatssecretaris van Financiën (Case C-401/05)
Value added tax - exemption - scope - manufacture and repair of dental prostheses by intermediary without status of dentist or dental technician - subcontracting to dental technician - whether entitled to VAT exemption for services - Council Directive 77/388. art. 13A(1)(e).

Dass v Special Commissioner & Ors. [2006] EWCA 2491 (Ch)
Income tax – relief – business expense - revenue or capital - vocational training – taxpayer claiming tax relief for cost of examination fees leading to qualification – statutory conditions for relief not met - whether fees constituted income or capital expenditure – appeal dismissed - Finance Act 1991, s. 32.

R & C Commrs v Empowerment Enterprises Ltd. [2006] CSIH 46
Value added tax – Supply of goods or services - Exemption – Education – Tuition given privately by teacher - Tuition given by director and employee of limited company – Whether exemption could be claimed only by individual as opposed to limited company – Court of Session held tribunal erred in holding that exemption available where tuition provided by teachers employed by taxpayer – Council Directive 77/388, art. 13(A)(1)(j) - Value Added Tax Act 1994, Sch. 9, Grp. 6, item 2.

HMRC issue draft guidance on the Indofood decision
HMRC have been asked to clarify their view following the judgement of the Court of Appeal in the case of Indofood International Finance Ltd v JP Morgan Chase Bank NA London Branch. This guidance outlines HMRC's practice on claims to relief from UK withholding taxes under the UK's Double Taxation Conventions (DTC), in the light of that judgement.