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HMRC plan to withdraw three extra-statutory concessions (ESCs):
HMRC plan to withdraw three extra-statutory concessions (ESCs):
- Employment Income Manual 03002, “Professional remuneration (income tax)”
- Sports testimonials (income tax)
- D45, “Capital gains tax: roll-over into depreciating assets”
The first enables an individual to treat employment income as trading income chargeable to income tax (for a sole trader/partnership) or corporation tax by relieving the company or organisation paying the remuneration of the obligation to operate PAYE in respect of relevant payments of employment income.
The Revenue believes the Department for Environment Food and Rural Affairs (Defra) was the main user of the practice until it amended its own legislation from April 2014 on the use of official veterinarians during an animal health crisis.
HMRC are negotiating a new, limited concession with Defra, and axing of the professional remuneration practice will mean the usual employment income rules and benefits code will apply to payments from 6 April 2016.
The taxation of income arising from sports testimonials has been a matter for discussion since the 1920s.
HMRC’s guidance at EIM 64120 takes the approach that proceeds are not likely to be taxable payments of general earnings of the individual unless there is a contractual or implicit entitlement to a testimonial.
The guidance also implies that testimonial proceeds will not usually be taxed where the testimonial has been arranged by an independent committee. The Revenue believes there may have been a widespread misunderstanding of this aspect of the guidance so that the existence of a testimonial committee has meant that this income has not been treated in most cases as general earnings of the individual.
The tax department now considers testimonial proceeds to be derived from a sportsperson’s employment and the sums received should be taxable as general earnings in line with other voluntary payments by the public to employees.
The final of the three concessions to be dropped was introduced to overcome the perceived tension between a capital gains tax (CGT) charge crystallising on the gain rolled over into a depreciating asset when it ceases to be used in the trade because of the death of the trader, and the general exemption that death is not an occasion of charge.
HMRC believe the concession is no longer necessary because the gain is already exempted by legislation at TCGA 1992, s 62(1)(b).
Comments on the taxman’s interim assessment of the impacts of the withdrawals should be emailed no later than 8 January, or sent to Stephanie Allistone, HMRC, room 1C/06, Central Policy, 100 Parliament Street, London SW1A 2BQ.
The Revenue has also published a technical consultation on draft legislation needed to enact the existing tax treatment of two ESCs: D40, “Non-resident trusts: definition of participator” and F15, “Woodlands”.
The former concession concerns the charge to CGT under TCGA 1992, s 86 and s 87 in respect of gains made by the trustees of a non-resident trust. It ensures a beneficiary is not treated as a participator in a company controlled by the trustees merely because of their status as beneficiary. The latter measure restricts the scope of a deferred estate duty charge for inheritance tax purposes in cases involving woodlands.
Responses must be sent no later than 27 November using the contact details above.
I just wondered if the first ESC re an individual to treat employment income as trading income chargeable to income tax would apply to Post Office remuneration, where postmasters are currently allowed to treat this as trading income where the PO generates other trading income e.g. card sales?