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Annuities; expenses; VAT
Annuities
The Treasury has launched the consultation Creating a Secondary Annuity Market. As part of the plan to allow pensioners who have already bought an annuity with their pension savings to be able to sell them to third parties, the government intends to create the conditions for the development of a secondary market in annuities, which will permit third parties, such as asset managers, pension funds, insurers and intermediaries, to be assigned the rights to annuity holders’ income streams in return for a lump sum.
Holders will be able to access the value of their assets if they can find a willing buyer. Provider would continue to hold the underlying assets and pay the annuity income to the third parties for the lifetimes of the holders.
The document includes proposals to ensure people obtain the right support and guidance to make decisions that suit their circumstances. It also provides an overview of how the market may develop when the legislative barriers are removed and appropriate consumer protection is in place.
Comments should be emailed by 18 June.
Expenses
The government is to proceed with plans to restrict tax relief for travel and subsistence for workers engaged through an employment intermediary, such as an umbrella company or a personal service company, and under the supervision, direction and control of the end-user. The move follows a discussion paper published after the autumn statement 2014. Legislative changes would take effect from 6 April 2016.
Anthony Thomas, chairman of the Low Incomes Tax Reform Group, warned, “Introducing new rules targeted on particular abuses without addressing the underlying gaps in the system, which cause people to turn to umbrella companies, leaves the door open for other arrangements to fill the void. Nothing but an in-depth review taking into account not only the tax position of the workers, but the benefits, credits and National Insurance positions too, will provide a satisfactory end to this cycle.”
VAT
- Medical courier charities: the government is to allow medical courier charities to reclaim the VAT incurred on the purchase of goods and services, and the acquisition and importation of goods from outside the UK, used for their non-business activities. The measure will have effect in relation to supplies made, and acquisitions and importations taking place, on or after the 1 April 2015. Medical courier charities transport blood and other items of a medical nature. The free, out-of-hours service provided by these charities is generally not a business activity for VAT purposes where the cost is met from voluntary donations and public funding, rather than from fees charged. There was previously no provision under normal VAT rules for medical courier charities to recover the VAT paid on purchases made to support their non-business activities.
- Palliative care: the Budget confirmed that a new VAT refund scheme for palliative care charities is to be introduced. As announced in the autumn statement 2015, the relief will enable such charities to reclaim the VAT they incur on purchases made to support their non-business activities. It will have effect in relation to supplies made, and acquisitions and importations taking place from 1 April 2015.
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Foreign branches: the VAT Regulations (SI 1995/2518) are to be amended so that supplies made by foreign branches will no longer be taken into account when calculating how much VAT incurred on overhead costs can be deducted by partly exempt businesses in the UK. The measure will have effect on and after 1 August 2015 but, where 31 July 2015 falls within the VAT longer period of accounting for a business, it will not have effect until the first day of the next longer period that applies to that business. This action implements the Court of Justice of the EU’s decision in Credit Lyonnais (case C-388/11). As a result, UK businesses will not be able to take into account supplies made by foreign branches when carrying out their partial exemption calculations irrespective of any special method agreed with HMRC. The measure is aimed at simplifying the calculation for businesses and also mitigating the risk of some businesses manipulating the amount of VAT they can recover
