Tax Bulletin Issue 14

Some readers have commented that articles appearing in Tax Bulletin do not always reflect a consensus view of the law. Tax Bulletin is not intended to do more than publicise our view of the law. The opinions given are authoritative in that they indicate how the Department will apply the law in a particular area. There is nothing to preclude an argument being taken on appeal to the Commissioners or Courts where readers disagree with our view. We think it is useful to our readers to know what our views are even where they may disagree with us. In publishing them we are responding to frequent requests that we should make public our interpretations of the law.

The final issue of the year normally gives information about subscription for the following year. Readers who would like to continue to subscribe should read the article on page 187.

! This Article Is No Longer Current (Deleted Index 1999)

MORTGAGE INTEREST RELIEF:
LETTING OF PRIVATE RESIDENCE

From 6 April 1994 new rules apply for giving relief on interest paid on a loan to purchase a private residence which is also commercially let. This will most commonly occur where a taxpayer lets his main residence while living in job-related accommodation, or while temporarily absent by reason of employment (see ESC A27).

In these circumstances the interest paid is eligible for relief under either:

Section 355(1)(a) ICTA 1988 (main residence) or Section 356(1) ICTA 1988 (job-related accommodation) against general income; or
Section 355(1)(b) ICTA 1988 (let property) against letting income.

Up to 5 April 1994 a taxpayer could choose each year whether to have relief:-

against general income (restricted to interest on the qualifying maximum of £30,000 and to lower and basic rates) or
against letting income (with no restriction to the qualifying maximum and relief available at marginal rates).

From 6 April 1994 Section 353(1C) ICTA 1988 provides that where a taxpayer has dual eligibility, relief is given as a deduction or set-off against letting income unless an election is made for relief to be given against general income as an income tax reduction (restricted to interest on the qualifying maximum of £30,000 at 20% for 1994-95).

ELECTIONS

An election must be made in writing within 12 months of the end of the year to which it relates (for example an election for 1994-95 can be made at any time until 5 April 1996). An election may only take effect from:-

the date when dual eligibility first occurs, or
the beginning of any subsequent year of assessment.

Once made an election will remain in force until:-

the letting ceases,
the election is withdrawn in writing, or
the conditions in Section 355(1)(a) or Section 356(1) cease to apply.

A withdrawal of an election may only take effect from the beginning of a tax year and must be made by the end of the tax year following that for which the withdrawal is to take effect (for example for 1994-95 withdrawal may only take effect from 6 April 1994 and notice of withdrawal must be given no later than 5 April 1996).

It follows that an election has effect for the whole of the tax year except for:-

the year in which dual eligibility first arises (if other than on 6 April), and
the year in which dual eligibility ceases (if other than on 5 April).

No particular form is required for making or withdrawing an election. Elections should be sent to the borrower's tax office, or if the borrower does not have a tax office to:

FICO (Savings & Investments),
St John's House,
Merton Road,
Bootle,
Merseyside,
L69 9BB

together with details of the lender, branch and mortgage roll number.

LOANS WITHIN MIRAS

The election mechanism also applies to loans within the MIRAS arrangements and most loans will already be within MIRAS when dual eligibility first occurs.

A taxpayer who wishes his or her loan to stay within MIRAS should make an election when dual eligibility first occurs. The election can, of course, be withdrawn subsequently, provided it is withdrawn within the time limit.

In the absence of an election the interest paid on the loan ceases to be relevant loan interest and the borrower should notify the lender (under Section 375(1) ICTA 1988) so that the loan can be taken out of MIRAS. If a borrower fails to notify the lender the Inland Revenue will, when it discovers the matter, instruct the lender to take the loan out of MIRAS (Section 375(6) ICTA 1988).

Taking a loan out of MIRAS does not mean that an election cannot be made subsequently provided it is made within the time limit. Where an election is made in these circumstances the lender will be notified that the loan can be put back into MIRAS. Relief for any period covered by the election but for which the loan has not been in MIRAS will be given in the borrower's code number or assessment, or if the borrower is a non-taxpayer by repayment from FICO (under Section 375(8) ICTA 1988).

Where a borrower fails to tell the lender of dual eligibility, or where an election is withdrawn, any excess relief will be recovered in the assessment under Schedule A, Schedule D Case VI or Regulation 19(4) SI 1982 No. 1236 as appropriate.

JOINT BORROWERS

For loans not within the MIRAS arrangements each borrower can make or withdraw an election and receive relief accordingly.

For loans within MIRAS all borrowers must elect if the loan is to stay within the MIRAS arrangements. The withdrawal of an election by any one borrower will require the loan to be taken out of MIRAS completely. In this event any borrower not withdrawing his or her election will receive relief by an income tax reduction in his or her code number or assessment.

SURPLUS INTEREST OVER LETTING INCOME

If a taxpayer chooses to have interest relieved against letting income there may be a surplus of interest over that income. Section 355(4) ICTA 1988 provides that any surplus can be carried forward and set against letting income of the following year, and so on, provided the conditions in Section 355(1)(b) continue to be met. In other words, once a claim is made under Section 355(1)(a) against general income any surplus interest for earlier years is lost.

NEW RULES FROM 6 APRIL 1995

New rules will apply from 6 April 1995 as a result of changes to the rules taxing income from property announced in the recent Budget. These will be covered in detail in a later issue.

(No longer relevant)
SELF ASSESSMENT:
PAYMENTS ON ACCOUNT

Under the present rules, income tax payments against assessments are concentrated around January and July. Tax under Cases I and II of Schedule D, which is payable in two instalments, is due on 1st January in the tax year and 1st July immediately after. Tax under Schedule D Cases III to VI and Schedule A is due on 1 January in the tax year, and income tax on taxed income and capital gains tax is due on 1st December after the tax year.

Under Self Assessment, where all income and capital gains will be brought together on one overall bill for a year, these different payment dates for different sources will end. However, it will still be important to maintain the flow of tax to the Exchequer on broadly the same timetable, and to avoid generating an unnecessary peaking of demands on taxpayers. To achieve this, the new system will involve making payments on account. The timing and level of these will try to ensure that money reaches the Exchequer at broadly the same times as it does currently, without either overcharging taxpayers or underpaying the Exchequer. The payments on account will need to become due automatically in most cases, but be flexible enough to respond to changing circumstances. The process will incorporate safeguards against possible abuse.

THE NORMAL SITUATION

Two payments on account will be required annually, on 31 January in a year of assessment and 31 July after that year of assessment. Initially each payment will be equal to half of the income tax liability for the previous year (after taking account of tax deducted at source in that year). If, year on year, income tax liability increases by a moderate amount (perhaps because a business is steadily developing), this would mean that a substantial amount of the tax liability for the year is paid by way of payment on account, leaving only the increase over the previous year's liability and any capital gains tax for the year to be paid by way of balancing payment on 31 January after the year of assessment. (Note -- Capital gains tax will not be subject to payments on account.)

So taxpayers will be asked to make payments on two occasions in the year. On 31 January each year, the balancing payment for the tax year most recently ended will be due, together with the first payment on account for the current tax year. Then on 31 July that calendar year a further payment on account will be due in the same amount. Any balancing payment due for that year would be due on the following 31st January together with the first payment on account for the next year, and so on. This is illustrated in Example 1.

Where no tax is suffered at source, and no claim is made to reduce the payments on account (see below) the balancing payment will always be the amount by which the tax liability for the year is greater than the previous year's tax liability.

EXAMPLE 1

Income tax liability for 1997-98 is £1,200. Assume no payments on account are made during the year to 31 January 1999 -- the filing and payment date for 1997-98. So £1,200 will be due on that date.

Payments on account for 1998-99 will be based on 1997-98 figures. So they will each be £600. If the final liability for 1998-99 is £1,600, the balancing payment for 1998-99 will be:

     Total liability                                   £1,600
Paid on account 31.1.99                 £600
Paid on account 31.7.99                 £600      £1,200
________
Balancing payment                                   £400
Payment on account for 1999-2000:
Total liability for 1998-99          £1,600
X 50%  =     £800
________
Total due on 31.1.2000                             £1,200
Due on 31.7.2000                                     £800

CLAIMS TO REDUCE PAYMENTS ON ACCOUNT

It may be that profits do not increase steadily year by year. If there is a fall in income during a year, payments on account made on the basis of the preceding year's liability might exceed the current year's liability, so that a repayment would be due on 31 January following the year of assessment. Where this is reasonably foreseeable taxpayers can claim that payments on account should be lower than half of the preceding year's liability on the basis that the lower amount is a more realistic estimate of the tax which will be due for the year. A penalty can be imposed where such a claim is made fraudulently or negligently.

PAYMENTS ON ACCOUNT FOR 1996-97

As, under Self Assessment, all income is combined in one assessment, tax which is at present paid in one annual instalment will be spread between both payments on account in the future. To smooth the transition from the old tax payment calendar to the new, there will be special rules for 1996-97.

For 1996-97 only, the payments on account in respect of trading and professional income will be split equally between 31 January 1997 and 31 July 1997, but a single payment on account in respect of tax on Schedule A, and Cases III-VI of Schedule D will be due on 31 January 1997. Again this will be computed on the basis of the 1995-96 figures, and will be reducible on a claim. No payment on account will be required for 1996-97 in respect of tax on taxed income (the full liability from this source will be due with the balancing payment on 31 January 1998). Example 2 on the following page may help to explain the transitional rules for 1996-97.

Because 1996-97 is the first year of self assessment there will not have been any self assessment for the previous year (1995-96) upon which the payments on account can be based. Instead, all the income tax assessments for 1995-96 will be aggregated to calculate the payments on account due for 1996-97. It will be possible to make a claim to reduce this payment on account just as for later years. However, whereas in later years the figure will be identifiable from a person's self assessment return, this is not the case for 1996-97 payments on account. The Inland Revenue will tell people what these should be in time for the first payment on account for
1996-97 due by 31 January 1997.

PARTNERSHIPS

1996-97 payments on account due from partnerships are computed differently. This subject was covered in Issue 12 of Tax Bulletin. To recap, a partnership assessment will be issued for 1996-97 as usual. The partnership will pay the tax (due on 1 January and 1 July 1997) on this assessment which will be subject to appeal and postponement as normal. But, 1996-97 is the first year of self assessment and so each partner will be required to file a self assessment return reflecting his or her share of the partnership profits. In so doing each partner's share of the 1996-97 tax paid by the partnership will be credited on the personal self assessments as if the income had been received under deduction of tax. So partners will not be expected to make payments on account for 1996-97 in respect of their partnership income. They may of course be liable to make payments on account in respect of income received in their personal capacity ie. unconnected with the partnership.

DE MINIMIS AMOUNTS

Where the payments on account would be below certain limits, no payments will be required. There are two limits:

Absolute limit.

This will make it unnecessary to make small payments.

Proportionate limit.

This will exclude from the payment on account regime people whose tax is predominately collected by deduction at source, especially PAYE taxpayers.

The precise levels of these limits will be announced in good time before any payments on account are due.

THE TAX RETURN

The Inland Revenue will notify taxpayers of the expected level of their payments on account for 1996-97 sometime during the Autumn of 1996, well in advance of 31 January 1997 when the first payment will be due.

Taxpayers who complete self assessment tax returns will have the option of calculating the tax bill based on the entries they make. The form itself will guide them through this. It will also set out clearly the calculation required to arrive at the payments on account for the next year. So the 1997-98 tax return, which will cover all 1997-98 tax liabilities, will also contain guidance on the calculation of the 1998-99 payments on account.

Alternatively, taxpayers who do not wish to take this option may ask the Inland Revenue to do all the calculations for them, including the calculation of payments on account.

In addition, the taxpayer statements which the Inland Revenue will use to give taxpayers information about their "account" will contain reminders of payments which are expected (based on the information held at the time) at appropriate times during the year.

SURCHARGE

Surcharge does not apply to payments on account which are made late, (though late payments will attract interest). Surcharge can only apply in respect of the balancing payment, ie. the full tax liability for a year, less amounts deducted at source/tax credits and less the payments on account already made for the year, and then only to any part not paid by 28 February after the tax year.

EXAMPLE 2

Income tax liability for 1995-96 is as follows:

     Case I              BP10,000
Schedule A           BP3,000
Case III(untaxed)    BP1,000
Dividends            BP4,000       (out of which BP 2,000 had
been deducted at source)

The payments on account for 1996-97 will be based on:

31.1.97        All the Cases III to VI of Schedule D
and Schedule A for 1995-96
(BP3,000 + BP1,000)                 BP4,000
Half the Case I/II and
Class IV NIC for 1995-96            BP5,000
________
BP9,000
31.7.97        Half the Case I/II and
Class IV NIC for 1995-96            BP5,000

No payment on account is due for 1996-97 in respect of the dividend income.

As explained above, it is possible to make a claim to reduce or cancel the payment on account for 1996-97 just as for later years.

(Superceded by EIM23122, EIM 23198, EIM23184 onwards)

COMPANY CARS:
P11D REPORTING

Employers who provide company cars for their employees will see some differences in the information they are required to report on Forms P11D next year. These differences are the result of the changes to the method of calculating the tax benefit which came into effect from 6 April 1994.

For the benefit of practitioners and employers who might find a preview helpful, page 1 of the 1994 version of Form P11D is reproduced on page 178. Commentary on the main areas of change is below. In addition we comment on three particular aspects of the company car benefit charge where we have been asked for clarification.

THE NEW FORM P11D

The tick boxes to indicate whether a car was first registered before the 6th of April 1991 or on/after that date have been replaced by a requirement to give the date of first registration of the car. We still need to know whether a car is under or over 4 years old at the end of the tax year for the purposes of deciding whether a discount for age is due but in addition the date of first registration of the car is a factor in determining the price of the car for tax purposes.

The requirement to show the value of the car when new has been replaced with a requirement to give the price of the car and the price of any optional accessories provided when the car was first available to the director/employee, and the price of accessories added after the car was first made available. The benefit charge is now based on the manufacturer's, importer's or distributor's list price at the date of first registration irrespective of the price actually paid for the vehicle. There are exceptions, however, for "classic cars" and for cars where there was no list price published. In the latter case the rules about notional price apply. This is explained in IR132: Taxation of Company Cars from 6 April 1994: Employers' Guide. A more detailed explanation of the new arrangements for car benefits will be included in the 1995 edition of booklet 480 which will be available early next year.

The mileage boxes remain and the business mileage bands are virtually identical to those under the old scale charge rules. The mileage bands determine whether a discount is due in calculating the benefit charge. The form now makes provision for business mileage to be recorded separately for a second car.

The car benefit charge is 35% of the price of the car for tax purposes. That figure is reduced by 1/3rd if the employee's business mileage in the car is 2,500 miles or more in the year or by 2/3rds if the business mileage is 18,000 miles or more in the year.

If a car is available for less than a year (eg. where an employee has successive cars in the same year -- whether with the same employer or different employers), the benefit charge for each car is separately calculated and is proportionately reduced to take account of periods when the car was not available to the employee. The P11D asks for the annual mileage figure based on the actual business mileage in the car and the time it was made available.

The P11D no longer asks for the precise engine capacity because this is no longer relevant to the calculation of the car benefit charge. However where there is a fuel benefit, the form now asks for an indication of engine size within 3 broad bands for the purpose of calculating the amount of the fuel charge.

The information previously requested on page 1 about drivers wages and allowances paid for business use of the employee's own car have been moved to page 2 of the new form.

LIST PRICE

There has been some discussion in the technical and popular press about whether the price advertised by a car dealer can be used instead of the price published by the car's manufacturer etc. The Inland Revenue does not accept that this interpretation is correct.

The argument has been advanced that a car dealer should be regarded as a "distributor" for the purposes of the legislation at Section 168A ICTA 1988. Such an interpretation could result in multiple price lists for each car, published by everyone involved right from its original manufacture to its final sale. In the Inland Revenue's view there is nothing within the structure or language of Section 168A to warrant that interpretation. It includes no provision for choosing between different prices for the same type of car. It also draws a distinction between "manufacturer, importer or distributor" and the "seller".

CAPITAL CONTRIBUTIONS

We have been asked on a number of occasions for clarification of the treatment of capital contributions within Section 168D ICTA 1988 where part of that contribution is refundable to the employee on the sale of the vehicle to a third party.

The terms of the agreement between the employer and the employee governing the payment of the contribution towards the cost of the car may provide that, on the eventual sale of the vehicle, the employee will be entitled to a repayment of part of the capital contribution by reference to the disposal value in the same proportion as the original contribution bore to the cost of the car. In these circumstances the Inland Revenue will not seek to take a charge under Schedule E on the amount repaid. An agreement of this nature would not prejudice the application of Section 168D in the calculation of the price of the car as regards the year(s) for the period when the benefit arises.

However, where the agreement provides that the amount will be repaid in full on the eventual disposal, the employee would not be regarded as having made a "capital contribution" within Section 168D.

"CHERISHED" NUMBER PLATES

We have also been asked how cherished or personalised number plates which are provided with a company car by an employer should be taken into account in calculating the car benefit charge.

Under the new arrangements for taxing company cars, the number plate itself, as opposed to the right to use a particular registration, is a qualifying accessory and so must be included in the price of the car as regards the year for tax purposes. (Although, if the car is re-registered with new plates the rules about replacement accessories (Section 168E ICTA 1988 and SI 1994 No 777) or accessories added after the car is first made available (Section 168C ICTA 1988) may be applicable.)

However, most of the value in "cherished" number plates lies in the intangible right to use a particular registration mark. The value of that right will not then be included in the list price or notional price of the company car. Where appropriate, Section 155(1) will exclude the benefit of that right from Section 154.

(Superceded by INTM 120070)
INTERNATIONAL TAXATION:
COMPANY RESIDENCE

Sections 249 to 251 Finance Act 1994 introduced changes to the rules on company residence for certain dual resident companies. This article answers various questions that we have been asked about the new rules.

WHAT IS A DUAL RESIDENT COMPANY?

A dual resident company is one which, but for the new rule, would be regarded as resident in the UK for UK tax purposes and as resident in some other country for the tax purposes of that country.

WHEN IS A COMPANY REGARDED AS RESIDENT IN THE UK FOR UK TAX PURPOSES?

When the company is either incorporated, or centrally managed and controlled, in the UK.

WHEN IS A COMPANY REGARDED AS RESIDENT IN ANOTHER COUNTRY FOR ITS TAX PURPOSES?

That would depend on the tax law of that country.

WHAT IS THE NEW RULE?

The new rule provides that if a company would, but for the new rule, be regarded as dual resident in the UK and some other country, but as resident in the other country and not in the UK for the purposes of a Double Taxation Agreement (DTA) between the two countries, then it is to be treated as not resident in the UK for UK tax purposes.

WHAT IS THE EFFECT OF THE NEW RULE?

It brings the treatment of the company for UK tax purposes into line with its treatment under the DTA, thereby removing mismatches between the two.

DOES THE NEW RULE AFFECT ALL DUAL RESIDENT COMPANIES?

No. It can only apply where there is a comprehensive DTA in force between the UK and the other country which includes a tie-breaker for dual resident companies under which the residence of the company would be awarded to the other country.

DO ALL UK DTAs INCLUDE A TIE-BREAKER FOR DUAL RESIDENT COMPANIES?

No. The comprehensive DTAs in force at 1 March 1994 were listed in Issue 11 of Tax Bulletin. Of these, the following include a tie-breaker for dual resident companies, so the new rule can apply to companies dual resident in the UK and that country:

Australia
Austria
Bangladesh
Barbados
Belarus
Belgium
Botswana
Bulgaria
Canada
China
Croatia
Cyprus
Czech Republic
Denmark
Egypt
Falkland Islands
Fiji
Finland
France
Gambia
Germany
Ghana
Guyana
Hungary
Iceland
India
Indonesia
Ireland, Republic of
Israel
Italy
Ivory Coast
Jamaica
Japan
Kenya
Korea, Republic of
Luxembourg
Macedonia
Malaysia
Mauritius
Morocco
Namibia
Netherlands
New Zealand
Nigeria
Norway
Pakistan
Papua New Guinea
Philippines
Poland
Portugal
Romania
Russian Federation
Singapore
Slovak Republic
Slovenia
South Africa
Spain
Sri Lanka
Sudan
Swaziland
Sweden
Switzerland
Thailand
Trinidad and Tobago
Tunisia
Turkey
Ukraine
Uzbekistan
Yugoslavia
Zambia
Zimbabwe.

The following do not include a tie-breaker for dual resident companies, so the new rule can not apply to companies dual resident in the UK and that country:

Antigua and Barbuda
Belize
Brunei
Faroe Islands
Greece
Grenada
Guernsey
Isle of Man
Jersey
Kiribati
Lesotho
Malawi
Malta
Montserrat
Myanmar
St Kitts and Nevis
Sierra Leone
Solomon Islands
Tuvalu
Uganda *
USA.

* The new treaty, effective from 1 April 1994, does contain a tie-breaker and so the new rule can apply from that date.

CAN THE PROVISION FOUND IN SOME DTAs THAT A COMPANY IS REGARDED AS RESIDENT IN THE OTHER COUNTRY IF ITS BUSINESS IS MANAGED AND CONTROLLED THERE TRIGGER THE APPLICATION OF THE NEW RULE?

No, these words are not a tie-breaker.

A number of UK DTAs (eg. those with the Channel Islands) define a "resident of the other country" to be a person who is resident in that country for the purpose of its tax and not resident in the UK for the purposes of UK tax, and add that a company shall be regarded as resident in the other country if its business is managed and controlled there. The additional words are not a tie-breaker. They do not override or displace the main definition. A person is entitled to treaty benefits under these agreements only if the person is resident in one country and not resident in the other. Dual residents are therefore not entitled to treaty benefits.

There was no statutory definition of residence for companies in the UK when these words were first used. But the courts had developed a case law test of central management and control. The additional words confirmed that the test of residence developed by the courts would be followed in the DTA. That has been overtaken by the development of statutory and case law definitions of residence in the UK and other territories. The main definition must be applied by reference to the definitions of residence for tax purposes in the respective territories today. If a company is dual resident under that test, it is not entitled to treaty benefits. The additional words cannot alter that.

DOES THE TIE-BREAKER FOR DUAL RESIDENT COMPANIES ALWAYS DEPEND ON THE PLACE OF EFFECTIVE MANAGEMENT, AS IN THE OECD MODEL TAX CONVENTION?

Not always. The tie-breaker for dual resident companies in the OECD model tax convention awards residence to the country in which the place of effective management of the company is situated. Although this is followed
in many UK DTAs, there are variations in some. The particular DTA must be consulted to establish the test to
be applied.

DOES EFFECTIVE MANAGEMENT MEAN THE SAME AS CENTRAL MANAGEMENT AND CONTROL?

The term "place of effective management" has not been considered by UK courts. The commentary to the OECD model tax convention explains that it is the place where the company is actually managed. In practice, effective management is normally found in the same place as central management and control, but that is not always the case. In considering the place where the company is effectively managed, it is necessary to have regard to all the relevant facts including the organisation of the company and the nature of its business and to decide where it is in substance actually managed. In particular where the central management and control of a company was transferred from or to the UK, for instance by changing the place where decisions of the Board were made, it would not necessarily follow that the place of effective management would also be transferred, for instance if the place from which the company was actually managed remained the same.

WHICH TAX AUTHORITY DECIDES WHETHER THE COMPANY WOULD BE REGARDED AS NOT RESIDENT FOR THE PURPOSES OF THE DTA?

The decision whether the company should be regarded as resident in the other country for its tax purposes, and for the purposes of the DTA, would normally be made by the UK Inland Revenue by applying the tax law of the other country and the tie-breaker in the DTA respectively to the facts of the case. In most cases, including all DTAs which use the place of effective management as the sole test, the tie-breaker depends on an objective test which can be applied by the UK Inland Revenue unilaterally in applying the new rule. But with some DTAs, that is not possible. For instance, the tie-breaker in the DTA with Canada depends on agreement between the two tax authorities.

WHAT IS THE POSITION WHEN THE TIE-BREAKER DEPENDS ON AGREEMENT BETWEEN THE TWO TAX AUTHORITIES, AS IN THE DTA WITH CANADA?

The new rule will apply in such cases only if the two tax authorities have agreed that the company should be regarded as resident in the other country for the purposes of the DTA.

CAN THE NEW RULE APPLY WHERE THE COMPANY HAS NOT CLAIMED DOUBLE TAXATION RELIEF?

Yes, provided the tie-breaker depends on an objective test which the UK Inland Revenue can apply unilaterally. There is no requirement that relief has been, or could be, claimed under the DTA before the new rule can apply. But, where the tie-breaker depends on agreement between the two tax authorities, as with Canada, the new rule can apply only where a claim has been made for relief under the DTA which depends on the determination of the tie-breaker, and residence has then been awarded to the other country.

ARE THERE SPECIAL RULES FOR COMPANIES WHICH WERE CAUGHT BY THE NEW RULE WHEN IT CAME INTO EFFECT?

Yes. The new rule came into effect on 30 November 1993. Any company which was dual resident in the UK and some other country at that date and would have been regarded as resident in the other country under the DTA between the UK and that country is treated as having ceased to be resident in the UK on that date. There are transitional provisions in Section 250 FA 1994 for those cases. The obligation under Section 130 FA 1988 to obtain approval from the Inland Revenue before ceasing to be resident is removed. The exit charge under Section 185 TCGA 1992 applies, but only to gains which are not exempt under the DTA, as the company would have been regarded as resident in the other country for DTA purposes prior to ceasing residence. In most cases the exit charge would be limited by the DTA to gains on land in the UK. The exit charge is deferred for up to six years, or until the asset is disposed of, if earlier. The degrouping charge under Section 179 TCGA 1992 is also disapplied.

CAN COMPANIES CEASE RESIDENCE BY VIRTUE OF THE NEW RULE IN THE FUTURE?

Yes. But the company is required under Section 130 FA 1988 to obtain approval from the Inland Revenue and to make satisfactory arrangements for the payment of any outstanding tax before it ceases residence. There would be an exit charge under Section 185 TCGA 1992 (and there can be no exemption under the DTA as this arises prior to the company becoming non-resident for the purposes of the DTA). In most cases, we would also need to be satisfied after the event that the company had become resident for tax purposes in the other country and would be regarded as resident there for the purposes of the DTA, including certification from the other tax authority where appropriate.

WOULD PENALTIES BE INCURRED IF A COMPANY CEASED RESIDENCE THROUGH THE OPERATION OF THE NEW RULE IN THE FUTURE WITHOUT FIRST OBTAINING APPROVAL FROM THE INLAND REVENUE?

Penalties would be incurred under Section 131 FA 1988. The amount of the penalty would depend on all the facts of the case and could be wholly mitigated where appropriate, eg. where there was no intention of changing the residence of the company.

IN WHAT CIRCUMSTANCES WILL THE NEW RULE APPLY?

Most companies are clearly resident in one country only for tax purposes, eg. the country in which the company is incorporated and wholly managed, and the new rule cannot apply. Most companies which are dual resident in the UK and another country with which we have a DTA which includes a tie-breaker are clearly resident in one of those countries for the purposes of the DTA, eg. the country in which it is wholly managed, and the new rule will be applied accordingly.

But there are some marginal cases where, although the company is clearly resident in the UK, eg. the company is incorporated and mainly managed here, it is unclear whether the company might also be regarded as resident for tax purposes in some other country with which we have a DTA which includes a tie-breaker and if so whether residence would be awarded to that country under the tie-breaker, eg. where some vestige of management lies in the other country.

In these marginal cases in which it is unclear whether the new rule would apply, we will have regard to the purpose of the legislation in deciding whether it should be invoked. This was set out in a Press Release on Budget Day which explained that the Chancellor's intention was to bring the treatment of the companies affected into line with their treatment under the DTA to prevent the loss of tax to the Exchequer which could result from multinationals using differences in treatment to reduce their tax liabilities in the UK.

For instance, we have been asked whether a holding company incorporated in the UK to hold the UK members of an overseas group, which was managed in the UK and intended to be treated for all tax purposes as UK resident only, might nevertheless be caught by the new rule since some element of management could be regarded as lying with the overseas parent. In these circumstances, the presumption would be that the new rule did not apply provided there was no loss of tax to the Exchequer from differences between the treatment of the holding company for UK and DTA purposes. Entitlement to purely domestic reliefs, for instance to group relief with and between members of the UK subgroup, does not involve any such loss. But the new rule would then apply if the company claimed relief under the DTA which depended on the tie-breaker and residence was awarded for that purpose to the other country.

An example of loss to the Exchequer from differences in treatment for UK and DTA purposes is where a dual resident company is trading overseas and would be able to claim exemption on trading profits by virtue of the tie-breaker. In that case, as explained in the Budget Day Press Release, the new rule would also apply to a company incurring trading losses to prevent those losses being surrendered as group relief.

CAN A COMPANY APPEAL AGAINST A DECISION BY THE INLAND REVENUE ON THE APPLICATION OF THE NEW RULE?

The company would be able to appeal to the Commissioners and the Courts against an assessment or a decision on a claim, either of which depended on the decision by the Inland Revenue on the application of the new rule, and thereby against that decision.

revenue interpretations

CAPITAL GAINS TAX:
TRANSFERS AT UNDERVALUE
TO EMPLOYEES OR DIRECTORS

Where an asset is transferred by an employer to an employee or a director in connection with the employment or services, Section 17(1)(b) of the Taxation of Chargeable Gains Act 1992 deems the consideration for the transfer to be at market value. For capital gains tax therefore the employer is treated as disposing of the asset at market value and the employee as acquiring it at that value.

But where the consideration actually paid by the employee is less than market value the difference will usually be chargeable to income tax on him as a Schedule E emolument. In such circumstances it has been our practice, in computing any capital gains tax payable by the employer on the disposal, and subject to certain conditions, to take the actual consideration paid, and not the market value of the asset, as the consideration for the transfer. The effect is to reduce the amount of the employer's chargeable gain. The employee continues to be regarded as having given market value consideration in calculating any gain on a subsequent disposal of the asset.

The Schedule E and the capital gains charges that can arise on such transfers at undervalue are quite distinct, arising on different taxpayers and separately calculated. We have concluded that there are no grounds for the continuance of this concessionary practice and it is therefore being withdrawn. The correct statutory treatment will apply to transfers of assets on or after 6 April 1995.

[Section 17(1)(b) TCGA 1992]

FARMING:
THE TIME AT WHICH ANIMAL GRANTS /
SUBSIDIES SHOULD BE RECOGNISED FOR TAX PURPOSES

The general principles for dealing with timing issues relating to grants and subsidies were set out in the article on Arable Area Payments page 108 of Issue 10 of Tax Bulletin.

That article did not comment on animal grants as, at that stage, we were awaiting accounting evidence.

We have now received representations from accountancy bodies about the correct time to recognise the following animal grants/subsidies;

Suckler Cow Premium Scheme
Beef Special Premium Scheme
Sheep Annual Premium Scheme
Hill Livestock Compensatory Allowances
Extensification Payments

After considering those representations we accept that, in most circumstances, correct accounting practice currently provides that it will be appropriate to recognise the grants listed above either:

at the end of the retention period, or
on receipt.

If either of these bases is consistently used in the accounts then Inspectors will accept that it is a valid basis for tax purposes.

Other bases may be recognised by accountancy bodies as reflecting the correct application of generally accepted accounting practice to the facts in particular cases. Inspectors will accept that such bases are valid provided they do not violate the taxing statutes as interpreted by the Courts.

A change from the basis of recognition that is currently being used should only be made where the need to change outweighs the requirement that accounts should be produced on a consistent basis. Where such change is justified it will be dealt with in accordance with SP3/90, but practitioners should note that a change in accounting policy is one of the 'triggers' in the anti-avoidance proposals in connection with the transition to current year basis periods.

We are sometimes asked about the effect of animal grants/subsidies on valuations which are prepared on the basis of "deemed cost" as described in Section 7 of Business Economic Note 19. Where a grant/subsidy has been taken into account in full in a particular period then there is no effect on such valuations. Where a receipt has not been taken into account in a particular period but:

the grant/subsidy has been applied for, and
that application had a material effect on the market value of the animal,

then the grant should be taken into account as a supplement to the market value when deemed cost is computed.

Grants/subsidies which have been applied for but not recognised as income in the period concerned should also be taken into account in arriving at net realisable value for stock valuation purposes.

INHERITANCE TAX:
BUSINESS & AGRICULTURAL RELIEF

The inheritance tax (IHT) legislation provides relief for transfers of agricultural property and for business property. We have been asked for our views on the availability of relief

where agricultural property is replaced by business property (or vice versa) shortly before the owner's death; and
on the donor's death, where the donee of a potentially exempt transfer of agricultural property has sold it and reinvested the proceeds in a non-agricultural business (or vice versa).

A 'potentially exempt transfer' (PET) is a lifetime transfer which only becomes chargeable to IHT if the donor dies within seven years of the transfer.

All statutory references in this article are to the Inheritance Tax Act (IHTA) 1984.

IHT business and agricultural relief reduces the value of relevant business property, or the agricultural value of agricultural property, by either 50 or 100 per cent. The rate of relief depends on the nature of the property and interest held.

The qualifying conditions for the relief include requirements of a minimum period of ownership and, in the case of agricultural property, of occupation of the property for agricultural purposes immediately before the transfer. If, and to the extent that, the same property may qualify for relief as both agricultural property and business property, Section 114 prevents double relief.

There are also rules which allow for the sale and replacement of qualifying property. The replacement is qualifying property only if it, and the original qualifying property, have together been owned (and, in the case of agricultural property, occupied) for a combined minimum period.

In the Revenue's view, where agricultural property which is a farming business is replaced by non-agricultural business property, the period of ownership of the original property will be relevant for applying the minimum ownership condition to the replacement property. Business property relief will be available on the replacement if all the conditions for that relief are satisfied. Where non-agricultural business property is replaced by a farming business, and the latter is not eligible for agricultural property relief, Section 114(1) does not exclude business property relief if the conditions for that relief are satisfied.

There could be cases where, for example, agricultural land is not part of a farming business, so any replacement could only qualify for business property relief if it satisfied the minimum ownership conditions in its own right. However, our experience suggests such cases are likely to be exceptional.

Where the donee of a PET of a farming business sells the business, and replaces it with a non-agricultural business, the effect of Section 124A(1) is to deny agricultural property relief on the value transferred by the PET. Consequently, Section 114(1) does not exclude business property relief if the conditions for that relief are satisfied; and, in the reverse situation, the farming business acquired by the donee can be "relevant business property" for the purposes of Section 113B(3)(c).

[Part V Chapters I & 11 IHTA 1984, as amended by Section 73 Finance (No 2) Act 1992 and Section 247 Finance Act 1994.]

LOSS RELIEF: LATE CLAIMS

We have been asked to explain how we respond to taxpayers who seek loss relief under Sections 380 and 381 Income and Corporation Taxes Act (ICTA) 1988 outside the statutory time limits.

Claims to relief under Sections 380(1) and (2) and Section 381 have to be made within two years (extended by Statutory Regulations for Lloyd's underwriters), except where Sections 36(3), 43(2) or 43A Taxes Management Act (TMA) 1970 apply.

For Section 380(2) claims, the normal time limit expires two years after the year for which relief is claimed; otherwise, it expires two years after the year of loss. For example, where a loss was sustained in 1993-94, any claims under Sections 380(1) or 381 should be made by 5 April 1996; any claim under Section 380(2) by 5 April 1997.

There is no provision in the Taxes Acts enabling claims to be admitted outside these time limits and the Board is unable to accept late claims as such. It is, however, prepared, in certain circumstances, to exercise its general powers of care and management under Section 1 TMA 1970 to grant such relief as would have been due if the claim had been made within time. These circumstances were set out by the then Financial Secretary to the Treasury (John Moore MP) in a written reply to a Parliamentary Question on 10 December 1985. Broadly, they are where the taxpayer or agent

has been misled by some relevant and uncorrected error on the part of the Revenue;
had made an informal claim within the time limit which fell short of a clear and unambiguous statement of what was being claimed but which he or she reasonably believed was an acceptable claim, and the need to formalise the claim was not, within the time limit, pointed out by the Revenue; or
had effectively been prevented from making an in-date claim for reasons beyond his or her control.

All the other conditions for relief will, of course, still need to be satisfied; and the late claim must have been made within a reasonable period (not normally more than three months) after the expiry of the excuse.

What constitute acceptable reasons for late claims will depend upon the facts of each individual case. However, there are a number of common explanations which the Revenue do not normally accept as falling within these criteria. These include:

Delay in preparing the accounts disclosing the loss, unless the delay is itself outside the control of the taxpayer or his agent. Past delays will not be regarded as reasonable excuses even where efforts are being made to bring matters up to date;
Delay by the Revenue agreeing the accounts. (But it should be noted that a valid claim can be made before the accounts have been either submitted or agreed. A valid claim must state the source of the loss, the year of loss and either the year of claim or the precise statutory provision under which relief is claimed, eg. Section 380(1), Section 381, etc.);
Misunderstandings between taxpayers and their agents, and failures to pass information between each other;
Oversight or neglect by current or previous agents;
Ignorance of the statutory time limits;
Deliberate decisions to delay the making of the claim because it was unclear when the time limit expired whether the claim was advantageous.

Where a taxpayer or agent believes he or she is entitled to the benefit of this practice, a late claim should be made to the local tax inspector explaining why it was not made within the statutory time limit.

There is no statutory right of appeal against the Revenue's application of this practice but any taxpayer who disputes the decision of a local office can ask for it to be reviewed by the District Inspector or the Controller of the Executive Office concerned.

[Sections 380 and 381 ICTA 1988]

(Article deleted since index 2002)

SECTIONS 380 AND 574 ICTA 1988 --
PRIORITY OF RELIEFS --
TRANSITION TO NEW RULES

Relief for trading losses to be offset against total income may be claimed under Section 380 Income and Corporation Taxes Act (ICTA) 1988 in one year in respect of losses sustained in different years. For example, a 1991-92 loss claimed under Section 380(2) and a 1992-93 loss claimed under Section 380(1), both against 1992-93 income. Following the changes made by Section 209 Finance Act 1994, a 1996-97 loss may similarly be claimed under Section 380(1)(a) and a 1997-98 loss under Section 380(1)(b), both against 1996-97 income. Equivalent claims may be made under Section 574 ICTA in respect of losses sustained on certain unquoted shares.

The legislation specifies the order in which these reliefs are to be given. Relief for a loss sustained in an earlier year is given before relief for a later year's loss. (Old Sections 380(2) and 574(2)(a); new Sections 380(2) and 574(2).)

During the transitional period, loss reliefs could be claimed against the same year's income under both the old and the new rules. For example, a 1993-94 loss may be claimed under old Section 574(1) and a 1994-95 loss may be claimed under new Section 574(1)(b). Both will be relieved against 1993-94 income.

There is no statutory order of priority between the relief due under the old rules and that due under the new rules. Section 835(4) ICTA 1988 will therefore apply, ensuring the reliefs are given in the order which saves most tax. In practice, therefore, taxpayers can choose the order in which these reliefs are given.

[Sections 380, 574 and 835 ICTA 1988]

!This article is no longer current (Deleted Index 2002)

SCHEDULE D CASES I AND II:
THE USE OF FORMULAE TO COMPUTE
STOCK PROVISIONS AND WRITE DOWNS

GENERAL BACKGROUND PAPERS

The ASC published its revised Statement of Standard Accounting Practice No. 9 on Stocks and Long-term Contracts in September 1988. On 10 January 1990 the Revenue published Statement of Practice (SP) 3/90 which comments on aspects of stock valuation. SP 3/90 also deals with the treatment of Long-term Contracts -- a subject not dealt with in this article.

BASIC PRINCIPLES

The profit computed by the correct application of generally accepted accounting practice to the particular facts is the starting point for the computation of the taxable trading profit. For stocks, generally accepted accounting practice, as detailed in SSAP9, is to calculate the profit or loss for an accounting period by matching costs with related income. Therefore at the accounting date the cost of unsold or unconsumed stocks should be identified and carried forward as the related income would not arise until a later year. At the accounting date, however, there may be a reasonable expectation that the proceeds of sale of some stock in future years will not produce enough income to cover its cost. If so, a loss on such stock should be recognised in the year under review by writing off the irrecoverable costs incurred. Thus, stocks normally need to be stated at cost, or, if lower, at net realisable value. Net realisable value may be less than cost because of deterioration, obsolescence or changes in demand.

APPLYING FORMULAE

Generally the stock should be valued item by item, but accounting practice permits groups of similar items to be considered together and allows net realisable value to be arrived at by applying to the cost of similar stocks a formula based on predetermined criteria. Some of the factors that such a formula would normally take into account are the age and condition, past and anticipated future demand and the scrap value of those stocks. The results of applying the formulae should be reviewed to ensure that they are likely to give a reasonable approximation of net realisable value. In particular they should be adjusted for any additional special circumstances and to take into account events occurring between the balance sheet date and the date when the accounts are approved which provide additional evidence of the value of stocks at the balance sheet date.

SLOW MOVING STOCK

If stock is slow moving it may be a pointer that the net realisable value is likely to be less than cost, eg. because it is likely to become obsolete before it can be sold. In some cases the formula adopted is that a percentage of the costs of each category of stock is written off depending upon its age. But the fact that stock is slow moving does not of itself mean that its net realisable value will be less that its cost. Therefore although age related formulae may often give acceptable results that is not always the case.

OUR APPROACH

Inspectors will accept provisions and write downs arrived at using formulae, including age related formulae, provided that each formula reflects a realistic appraisal of the future income from the particular category of stock and results in the stock being included at a reasonable estimate of its net realisable value. This is not an area where we expect pinpoint accuracy, but Inspectors will challenge provisions based on unrealistic assumptions where the effect on the tax liability is significant.

After reviewing the position in a particular case an Inspector may agree that certain formulae are appropriate and indicate that it is not intended to review the position for a specified number of years, though the Inspector's right to review the position during that period would remain. For their part traders and their agents should check each year that the agreed formulae still give a reasonable approximation of the net realisable value of the stock.

When Inspectors accept computations without enquiry it is on the assumption that traders and their agents have ensured that the taxable trading profits declared are arrived at in accordance with the above principles and SP 3/90.

! This Article Is No Longer Current (Deleted Index 2001)

SCHEDULE E:
EXPENSES RULE --
ALLOWABLE BUSINESS TRAVEL

We have been asked whether, in order to qualify for tax relief on their travelling expenses, employees must always take the shortest route on a business journey. This question might arise, for example, when it would be quicker for someone to travel more miles along a motorway than to take the shortest route across country, possibly through country lanes, or to go across a city or town where there might be heavy traffic.

When it comes to calculating allowable business miles our responsibility under the law is that we must be satisfied the journey made by the employee actually was a business journey. That is that the travelling expenses were incurred necessarily in the performance of the duties.

Looking at the most straightforward position first. When an employee has to go from his or her normal place of work to visit a client, and then returns to that normal place of work, the expenses of a journey longer than the shortest route may be allowable, provided the alternative route has been selected for good business reasons.

Similar considerations apply in the "triangular travel" situation when applying the "lesser of" rule in Paragraph 8.4 of Booklet 480. We need to be satisfied that when an employee travels from home to a temporary place of work or returns home directly after such a visit, the journey was in fact a business journey. Having satisfied ourselves that the journey undertaken was a business one, we would compare the cost of that journey with the cost of the journey from the normal place of work to the temporary place of work by the same mode of transport.

We shall include this clarification in the next reprint of Booklet 480.

[Section 198 ICTA 1988]

miscellaneous

NEW PROCEDURAL RULES FOR GENERAL COMMISSIONERS: THE REVENUE VIEW ON THE TRANSITIONAL PROVISIONS AND INFORMATION NOTICES

This article explains how the transitional provisions in the new statutory regulations on appeals to the General Commissioners affect Commissioners notices requiring information.

BACKGROUND

The Lord Chancellor introduced Procedural Rules for the General and Special Commissioners which came into force on 1 September this year. These rules provide a statutory framework for conducting appeals before the Commissioners. For the General Commissioners, the rules apply to any proceedings heard on or after 1 September 1994. However, it is possible to elect that the new rules should not apply to proceedings where any notice of hearing relating to that appeal had been issued before 1 September 1994. The rules also include transitional provisions, to apply where no election has been made, for proceedings which had commenced but had not been completed prior to the introduction of the new rules. These transitional provisions may be relevant where a precept had been issued under Section 51 TMA 1970 prior to the introduction of the rules and action is requested of the Commissioners to enforce compliance on or after 1 September 1994.

THE PROBLEM

Some commentators have suggested that in such a case the Commissioners cannot take any action because of the wording of Regulation 10. This replaces Section 51 TMA 1970, and provides that sanctions are applicable where "a notice is served under this regulation". If this view were correct then in order for the Commissioners to consider the award of a penalty for non-compliance with the precept, the Revenue would have to elect under Regulation 1(2)(a) for continuing application of the previous legislation. The sanctions at Section 53 TMA 1970 would then be available to the Commissioners.

OUR VIEW

We do not consider that an election is necessary in this situation because Regulation 1(3) deals with proceedings which began before the introduction of the rules. It provides that "anything done in relation to these proceedings prior to [the introduction of the rules] which, if the proceedings had been brought before the General Commissioners on or after [their introduction], could have been done [under the new rules], shall have effect as if done [under the new rules]". We interpret this transitional provision as meaning that in continuing proceedings, to which the new rules apply, the information notice is treated as having been issued under Regulation 10(1). A penalty for non-compliance under Regulation 10(3) may be awarded accordingly.

! This Article Is No Longer Current (Deleted Index 2004)

PENSION SCHEMES OFFICE --
SYNOPSIS OF MEMORANDUM

The Pension Schemes Office (PSO) issued Memorandum No 120 to practitioners on the PSO Mailing List in July.

The Memorandum contains a report of the findings so far from the Office's audits of retirement benefit schemes, a few clarifications of PSO discretionary practice and announces in particular a new revised funding basis for insured schemes using money purchase contracts.

The Memorandum outlines the provisions of Sections 103-106 Finance Act 1994 which modify the existing information powers to provide a basis for the future development of compliance audit work by the PSO. A more detailed article will feature in a future Tax Bulletin when the statutory regulations under Section 105 are laid.

A copy of the Memorandum can be obtained by writing to

PSO Supplies Section,
Lynwood Road,
Thames Ditton,
Surrey
KT7 0DP

or by telephoning 081-398 4242 extension 4254.

! This Article Is No Longer Current (Deleted Index 1998)

RECOGNISED STOCK EXCHANGES OVERSEAS

The phrase "recognised stock exchange" occurs throughout the Taxes Acts and in Regulations. For example, references occur in the definition of a close company in Section 415 Income and Corporation Taxes Act (ICTA) 1988, in the valuation of securities in Section 273 Taxation of Chargeable Gains Act (TCGA) 1992, in the eligibility for roll-over relief on reinvestment under Part V Chapter IA TCGA 1992 and in the definition of assets which may be held in Personal Equity Plans (Statutory Instrument 1989 No 469).

The definition of a "Recognised Stock Exchange" is in Section 841 ICTA 1988. It includes the London Stock Exchange and any such Stock Exchange outside the UK designated as approved by an order of the Board of Inland Revenue. There is no link between recognition under Section 841 for tax purposes and recognition or approval for regulatory or any other purposes.

The Board's policy is to consider recognition on receipt of a request made by or on behalf of an overseas stock exchange. The fact that a particular exchange is not on the list may simply mean that recognition has not been requested. The exchanges currently recognised are listed below. Enquiries regarding applications for recognition or the date on which particular exchanges were first recognised should be sent to:

Financial Markets Section,
Financial Institutions Division,
22 Kingsway,
LONDON
WC2B 6NR

List of Stock Exchanges designated as "recognised stock exchanges" by order of the Board under Section 841(1)(b) Income and Corporation Taxes Act 1988, as at 10 October 1994

The Athens Stock Exchange
The Australian Stock Exchange and any of its stock exchange subsidiaries
The Basle Stock Exchange
The Colombo Stock Exchange
The Copenhagen Stock Exchange
The Geneva Stock Exchange
The Helsinki Stock Exchange
The Johannesburg Stock Exchange
The Korea Stock Exchange
The Kuala Lumpur Stock Exchange
The Mexico Stock Exchange
The New Zealand Stock Exchange
The Singapore Stock Exchange
The Stockholm Stock Exchange
The Stock Exchange of Thailand
The Zurich Stock Exchange

Any stock exchange in the following countries which is a stock exchange within the meaning of the law of the particular country relating to stock exchanges (or as specified below)

Austria
Belgium
Canada -- Any stock exchange prescribed for the purposes of the
Canadian Income Tax Act
France
Federal Republic of Germany
Hong Kong -- Any stock exchange which is recognised under Section 2A(1) of
the Hong Kong Companies Ordinance
Italy
Japan
Luxembourg
Netherlands
Norway
Portugal
Spain
USA -- Any exchange registered with the Securities and Exchange Commission
of the United States as a national securities exchange
USA -- The NASDAQ Stock Market as maintained through the facilities of the
National Association of Securities Dealers Inc. and its subsidiaries

TAX BULLETIN:
SUBSCRIPTIONS FOR 1995

The current subscription rate for Tax Bulletin of £7.50 per annum was based on four issues a year. With the increase to six issues announced in October there will be an increase to the annual subscription rate. We are currently exploring the possibility of contracting out the subscription and distribution of Tax Bulletin which is now undertaken by our Press Office. We hope that the new arrangements will introduce more flexibility into our distribution in that we are considering the possibility of selling single issues. At the time of going to print, however, negotiations are still taking place and we are unable to set the rate of subscription for 1995.

Current subscribers will receive Tax Bulletin until the new arrangements are in place. They will then be notified of both the new rate and how to continue their subscription. New subscribers should write to Tom Davis or Alan Brown at the Inland Revenue Press Office (see back page for address) who will ensure their names are added to our list for 1995.

INLAND REVENUE STATEMENTS OF PRACTICE AND EXTRA-STATUTORY CONCESSIONS ISSUED BETWEEN 1 OCTOBER 1994 AND 30 NOVEMBER 1994

EXTRA STATUTORY CONCESSIONS

Number    Title                                           Date of Issue
A86        Blind persons' allowance                               06/10/94
A87        Income Tax: Loss Relief                                16/11/94
A88        Income Tax: Loss Relief                                16/11/94
D49        Capital Gains Tax Private
Residence Relief: short delay by owner
occupier in taking up residence                        07/10/94
D40        Non-resident trusts: definition                        07/10/94
of participator                                        (revised)
B18        Payments out of discretionary trusts                   07/10/94
(revised)
D15        Relief for the replacement of
business assets: unincorporated                        18/10/94
associations                                           (revised)
D26        Relief for exchanges of joint                          18/10/94
interests in land                                      (revised)
D27        Earn-outs                                              18/10/94
(revised)
D39        Extension of leases                                    18/10/94
(revised)

STATEMENTS OF PRACTICE

There have been no new nor revised Statements of Practice issued since 1 October.

You can get copies of SPs and ESCs from Christine Jordan at the Public Enquiry Room, Somerset House. Telephone 071-438 7772.

CONTENT

The content of Tax Bulletin gives the views of our technical specialists on particular issues. The information published is reported because it may be of interest to tax practitioners. Publication will be six times a year, and include a cumulative index on an annual basis.

You can expect that interpretations of the law contained in the Bulletin will normally be applied in relevant cases, but this is subject to a number of qualifications.
Particular cases may turn on their own facts, or context, and because every possible situation cannot be covered there may be circumstances in which the interpretation given here will not apply.
There may also be circumstances in which the Board would find it necessary to argue for a different interpretation in appeal proceedings.
"Revenue decisions" report conclusions that were reached on the facts of individual cases, but do not necessarily include all the detailed facts which may have been relevant to the decision. They provide an indication of the approach the Revenue has adopted in the past, but have not been drafted as generally applicable statements of the Revenue's position. It cannot be assumed therefore, that interpretations of the law contained or implicit in these decisions will necessarily be applied in other cases.
The Bulletin does not replace formal Statements of Practice.
The Board's view of the law may change in the future. Readers will be notified of any changes in future editions.

Nothing in this Bulletin affects a taxpayer's right of appeal on any point.

Letters on any article appearing in Tax Bulletin should be sent to the Editor, Louise Boyle, Room 402, 22 Kingsway, London WC2B 6NR. We are sorry though that neither she nor our contributors will normally be able to enter into correspondence about Tax Bulletin or its contents.

SUBSCRIPTION

The subscription for 1994 is £7.50. The revised rate for 1995 has not yet been set (see article on page 186 for more detail). If you would like to subscribe to Tax Bulletin please send your name and address to Tom Davis or Alan Brown at Inland Revenue Press Office, 6th Floor, North West Wing, Bush House, Aldwych, London WC2B 4PP. Telephone: 071-438 6692/6706/7327. Current subscribers do not need to contact Press Office as we will write to them shortly indicating how to renew subscriptions.

Subscribers to our Press Release mailing list automatically receive copies of Tax Bulletin. If you would like to receive Tax Bulletin and News Releases please contact Tom Davis or Alan Brown at the address given above.

COPYRIGHT

Tax Bulletin is covered by Crown Copyright. There is no objection to firms copying the Bulletin for their own use. Anyone wishing to republish Tax Bulletin or extracts more widely should write for permission to Nahid Shariff, Room 435, 22 Kingsway, London WC2B 6NR

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