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Finance Bill 2005
The Finance Bill 2005 was published on 26 May. This is the third Finance Bill to be published this year, and reintroduces clauses introduced in the original Finance Bill 2005 (published 24 March 2005), but omitted from Finance (No 2) Bill (published 6 April), which was enacted on 7 April as FA 2005.
In responding to representations, the Government has made amendments in the following areas:
- Avoidance involving tax arbitrage — the legislation will allow companies to amend their returns to adjust the amount of deduction claimed, and extends the grandfathering period, which gives transitional protection to some companies, to 31 August 2005.
- Avoidance involving financial arrangements — the legislation has been amended to ensure that it does not affect routine arrangements concerning preference shares and other common corporate structures not set up for the purposes of tax avoidance. The regulation-making power has also been amended so that it can only be exercised prospectively.
- Insurance companies — a regulation-making power allowing the Treasury to amend a number of life assurance company tax provisions relating to apportionment of income and gains has been time-limited. Other minor changes deal with deemed returns on certain transfers of business, the taxation of certain income at special rates of corporation tax, regulation making powers in relation to overseas life insurance companies and the definition of pension business.
- Miscellaneous amendments to stamp duty land tax — changes have been made to ensure the legislation works as intended for home reversion plans, for loans or deposit schemes and to ensure that group-relief clawback cannot be avoided by the use of leases.
- European company statute — the legislation has been extended to ensure that the UK intangible assets regime is fully compliant with the EU Mergers Directive.
HM Treasury press release dated 26 May 2005.
HMRC powers
HMRC have published an advice note setting out the approach that HMRC compliance officers will adopt in their dealings with taxpayers, and taxpayers' rights. The existing powers and taxpayer rights for individual taxes and duties have been transferred into the new department without any changes.
HMRC are working to ensure a consistent approach across all taxes and duties, including a co-ordinated approach to enquiries into tax affairs, but individual tax regime powers remain unchanged. This means that HMRC will not use the powers that relate to one tax or duty to obtain information about another tax or duty. However, any officer of HMRC, whether formerly an officer of Customs or of the Inland Revenue, can use those powers that exist in relation to the specific tax they are looking into. If an officer of HMRC obtains information that is also relevant to other areas of HMRC they can pass on that information for immediate or future follow-up action.
HMRC will always state specifically what tax, duty or tax credit they want information about.
They will normally tell the individual in advance that they require information or want to look at his records, although HMRC may, in certain circumstances, make an unannounced visit to look at VAT, customs or excise duties records.
All HMRC officers will in law be authorised to use all the HMRC powers. But initially officers of the former Customs will generally continue to deal with VAT, excise and customs duty matters, and former Revenue officers will continue to handle income, including PAYE and National Insurance, and corporation tax and tax credits affairs. HMRC will however be piloting different ways of working, and this is likely to include some integrated or joint visits and enquiries. If HMRC intends to carry out a joint visit they will provide advance notice, and will give the individual the opportunity to decline.
HMRC hold meetings at business premises for income and corporation tax (for tax credits, meetings more usually take place at the individual's home) only with the individual's consent. The reasons for deciding whether HMRC need a meeting, and if so where it should take place, will not change. Taxpayers will continue to have the same rights as they do now to decline the suggestion of a meeting.
HMRC will only review the records relating to the tax, duty or tax credit they have said that they will be looking at. If, in the course of a review, an officer obtains information that is relevant to other areas of HMRC, he may pass on that information for immediate or future follow-up action.
If a taxpayer is unclear why he is being asked for a particular piece of information, he should ask the visiting officer to explain the reasons for requesting it. If the taxpayer is not satisfied with the explanation, he should say so, and can refuse to provide the information. If the officer still considers that he needs it, he will be able to use formal powers to obtain it if he can show it is relevant.
HMRC guidance notes, 25 May 2005.
