Tax Doctor
Hello. I'm Andrew Jupp, National Head of Tax at Tenon. This blog is my attempt to unravel what's going on in the world of tax and how it might affect you and your business.
HMRC has just issued some guidance
Well August really is a quiet month in the world of tax. Nothing startling has happened – well I guess Team GB’s performance in the Olympics is pretty amazing – but for a tax practitioner all has been quiet.
So I thought I would take the opportunity to remind you that HMRC is proposing a radical redesign of the penalty regime for all taxes so as to bring consistency across all the taxes and to align penalties more closely with the behaviours which they are intended to punish. The new regime will cover income tax, PAYE, National Insurance Contributions, CGT, VAT, corporation tax and the Construction Industry scheme. It will not cover IHT or Excise Duties.
No date is yet set for when the new rules will apply – one will be set by Statutory Instrument. But the Budget Day press release said that the intention is that the new rules will apply for return periods commencing after 31 March 2008 where the return is filed after 31 March 2009.
HMRC has just issued some guidance “Take care to avoid a penalty”. The guidance claims that “our penalty system for tax errors will much simpler”. It goes on to say that “if you take reasonable care to get your tax right, we will not penalise you, even if you make a mistake”. The guidance goes on to give examples of what reasonable care is.
So boring though this may seem, I would urge everyone to read the guidance and to ensure that your systems and processes are robust and that your returns will be correct. http://www.hmrc.gov.uk/about/new-penalties/new-penalties.pdf
Hopefully I will have some more exciting news to pass on next time I update this!.....
Posted by Andrew Jupp on August 22nd 2008
Little is going on in the world of tax...
Well, with Parliament in recess, and all the posturing around who is really leading the country this week, little is going on in the world of tax. That being said, there have been some interesting decisions published by the Special Commissioners in the past few weeks. Funny how suddenly the desks are being cleared just before the summer...
One deadline you might like to focus on is that yesterday was the start of the 100 day countdown to when self assessment tax returns have to be submitted if you don’t want to have to calculate the tax bill yourself. So if you haven’t assembled all your tax return stuff yet, now might be a good time to start.
But although things are generally quiet at the moment we have had a couple of missives from HMRC over the last couple of weeks.
In June HMRC formalised its practices and procedures for the conduct of transfer pricing enquiries, although very much confirming current practice, it is clear indication that it remains at the top of the agenda as far as compliance is concerned.
More recently, Government announced that it is extending the consultation on the Taxation of Foreign Profits. Frustrating as it is - this will mean continued uncertainty for businesses - it is particularly pleasing to see that Government appears to be listening to us and has abandoned the idea of a complete reform of the controlled company legislation. Further good news is that a Dividend Exemption seems a step closer.
So on that happy note, I will stop thinking about tax and instead log onto the BCC sports website to see if it’s raining at Edgbaston. England supporter though I am a few days’ rain might be the best thing to stop the current rot.
Posted by Andrew Jupp on July 30th 2008
Change at the top at HMRC
So, there’s a change at the top at HMRC. Now methinks, why would a successful businessman and latterly a Private Equity Managing Director want to take on this role? The lucky man is Mike Clasper, formerly Chief Executive Officer at BAA and until now Operational MD at Terra Firma Capital Partners. Now maybe I am reading too much into this, but with all the shenanigans recently with lost computer discs etc, maybe it’s been decided that a very safe pair of hands is needed. So our new man will Clasp hold of things with both feet firmly on Terra firma. Who says the Treasury is not imaginative in its thinking?...
Now if that’s not exciting enough, we see an end in sight to the progress of the Finance Bill through Parliament. Royal Assent is likely on 18, 21 or 22 July. How exciting is that? But one thing I do hope is that the last ditch attempt by the opposition parties to stop the enactment of legislation to give new powers to HMRC will be successful. I doubt it will but I am very concerned that the new powers might give the excuse for fishing expeditions into taxpayers’ affairs. Let’s hope common sense prevails and we have an even playing field for the authorities and the taxpayer.
Posted by Andrew Jupp on June 30th 2008
It’s always good to be right!
Well, it’s always good to be right! In my last blog I predicted that the long-awaited consultation document on the taxation of foreign profits would be abandoned. And Mr Darling, bless him, has clearly been reading this blog and has indeed announced that the proposed changes have been put on hold until at least 2010. I wonder what’s happening that year? Oh, the Election. But seriously this is good news: good for the multi-nationals which were threatening to leave the UK; good for OMBs and SMEs which would not have the option of relocating overseas and potentially having all their foreign income taxed in the UK.
Otherwise it’s rather quiet in the tax world at the moment. With so much turmoil in the economy, the oil crisis (surely not the biggest issue facing the world at the moment as Gordon Brown suggested?) and continued problems with world peace, that’s probably just as well.
But thinking about it, as most of us look forward to some form of break over the summer, it’s really only a few months until the Pre-Budget Report. I predict that it’s going to be an interesting one, and certainly my team here at Tenon will be gearing up to treat it with the same, if not more importance as the Budget. So that’s twice a year now we have to work through the night. Joys!
Posted by Andrew Jupp on June 24th 2008
The Mini Budget
Well, a mini Budget last week, and are we now going to have another U-turn on foreign tax for multinationals? First the mini Budget. Actually it wasn’t so mini. It was a fundamental change to our income tax system. Increasing personal allowances to try and compensate for the abolition of the 10% rate, but taking action to ensure that higher rate taxpayers didn’t benefit from it. It would be churlish not to welcome it, but why oh why did we ever get into this situation in the first place? And as to the hassle – systems will need to be changed, PAYE tables will need to be reprinted. And the benefit won’t come through until the September pay packet. Employees will get an extra £60, and then next month their pay packet will fall. I can imagine some interesting conversations with HR departments and employees later in the year...
So to foreign tax. Well on Tuesday Mr Darling addressed the CBI annual dinner and said that he intended the proposed changes to the taxation of companies’ foreign profits to be revenue-neutral. Hmmm… in that case why do anything? Methinks another volte face may be about to happen. But we’ll have to wait for the long-awaited consultative document to see. Of course, if he just decides not to change anything there won’t be a need for another consultative document. Good news for the rainforests too!
It’s such an exciting week. It’s the annual Taxation Awards tomorrow night. We’ll be partying the night away in the Hilton on Park Lane. 1,000 tax specialists and interested parties dancing into the wee small hours. Now if Mr Darling really wanted to bury bad news I think Friday at 8am might be a very good time...
Posted by Andrew Jupp on May 22nd 2008
Tax Reminders
Well, if you’re wondering why my blog has been quiet for a few weeks it’s because I’ve been away in Australia on holiday. But as I read the newspaper over breakfast each morning, I could easily have been back in the UK. At least, as far as what’s taxing people’s minds in the world of finance is concerned.
One of the things that struck me about Oz is how isolated it is. Not just geographically - although after 24 hours flying it seemed to be the other side of the world (!) - but culturally and economically. But even so, the credit crunch is big news there too. And there’s a daily debate about the taxation of individuals - particularly those on lower incomes - and whether the new government’s budget in a few weeks time will do something about that. Environmental taxes are a hot issue too.
Back home things seem to have been rather quiet in the world of tax. So I will take this opportunity to remind you that certain compliance matters need dealing with, especially if you are an employer. Remember those end of year returns that need completing; if you haven’t started yet you need to very soon. And of course, it’s never too early to start gathering all the information for your personal tax returns.
No doubt as I continue to progress through the massive inbox, and the piles of reading, I will discover something exciting that’s happened in the world of tax. Or are tax and exciting oxymorons? I won’t attempt to answer that one!
Posted by Andrew Jupp on May 7th 2008
Happy New Tax Year
First, of all, a Happy New Year to you all (well, tax year that is!). So the 10% rate has gone, and basic rate tax is at 20%. Now without wishing to be political, I just can’t see the sense in this. Surely the very people who need help most are those who have actually lost out. Most of you reading this blog will be winners. I certainly am. And do I feel good about it? Actually no, not at all. One of the arguments for abolishing the 10% rate band was that it benefited all taxpayers, including those well-paid. Well, yes it did, but so did reducing the basic rate to 20%. To me, by far the best way to benefit the low paid is to remove them from tax altogether, by raising the level of the personal allowance significantly. The reason why this isn’t done, apparently, is that everyone would benefit from this. I rest my case!
Well, we all said that the abolition of taper relief would accelerate a number of business disposals, and it did. Many other locked in their taper relief by passing their shares into family trusts. I was interviewed on the Today programme last week about this. I’ll tell you about the logistics in a moment. The serious point was that I was in the studio with a gentleman from a City analysts, who confirmed that in the public company sector, they had seen more than twice the number of personal share disposals by executives than in a normal year. Certainly many Tenon clients have done something to preserve their taper relief before 5 April.
As to the logistics. I was away overnight in West Sussex. So the BBC kindly agreed to send a car to collect me from my hotel at 5.30am, take me to the studio in Tunbridge Wells, wait for me, and take me back to the hotel after the interview. Well, the car didn’t arrive - it had gone to the wrong hotel. Finally arrived, the driver looked at me and asked where we were going. He had no idea where the BBC studios were… Got to Tunbridge Wells, couldn’t find them, went to the Station, where they thankfully knew where to direct me. Studio appeared locked. Banged on door. Rang the buzzer. Finally attracted the attention of a cleaner who let me in. Found the morning producer who took me to the studio. I put the cans on with about a minute to spare, before the Today Producer came on line, checked I was OK, and straight into the interview. And was the car still waiting for me outside?....
Anyway, back to serious matters, and I, along with many tax advisers, will be following the progress of the Finance Bill as it passes through its various stages over the next couple of months. Watch this space for updates on progress.
Posted by Andrew Jupp on April 10th 2008
Is your business tax in good order?
Like any good Doctor, I would always advise that prevention is better than a cure, and so with only a few days left until the end of the tax year (5 April just in case there is anyone who doesn’t remember this obscure date), I need to remind you once more to ensure that all the year end planning issues are considered (ISAs, pension contributions, using basic rate bands and CGT exemption etc).
So if you have got your personal tax situation under control, is your business tax in good order? One area where you might need to act very quickly concerns research and development (R&D) tax relief. Introduced in 2000 to encourage innovation and enterprise in the UK economy, this relief has benefited thousands of companies, especially those start ups in the technology sector. But seven years on many companies are still missing out on this huge tax saving opportunity, often because they simply don’t realise that some of their activities qualify for R&D relief. You only have until 31 March to submit claims for the earlier years, so if you think this might be relevant to you speak to a Tenon Tax adviser now! And the Chancellor’s lack of mention of innovation and entrepreneurship in the Budget was hardly a reminder!
Posted by Andrew Jupp on March 26th 2008
The Budget that wasn’t
Well, this was the Budget that wasn’t. I think in over 20 years as a tax practitioner I’ve never known a Budget with so little to get excited about. Even the National dailies are finding it hard to come up with interesting angles, and whilst all the fuss about car tax and excise duty on alcohol interests me personally, there’s not much for me to say as a tax adviser.
Of course, there’s lots of technical stuff that will keep us busy for some time, but it’s hardly headline-grabbing. Some tweaks here and there, and some perceived loopholes blocked. And then of course there’s the new venture capital fund specifically to encourage women to start-up businesses. Here at Tenon we have our doubts as to what good this will do. There are many successful women entrepreneurs, and we don’t see lack of funding being what prevents more.
So with only three weeks to go to the end of the tax year, I guess I should remind all readers that you should be considering all the normal year end planning points - using personal allowances, maximising CGT exemption, paying pension contributions, using your ISA allowance etc.
And we now know for sure that Business Asset Taper Relief and Indexation Allowance is going, so again, if you haven’t done so already, think about this now!
Our next edition of Tax Matters is out shortly, updating you on some of the developments in the world of tax. And I’m off now to scratch my head some more to see if I can find that hidden gem which is the “exclusive” all the newspapers are asking me for!
Posted by Andrew Jupp on March 14th 2008
A hint of retrospection?
Well, at last! The long-awaited draft legislation for the Entrepreneurs’ Relief has been published. It’s taken long enough but we have it. Although we still can’t be sure it won’t change again.
On the face of it it’s good news. The first £1million of lifetime business gains are taxable at only 10% - so rather like Business Asset Taper Relief now. But there’s a sting in the tail. It appears from reading the detail that many people who have already sold their business and taken some of the consideration in the form of loan notes may be very unhappy. You see, they would have taken the loan notes, expecting that when they matured they would pay CGT at 10%. Well they would under the old rules. But for certain types of loan notes maturing after 5 April 2008, the gain will be taxed under the new rules, at 18%, although Entrepreneurs’ Relief will probably be available. But I know that I have a number of clients who did significant deals in the last couple of years, and have well in excess of £1million locked up in loan notes. So unless something happens before the legislation is finalised their 10% will become 18%.
Now I entitled this “a hint of retrospection”. Why? Because if one was expecting a tax of 10%, and now find it’s 18%, I find it hard to see what else it is. Of course, it can be argued that if you choose to defer a gain recognition until sometime in the future, then you have to take the risk that legislation will change. I accept that - but so many commercial deals are structured using loan notes for very sound commercial reasons, this does seem harsh to me.
Taken with the pre-owned assets legislation that was introduced for inheritance tax a few years ago, we have a worrying trend towards an element of retrospective legislation, even if as yet it doesn’t go the whole way.
So, we have less than 10 days until the Budget. I have a series of radio interviews planned for the morning after. I am hoping I can be positive and welcome what has been said. Actually, it won’t be what’s been said, as unless Mr Darling changes the pattern of his predecessor big time, nothing much will be said. It will be the Press Notices issued immediately after the Chancellor sits down that will have all the detail. But rest assured, my team will be pouring through the detail and it will all be explained on a desktop near you by the time you wake up the morning after the night before.
Posted by Andrew Jupp on March 3rd 2008
The saga over non-doms continues
Well, confusion reigns! Again…. The saga over non-doms continues. The papers are claiming that Mr Darling has done a U-turn and significantly changed the plans announced in the Pre-Budget Report. But actually he hasn't.
What happened yesterday was that HMRC sent a letter under Dave Hartnett's signature to the major professional bodies giving clarity on some of the disputed areas of the new rules, and the press interpreted this rather freely. In essence there has been no change of policy.
What the government has done is said that they will remove some of the more absurd elements of the offshore trust rules, under which certain gains which were incurred years ago could become taxable next year. They have said that this was never their intention and it was only poor drafting that caused the problem in the first place! They have also clarified some of the reporting requirement and said that if you remit £30K to pay the non-dom levy that £30K will not be treated as a remittance otherwise one would get into a silly cycle of paying tax on money brought into the UK to pay tax!). HMRC has also said that it is continuing to negotiate with the IRS in the States to see if the £30K can be treated as a creditable tax against US taxes. Personally, I hold out very little hope for this. So there's a little bit of good news but the reality is that the fundamentals remain as they are.
Do look out for a latest edition of Tax Matters which has lots of interesting updates on other topical issues. And the second of our commentaries in advance of the Budget is now available.
Posted by Andrew Jupp on February 16th 2008
Hurray to certainty about CGT
Well, as I said in my last blog, hurray! Hurray to certainty about CGT (now get real Dr Jupp!) . Hurray that we will have a Budget that means we can go forward with a feeling of stability. Ah yes... The Budget! Great news that Mr Darling has given us plenty of warning - 12th March actually. Now one could say that by setting the date so long in advance it means that we will have serious proposals and draft legislation by then. However, there hasn't been much evidence of that recently
But I have an open mind. I really hope that the Budget will give some degree of certainty, have measures to encourage small business and enterprise and innovation, and give certainty over the tax treatment of more complex transactions for larger businesses. Most commentators predict that we are heading for a time of economic challenge - a recession in most people's language. We could so easily talk ourselves into one. But the best thing the Chancellor can do is to present a fair picture of the economy, emphasise the underlying strength of the UK economy that has been there for many years, and provide fiscal certainty to entrepreneurs and business people
Here at Tenon we are starting our series of Budget predictions. Together with my colleague Andrew Hubbard, our National Tax Technical Director, we are giving our weekly update on what the Chancellor may do. Click here to see the latest commentary.
And as always, we will be providing commentary on what the Chancellor has said as soon as he has finished speaking. Click on our Budget website to see our immediate thoughts. And overnight, thanks to Andrew Hubbard and his team, by the time you are enjoying your post-Budget breakfast, our detailed Budget commentary will be on a desktop near you!
Happy Budget season to you all!
Posted by Andrew Jupp on February 6th 2008
Announcement about CGT
So. Now we have it. Mr Darling has finally made his long-awaited announcement about CGT. That's the good news. The bad news is that it really wasn't worth waiting for. So what has he said?
Broadly the 18% flat rate remains but there is a concession for smaller businesses. There will be a new lifetime limit relief for people selling small businesses and any directors or employees of a qualifying company who own 5% or more of the shares. The relief will permit people to pay CGT at 10% on the first £1 million of gain. Gains in excess of this will be taxable at 18%. All other gains will be taxable at 18% as per the PBR proposals.
Now let's not be churlish. Whilst any changes to the draconian changes announced in the Pre-Budget Report are welcome, what Mr Darling has said today fails to meet the real concerns we have been voicing for months. There is nothing to relieve the tax burden on the highly-successful entrepreneurs who have created great businesses; nor is there any encouragement to the serial entrepreneurs who invest time and time again and are the lifeblood of the UK's entrepreneurial culture. It's simply too little, too late, and benefits far fewer people than we have been campaigning for. And what about all those employees who have shares or options in their employing companies; very few of these will own 5% of the company? They still do not benefit from the changes.
The changes, which come into effect on 6 April, give businesses, investors, and their advisers less than 10 weeks to prepare. We have already seen a number of people getting out of their business early to "bank" the 10% CGT rate; we are likely to see a further flurry of activity in the next couple of months.
And as always, the devil will be in the detail. It will take some time to absorb the changes, and we will need to advise clients based on incomplete information and no firm legislation. The situation is far from ideal; how can we be sure that there won't be further changes before the legislation becomes law?
So Mr Darling. There won't be any Valentine card for you from this particular tax adviser.
Posted by Andrew Jupp on January 24th 2008
Well, first of all Happy New Year!
And so, as at the time of writing we still wait for an announcement from the Chancellor concerning capital gains tax. The UK government will decide "soon" on any changes to its capital gains tax reform proposals, Chancellor of the Exchequer Alistair Darling said on Tuesday.
In a question and answer session following a speech to the Royal Society for the Encouragement of Arts, Manufacturers & Commerce in London, Darling said he would "make an announcement soon in the House of Commons."
In the pre-budget report in October, the Government outlined proposed changes to capital gains tax which would set a new 18% rate. The proposals have been criticised heavily by the business sector and Darling said he would revisit the plans.
Darling said on Tuesday that he continues to "reflect on some of the representations made" by business groups.
But this is getting ridiculous. We all know that the Chancellor is very busy (aren’t we all?!) but how can businesses plan for the future with so much uncertainty? We are seeing lots of evidence that business leaders are losing confidence and are trying to exit their businesses before 5 April. This surely can’t be right. So, I say to Mr Darling, ‘it’s easy: simply announce that you are delaying the changes for at least a year, and in the meantime you will consult widely with business leaders and their advisers’.
You might recall that in my last couple of blogs I mentioned that we were running an on-line poll. Thank you to all of you who took part. The first question we asked was “Is it possible to have a tax system that is simple but at the same time fair?”. Now I have to say I am very surprised that 60% of you think that this is possible. I was predicting a much lower positive response. However, when we then asked “If yes, is it inevitable that there will be winners and losers?”, over half (56%) of those who thought that it was possible to have a simple but fair tax system thought that there would be winners and losers. Hmmm…. Not sure I follow the logic here! But for those of you who answered “No” to the first question, an overwhelming majority (84%) would rather have a fair tax code than a simple tax code if the choice had to be made.
So, if Mr Darling’s proposed changes really are driven by the supposed desire for tax simplification, it seems he ought to listen more to those of us who pay the tax he is concerned about.
Another tax that is talked about quite a bit at the moment is Inheritance Tax (IHT). IHT has been known as the “voluntary” tax for sometime, but actually this is a bit of a misnomer. Yes, with careful planning most entrepreneurs can avoid paying IHT on their business assets, but the operative phrase is “careful planning”. My colleague, Andrew Hubbard, who is Tenon’s National Tax Technical Director recently did a pod cast on these pitfalls and other relevant issues. Click here to listen to it.
The new year has started much as the old ended. Confusion. Uncertainty. It’s the 21st Century isn’t it?...
Posted by Andrew Jupp on January 17th 2008
Well. So much for my plea in my last blog...
Well. So much for my plea in my last blog for certainty in the tax world. There we were all ready for Mr Darling to announce his response to the calls for change to his CGT proposals. 13th December we were told. The BBC called me and asked me to appear on the business slot on Radio 5Live on Thursday morning…7am at White City please. Oh well, another 5am start! So, I was on train home on Wednesday evening when the programme editor called me to say that they’d just heard from the Treasury that the announcement had been postponed until next week. Good news for me - I could have a more civilised start. Bad news if the announcement was on Monday next week as getting up at 5am on my birthday isn’t too appealing.
I happily returned to my desk at 11.45am on Thursday morning to find that all hell had let loose. The Chancellor had been called to the Dispatch Box to make an emergency statement after all. But all he had to say was that he was still considering his response and would make another announcement in the New Year. Well as Parliament doesn’t return until 7th January we have another three weeks of uncertainty. It’s ridiculous. How can we possibly advise you when we have no idea as to whether the proposed changes will go ahead as planned, whether there are modifications, or, as we amongst others have suggested, there will be a delay for a year whilst proper consultation takes place?
You see, the trouble is that the Pre-Budget Report in October announces proposals, but doesn’t give time for proper draft legislation to be issued for consultation before it is formally announced in the Budget and then contained in the Finance Act. I can remember the good old days when the only time that proposals were announced were in the actual Budget with, in most cases, proper consultation before changes in legislation were enacted the following year.
If you haven’t yet visited our on-line poll, please do click here and answer the questions. It will only take you a few seconds. The results so far are interesting and I will reveal the results and comment on these in my New Year blog.
And from now on we will be issuing regular e-bulletins bringing you up to speed on a number of technical issues. We launch the first of these today, click here to view.
For most of us there’s only another week at work before we all have a well-deserved rest. But I hope very much that those folk in the Treasury and HMRC are beavering away between Christmas and the New Year working on the elusive draft legislation.
A very happy Christmas and prosperous New Year to you all!
Posted by Andrew Jupp on December 18th 2007
Welcome to my new blog
Well this is the first entry on my new blog which I hope will keep you up to speed with what's going on in the world of tax. I also plan to share with you some of the exciting things we are doing here at Tenon and no doubt from time to time I'll entertain you with news of my travel mishaps.
I have to say since joining Tenon in July as National Head of Tax things haven't been dull. I have discovered all sorts of places I didn't know existed (like the shoe-shine stand in Edinburgh airport where out of sheer boredom waiting for another delayed flight I paid £5 to have my shoes shined - or should that be shone?!). Then there was the day travelling back from Leicester where I encountered one delay after another and built up quite a rapport with the lady from Radio 5 Live travel who entertained listeners with updates on my progress throughout the afternoon!
But what has really shocked us all in the tax world is what the Chancellor announced in his Pre-Budget Report. Much has been written already about the proposed changes to capital gains tax so I won't go over old ground. Suffice it to say that most commentators agree that the proposals are ill-thought out, they completely undermine much of what his predecessor and, now boss, introduced and the phrase "sledgehammers and nuts" springs to mind. Let's hope that we see some changes and I will be the first to say "thank you Darling".
Of course, Mr Darling justifies his proposals by saying that people want tax to be simpler. Well you can't get much simpler than a flat 18% rate. But can tax be simple and at the same time fair? We'd love to hear your views on this, so please spend just a few seconds completing our on-line poll. We'll publish the results in the new year, I predict that they will make interesting reading. And whilst I'm plugging various things, look out for Tax Matters, our new e-bulletin that will keep you informed of important developments in the tax world.
As I'm writing this I'm conscious that I've yet to finish all my Christmas shopping. But what about my wish list to Santa? Well if there's one thing I'd love more than anything else it would be a gift-wrapped parcel for of certainty. Actually forget the gift-wrapping. I'd be satisfied just with the certainty. Certainty as to future tax policy, so that all you people who are building businesses and creating wealth can do so in the knowledge that tax changes in the future are not going to throw all your plans into confusion. And in return to Santa for bringing me that, I will make some New Year resolutions ... but more of that in the future.
Posted by Andrew Jupp on December 2nd 2007