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08 November 2000
Revenue and Customs news
Internet trading
The Revenue has published a guide to the tax consequences of trading over the Internet. The idea of the guide is to give practical advice about the tax obligations of businesses which trade electronically, for instance using the Internet for advertising, placing and receiving orders or making and receiving payments. The guide also explains the reliefs and incentives available to such traders.
The guide can be found on the Revenue website at www.inlandrevenue.gov.uk/e-commerce/sme1.htm.
Internet trading
The Revenue has published a guide to the tax consequences of trading over the Internet. The idea of the guide is to give practical advice about the tax obligations of businesses which trade electronically, for instance using the Internet for advertising, placing and receiving orders or making and receiving payments. The guide also explains the reliefs and incentives available to such traders.
The guide can be found on the Revenue website at www.inlandrevenue.gov.uk/e-commerce/sme1.htm.
Revenue and Customs news
Internet trading
The Revenue has published a guide to the tax consequences of trading over the Internet. The idea of the guide is to give practical advice about the tax obligations of businesses which trade electronically, for instance using the Internet for advertising, placing and receiving orders or making and receiving payments. The guide also explains the reliefs and incentives available to such traders.
The guide can be found on the Revenue website at www.inlandrevenue.gov.uk/e-commerce/sme1.htm.
Shipping agreement
A double taxation agreement covering revenues from international shipping transport has been signed between the United Kingdom and the Hong Kong Special Administrative Region of the People's Republic of China. It was signed on 25 October 2000 in Hong Kong.
(Source: Inland Revenue press release dated 30 October 2000.)
Troubled businesses
Customs and Excise and the Inland Revenue are introducing over the next few months various reforms to help businesses in trouble.
The reforms are in response to the recommendations of the Government's working group on insolvency and corporate rescue mechanisms, and also the result of an internal review on improving co-ordination between the two departments in the field of debt management.
The changes include:
the creation of a single joint unit to handle all voluntary arrangements (formal procedures whereby a business in trouble seeks to reach a binding agreement with its creditors over existing debts to give it the chance to trade its way out of trouble);
the adoption of a practice of considering voluntary arrangements in the same way as commercial creditors, that is on their individual merits and principally in relation to the likelihood that approval of the voluntary arrangements will lead to improved recovery of the departments' existing debt. The revenue departments would remain in close contact with the business to monitor and support its management's efforts to meet liabilities falling due once the voluntary arrangement was in place;
the introduction and publication of tight turn-around targets for responding to proposals;
the publication of the criteria against which proposals will be judged;
the encouragement of insolvency practitioners to obtain waivers of confidentiality so the new joint unit can fully disclose its reasons when it decides to reject proposals. This means those reasons could be examined and discussed;
the creation of a new forum for regular discussions between insolvency practitioners and members of the new joint unit on ways of improving mutual understanding and working practices.
These changes will take effect from April 2001 or in some cases earlier.
The working group's report also recommended that the revenue departments should consider, with the Insolvency Service, the idea of warning companies in arrears of the consequences of trading while insolvent. The revenue departments are discussing with the Insolvency Service how best to implement this proposal.
Copies of the report ('Review of Company Rescue and Business Reconstruction Mechanisms') are available from Maureen Charles, The Insolvency Service, on 020 7291 6740. The report will also be available on the Internet at www.insolvency.gov.uk.
(Source: Inland Revenue and Customs joint press release dated 2 November 2000.)
Malcolm Penney
Rather belatedly, I have learnt that Malcolm Penney died suddenly on 6 September 2000 following an accident at home. Despite the weeks that have passed since, I would nevertheless not wish this sad event to go without notice in the columns of this magazine.
Malcolm had recently retired from Ernst & Young where he was an international tax partner. He also served as the chairman of The Chartered Institute of Taxation's technical sub-committee on international tax, as well as serving on the Tax Policy Committee.
It was always a real pleasure to renew my acquaintance with Malcolm from time to time in professional circles, and his friendly humour was an inspiration. My thoughts go out to his family for whom events on 6 September must have been a terrible shock.
Malcolm Gunn
Tax Case
Question of values
Lex Services plc was a business whereby cars were sold to customers in exchange for cash and a car taken in part exchange. Lex argued that for VAT purposes, the VAT payable on the supply of a car to a customer was the value of the car to Lex, rather than the price agreed with the customer. Customs said that the value of the part exchange car had additional value because it enabled Lex to secure the sale.
On Lex's appeal, the tribunal found for Customs saying that in order to encourage a customer to buy a car, Lex increased the part exchange value. Therefore the value of the car was that attributed to the part exchange car by the parties.
In the High Court, Mrs Justice Arden said that the court was bound to take the subjective value of the non-monetary consideration. The value to be placed on the part exchange car was therefore the value placed on it for purposes of the transaction. The price was agreed between Lex and the customer, and there were commercial reasons for it. The court could not therefore substitute the trade value of the car.
Lex's appeal failed.
(Lex Services plc v Commissioners of Customs and Excise, Chancery Division, 20 July 2000.)
Other news
Widowers' campaign: the latest
Evidently, as has been demonstrated by the editor's incoming post, quite a number of readers have submitted claims to the Revenue on behalf of their widower clients for them to be given an allowance equal to the widows' bereavement allowance. All such claims are receiving a standard response from the Revenue which confirms that the Crossland case (see the editor's article in Taxation, 27 July 2000 at pages 431 to 433) was resolved through a 'friendly settlement'. Information is in fact in the public domain to indicate that Mr Crossland received a sum exactly equal to the allowance claimed, plus compensation for his legal costs. The inference to be drawn was that the claim was considered to have some merit but the Revenue wanted to avoid publicity.
The letter from the Revenue is likely to continue as follows:
'There is still no basis in United Kingdom law for allowing widowers to claim the widows' bereavement allowance. The European Convention on Human Rights has been given further effect under United Kingdom law from 2 October 2000, but the changes will not apply retrospectively to allow your client to claim for the past.'
David Brodie of TaxAid is coordinating the campaign and the recommendation is that those receiving this standard response should send a copy of the correspondence to their Member of Parliament, requesting that the matter be raised with Treasury Ministers.
A number of claimants have already commenced legal action on the matter, and it is understood that Philip Baker of Gray's Inn Tax Chambers is advising some on a pro bono basis. For claims rejected before 2 October 2000, it will be necessary to take the complaint to the European Court of Human Rights. In the case of claims rejected after 2 October, it is considered that the challenge would be possible in the United Kingdom courts.
Naturally the costs involved could be disproportionate, and it is hoped that the cases which are already proceeding will be sufficient to persuade the Government to change its view on the matter.
Interested parties are encouraged to visit the TaxAid website from time to time for an update on the position. The web address is: www.taxaid.org.uk.
In Parliament
Tax harmonisation
The Government's policy on tax harmonisation was explained by Dawn Primarolo responding to a written question. She said that the Government's approach was based on 'fair tax competition', rather than harmonisation. She mentioned the Feira European Council in June where the Prime Minister and Chancellor of the Exchequer 'persuaded the European Union to accept exchange of information rather than withholding tax on cross-border savings income'. She said this 'illustrated the success of the Government's policy on constructive engagement on European Union issues'.
(Source: Hansard, 31 October 2000, Vol 355, No 150, col 409W.)
Amateur sports clubs
In response to a request to introduce tax exemptions for community sports clubs, Melanie Johnson said that many amateur sports clubs already were exempt from corporation tax on the income earned from members. Furthermore, subscriptions from playing members were exempt from VAT. She mentioned also that the Department of the Environment, Transport and the Regions had published a green paper 'Modernising Local Government Finance', which invited views on rate relief for non-profit making sports clubs.
(Source: Hansard, 31 October 2000, Vol 355, No 150, col 414-15W.)
Inheritance tax cost
Repying to a written question, Dawn Primarolo said that the costs of administration of inheritance tax were £30.1 million for the year 1999-2000, or 1.5 pence per pound collected. The latest figures for the compliance costs of inheritance tax were estimated at four pence per pound collected in the year 1986-87.
(Source: Hansard, 31 October 2000, Vol 355, No 150, col 409W.)
Internet trading
The Revenue has published a guide to the tax consequences of trading over the Internet. The idea of the guide is to give practical advice about the tax obligations of businesses which trade electronically, for instance using the Internet for advertising, placing and receiving orders or making and receiving payments. The guide also explains the reliefs and incentives available to such traders.
The guide can be found on the Revenue website at www.inlandrevenue.gov.uk/e-commerce/sme1.htm.
Shipping agreement
A double taxation agreement covering revenues from international shipping transport has been signed between the United Kingdom and the Hong Kong Special Administrative Region of the People's Republic of China. It was signed on 25 October 2000 in Hong Kong.
(Source: Inland Revenue press release dated 30 October 2000.)
Troubled businesses
Customs and Excise and the Inland Revenue are introducing over the next few months various reforms to help businesses in trouble.
The reforms are in response to the recommendations of the Government's working group on insolvency and corporate rescue mechanisms, and also the result of an internal review on improving co-ordination between the two departments in the field of debt management.
The changes include:
the creation of a single joint unit to handle all voluntary arrangements (formal procedures whereby a business in trouble seeks to reach a binding agreement with its creditors over existing debts to give it the chance to trade its way out of trouble);
the adoption of a practice of considering voluntary arrangements in the same way as commercial creditors, that is on their individual merits and principally in relation to the likelihood that approval of the voluntary arrangements will lead to improved recovery of the departments' existing debt. The revenue departments would remain in close contact with the business to monitor and support its management's efforts to meet liabilities falling due once the voluntary arrangement was in place;
the introduction and publication of tight turn-around targets for responding to proposals;
the publication of the criteria against which proposals will be judged;
the encouragement of insolvency practitioners to obtain waivers of confidentiality so the new joint unit can fully disclose its reasons when it decides to reject proposals. This means those reasons could be examined and discussed;
the creation of a new forum for regular discussions between insolvency practitioners and members of the new joint unit on ways of improving mutual understanding and working practices.
These changes will take effect from April 2001 or in some cases earlier.
The working group's report also recommended that the revenue departments should consider, with the Insolvency Service, the idea of warning companies in arrears of the consequences of trading while insolvent. The revenue departments are discussing with the Insolvency Service how best to implement this proposal.
Copies of the report ('Review of Company Rescue and Business Reconstruction Mechanisms') are available from Maureen Charles, The Insolvency Service, on 020 7291 6740. The report will also be available on the Internet at www.insolvency.gov.uk.
(Source: Inland Revenue and Customs joint press release dated 2 November 2000.)
Malcolm Penney
Rather belatedly, I have learnt that Malcolm Penney died suddenly on 6 September 2000 following an accident at home. Despite the weeks that have passed since, I would nevertheless not wish this sad event to go without notice in the columns of this magazine.
Malcolm had recently retired from Ernst & Young where he was an international tax partner. He also served as the chairman of The Chartered Institute of Taxation's technical sub-committee on international tax, as well as serving on the Tax Policy Committee.
It was always a real pleasure to renew my acquaintance with Malcolm from time to time in professional circles, and his friendly humour was an inspiration. My thoughts go out to his family for whom events on 6 September must have been a terrible shock.
Malcolm Gunn
Tax Case
Question of values
Lex Services plc was a business whereby cars were sold to customers in exchange for cash and a car taken in part exchange. Lex argued that for VAT purposes, the VAT payable on the supply of a car to a customer was the value of the car to Lex, rather than the price agreed with the customer. Customs said that the value of the part exchange car had additional value because it enabled Lex to secure the sale.
On Lex's appeal, the tribunal found for Customs saying that in order to encourage a customer to buy a car, Lex increased the part exchange value. Therefore the value of the car was that attributed to the part exchange car by the parties.
In the High Court, Mrs Justice Arden said that the court was bound to take the subjective value of the non-monetary consideration. The value to be placed on the part exchange car was therefore the value placed on it for purposes of the transaction. The price was agreed between Lex and the customer, and there were commercial reasons for it. The court could not therefore substitute the trade value of the car.
Lex's appeal failed.
(Lex Services plc v Commissioners of Customs and Excise, Chancery Division, 20 July 2000.)
Other news
Widowers' campaign: the latest
Evidently, as has been demonstrated by the editor's incoming post, quite a number of readers have submitted claims to the Revenue on behalf of their widower clients for them to be given an allowance equal to the widows' bereavement allowance. All such claims are receiving a standard response from the Revenue which confirms that the Crossland case (see the editor's article in Taxation, 27 July 2000 at pages 431 to 433) was resolved through a 'friendly settlement'. Information is in fact in the public domain to indicate that Mr Crossland received a sum exactly equal to the allowance claimed, plus compensation for his legal costs. The inference to be drawn was that the claim was considered to have some merit but the Revenue wanted to avoid publicity.
The letter from the Revenue is likely to continue as follows:
'There is still no basis in United Kingdom law for allowing widowers to claim the widows' bereavement allowance. The European Convention on Human Rights has been given further effect under United Kingdom law from 2 October 2000, but the changes will not apply retrospectively to allow your client to claim for the past.'
David Brodie of TaxAid is coordinating the campaign and the recommendation is that those receiving this standard response should send a copy of the correspondence to their Member of Parliament, requesting that the matter be raised with Treasury Ministers.
A number of claimants have already commenced legal action on the matter, and it is understood that Philip Baker of Gray's Inn Tax Chambers is advising some on a pro bono basis. For claims rejected before 2 October 2000, it will be necessary to take the complaint to the European Court of Human Rights. In the case of claims rejected after 2 October, it is considered that the challenge would be possible in the United Kingdom courts.
Naturally the costs involved could be disproportionate, and it is hoped that the cases which are already proceeding will be sufficient to persuade the Government to change its view on the matter.
Interested parties are encouraged to visit the TaxAid website from time to time for an update on the position. The web address is: www.taxaid.org.uk.
In Parliament
Tax harmonisation
The Government's policy on tax harmonisation was explained by Dawn Primarolo responding to a written question. She said that the Government's approach was based on 'fair tax competition', rather than harmonisation. She mentioned the Feira European Council in June where the Prime Minister and Chancellor of the Exchequer 'persuaded the European Union to accept exchange of information rather than withholding tax on cross-border savings income'. She said this 'illustrated the success of the Government's policy on constructive engagement on European Union issues'.
(Source: Hansard, 31 October 2000, Vol 355, No 150, col 409W.)
Amateur sports clubs
In response to a request to introduce tax exemptions for community sports clubs, Melanie Johnson said that many amateur sports clubs already were exempt from corporation tax on the income earned from members. Furthermore, subscriptions from playing members were exempt from VAT. She mentioned also that the Department of the Environment, Transport and the Regions had published a green paper 'Modernising Local Government Finance', which invited views on rate relief for non-profit making sports clubs.
(Source: Hansard, 31 October 2000, Vol 355, No 150, col 414-15W.)
Inheritance tax cost
Repying to a written question, Dawn Primarolo said that the costs of administration of inheritance tax were £30.1 million for the year 1999-2000, or 1.5 pence per pound collected. The latest figures for the compliance costs of inheritance tax were estimated at four pence per pound collected in the year 1986-87.
(Source: Hansard, 31 October 2000, Vol 355, No 150, col 409W.)
