Tax Bulletin Issue 23

INLAND REVENUE TAX BULLETIN 
Issue 23

CONTENTS

Discovery and Disclosure Under Self Assessment

Self Assessment key dates and events -- November 1996 to February 1998 (Article deleted since index 2004)

Controlled Foreign Companies (Superceded by INTM 214120)

Tax Treatment of Landfill:

Ostrich 'Farming' (No longer relevant)

interpretations

Schedule D Cases 1 & 11

miscellaneous

Inheritance Tax:

IR150 --Taxation of Rents:

Pensions Schemes Office:

Inland Revenue

Inland Revenue Reorganisation:

Statements of Practice and Extra-Statutory Concessions

DISCOVERY AND DISCLOSURE
UNDER SELF ASSESSMENT

This article sets out the Inland Revenue's position on the concerns that have been expressed about disclosure and discovery under Self Assessment, following discussions between the Inland Revenue and representatives of accountants, tax advisers businesses and other professional bodies.

INTRODUCTION

The introduction of Self Assessment (SA) and the Electronic Lodgement Service (ELS) heralds a new approach to the handling of tax returns, with more realistic filing dates and streamlined procedures. In particular, the new return has been designed to enable full disclosure to be made without the need to send in accounts or computations in most cases. But concerns have been expressed that reliance on the SA return, without additional information, such as accounts, might expose taxpayers to a greater risk of 'discovery' assessments under (new) Section 29 Taxes Management Act (TMA) 1970.

DISCOVERY

New Section 29 TMA 1970 introduced by Section 191 Finance Act 1994 is designed to reproduce the current mix of law, practice and concession on discovery set out in the Inland Revenue's Statement of Practice 8 of 1991 as it applies for Self Assessment.

The foundation of the principle of discovery is that the Inland Revenue should be able to recover tax which has been under-assessed (or over-relieved) where there is fraudulent or negligent conduct or where the Inland Revenue officer could not be reasonably expected to be aware of the under-assessment (or excessive relief) from the information provided in or with the tax return.

DISCLOSURE

This article is concerned only with the second of these two aspects, the concept of 'disclosure'. Where all relevant facts are disclosed to the Inland Revenue, taxpayers can be certain (except in the case of fraud or neglect) they have gained finality at the end of the enquiry period.

Section 29 TMA 1970 sets out the ways in which information is made available for the purpose of making a disclosure. These include providing details in the return or claim, or in any material accompanying the return or claim, for the year in question or the two preceding years. In addition, it is open to the taxpayer or agent to write to the Inland Revenue explaining the existence and relevance of any particular material for the purposes of making an adequate disclosure.

A change of opinion on information that has previously been made available to the Inland Revenue will not be grounds for a discovery assessment.

THE SELF ASSESSMENT RETURN AND STANDARD ACCOUNTS INFORMATION

Additional information takes more time to process and store, costs which by extension all taxpayers bear. The new return is designed to enable full disclosure to be made without the need to send in accounts or computations in most cases. Taxpayers and practitioners are entitled to send in additional material if they consider that it adds information of relevance to the tax liability which cannot be contained within the return. The Inland Revenue will accept any additional information sent in with the return; see the section on accompanying documents below.

The Self Assessment return requires comprehensive information regarding each taxpayer's affairs. With the exception of partnerships whose annual turnover exceeds £15 million (see below), separate accounts and computations are not required to be submitted with the return. Instead specific details, including standard accounts information (SAI), are required within the return.

The majority of income tax cases involve reasonably straightforward accounts. In these cases, the fully completed return and SAI will enable a full and fair picture of the taxpayer's affairs, including any business, to be presented. In otherwise straightforward cases, there may be the odd point of difficulty which needs further explanation. Such aspects may be dealt with by providing extra information within the areas provided on the return.

In some of the larger or more complex cases the SAI details and the space provided in the return for additional information may not by themselves provide a means of adequate disclosure. The submission of further information, including perhaps the submission of accounts, may be considered appropriate by the taxpayer or agent. Such cases would include, for example, large partnerships with substantial turnovers or cases where, although not large, the business is complex -- perhaps because it is a highly specialised trade, or where accounts or computations are required for a proper understanding of the figures.

The SAI will have to be completed in order for the return to be accepted, even where the accounts are submitted. To leave providing this information to the discretion of the taxpayer would seriously undermine its value to the Inland Revenue. The only exception is for the very largest partnerships (i.e. annual turnover over £15 million) where taxpayers are required to submit accounts and computations as well as the return instead of completing SAI. This difference in treatment is justified because the Inland Revenue are likely, anyway, to require to see the accounts and computations of these large cases every year, on account of their size and inherent complexity. Tax returns will be considered to be incomplete where, at the filing date, the SAI boxes have not been completed or, in cases where partnership turnover exceeds £15 million per annum, the accounts have not been submitted.

THE SUBMISSION OF ADDITIONAL MATERIAL

Taxpayers and agents should be aware that the submission of accounts and computations or other documents may not provide protection against a discovery assessment beyond that arising from the submission of the return alone. The information contained in the additional material may have been fully covered within the return or, alternatively, there may be so much material that the Inland Revenue officer 'could not have been reasonably expected, on the basis of the information made available to him before that time, to be aware' (new Section 29(5) TMA 1970) of the particular point of liability, unless the taxpayer or agent had explained its relevance. Where voluminous information beyond the accounts and computations is sent with the return, therefore, it is recommended that there should be a brief indication of the relevance of the material.

ELECTRONIC LODGEMENT SERVICE

The Electronic Lodgement Service (ELS) will accommodate all the information which may be given on the Self Assessment return, including any additional details in the space provided on the return. Furthermore, recent developments in the design of the ELS system mean that the service will be able to cope with substantial amounts of additional information such as accounts or computations should their submission be considered appropriate by the taxpayer or accountant.

ACCOMPANYING DOCUMENTS

The Section 29 TMA 1970 definition of disclosure includes information in 'any accounts, statements or documents accompanying the return'. The Inland Revenue consider that any material sent in support of a return 'accompanies' the return for that purpose. Although advised that, in strictness, statutory time limits for filing a return apply equally to any documents intended to accompany it, the Inland Revenue will accept that any documents submitted within one month of the return "accompany" it for the purpose of making a disclosure within Section 29 TMA 1970 if the return indicates that such documents have been, or are to be, submitted. Where documents have been sent outside that time limit, the Inland Revenue will consider sympathetically any request for them to be treated as supporting the return in question for that purpose.

CONCLUSION

It is in everyone's interests that the new Self Assessment system enables taxpayers to disclose their affairs fully. The Inland Revenue believe that this can be achieved through the return and SAI, explanations in the space provided in the return for additional information, or the submission of accounts or computations where appropriate. The Self Assessment return and the guidance notes will help taxpayers to be aware of matters which should be disclosed and, where there are doubts, taxpayers can consult their tax adviser or the Inland Revenue.

[ This article is based on an Inland Revenue Press Release dated 31 May 1996. It will be reproduced in the Inland Revenue guidance to the local offices on Discovery and Disclosure in due course].

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

SELF ASSESSMENT KEY DATES AND EVENTS --
NOVEMBER 1996 TO FEBRUARY 1998

In this issue we have included a calendar of Self Assessment key dates and events from November this year through to February 1998. We hope you find this -- and the notes below -- useful.

PAYMENTS ON ACCOUNT FOR 1996-97

Some people will need to make Payments on Account for 1996-97. We will calculate the amounts due and notify the relevant taxpayers on a statement which will be issued in November/December. We will send an explanatory leaflet with the statement.

The 1996-97 Payments on Account are based on certain 1995-96 liabilities. Please see SAT 2 (1995) Self Assessment: the legal framework, paragraphs 3.25 and 3.116 - 3.122. The Government intends to set the fixed amount referred to in paragraph 3.25 at £500 and to have the fixed proportion limit ineffective for 1996-97.

P11DS/P9DS FOR 1996-97

The P11Ds/P9Ds will be in the new design which was shown in Booklet 480 (1996), appendix 9. A range of optional working sheets will also be available to help employers calculate the cash equivalent of benefits.

30 SEPTEMBER 1997

There are two reasons for sending back tax returns by 30 September. One is for Revenue Calculation and the other is for collection of tax due (below £1000) -- where practicable -- through the next year's PAYE code.

To be sure that the Inland Revnue can calculate the tax due in time for taxpayers to pay it by 31 January, they must get their returns in by 30 September. We shall still calculate the tax for them but we cannot guarantee that this will be done before the filing and payment date. And that could mean that interset -- and perhaps surcharge -- will run on any sums unpaid.

A similar principle applies if someone wants their tax bill collected through PAYE but misses the 30 September deadline. We will try to do as they wish but we cannot guarantee it, and if tax is due by 31 January and is not paid on time, interest -- and perhaps surcharges -- will run on any unpaid amounts.

31 OCTOBER 1997

If the Inland Revenue have been timeously notified of a taxpayer's chargeability and the return is issued late (after the 31 October), then the tax, as well as the return, is also due three months after the date of issue of the return. If a return is issued late owing to a taxpayer failing to notify the Inland Revenue of their chargeability, then the return is due three months after the date of issue of the return, but the tax is due by 31 January.

Date                    Event
November/
December 1996           Inland Revenue issue Taxpayer Statement advising of first Payment
on Account due 31/01/97.
1 January 1997          First instalment due on 1996-97 assessment for partnerships in
existence before 6 April 1994.
31 January 1997         First Self Assessment Payment on Account due for 1996-97.
January/February 1997   Inland Revenue supply 1996-97 P11Ds.
February 1997           Inland Revenue issue second Taxpayer Statement either as a
receipt for the Payment on Account or as a warning of overdue
payment, (in which case it will show accrued interest).
April 1997              Inland Revenue issue first SA tax returns.
31 May 1997             Deadline for employers to provide 1996-97 P60s to
relevant employees.
1 July 1997             Second instalment due on 1996-97 assessment for
partnerships in existence before 6 April 1994.
6 July 1997             Deadline for employers to provide 1996-97 P11D/P9D
information to the Revenue and to relevant employees.
31 July 1997            Second Self Assessment Payment on Account due for 1996-97.
31 July 1997            In those cases where the return is issued after the 31 July
and taxpayer wishes to opt for Revenue calculation the return
should be filed 2 months from the date of issue of the return.
30 September 1997       Date for submission of tax returns for: (a) Inland Revenue
calculation, and (b) where the taxpayer wants a balancing
payment (below £1000) collected through their 1998-99 PAYE code.
5 October 1997          Deadline for notification of chargeability for 1996-97.
31 October 1997         Where the return is issued after 31 October, the return is due
3 months after date of issue.
31 January 1998         Deadline for filing tax returns for 1996-97.
31 January 1998         Balancing Payment due for 1996-97.
31 January 1998         First Payment on Account due for 1997-98.
28 February 1998        Initial surcharge arises on unpaid tax due by 31 January.
February 1998           Inland Revenue issue first fixed penalty notices for non-filing.
First Inland Revenue determinations issued where tax return and
tax not received. Inland Revenue take first daily penalty action
for non-filers.

(Superceded by INTM 214120)
CONTROLLED FOREIGN COMPANIES

CLEARANCE PROCEDURE

The introduction of an advance clearance procedure for non-trading controlled foreign companies for accounting periods ending on or after 30 November 1993 was announced in a Press Release dated 9 November 1994. Clearances will be given on the application of the "exempt activities" and "motive" tests. Following the passage of this year's Finance Act which made changes to the "Acceptable Distribution Test" for trading companies, this clearance procedure is now open to trading as well as non-trading controlled foreign companies.

Details of the information which the Board will need in order to come to a view on a clearance application can be obtained from

International Division
(Controlled Foreign Companies)
Room 311
Melbourne House
Aldwych
London
WC2B 4LL.

DEFINITION OF AN INTEREST

Some concern has been expressed about a change to the exempt activities test in this year's Finance Act. A company will not qualify for exclusion if it is mainly engaged in wholesale, distributive or financial business and 50% or more of its gross trading receipts are derived directly or indirectly from connected or associated persons or (from November 1995) persons who have an interest in the company. The concern relates to the interpretation of an "interest" in a controlled foreign company in this context.

During the course of the Standing Committee debate on the Finance Bill, the Financial Secretary to the Treasury
explained that:

  • "the purpose of including persons with an interest in the company was to prevent two or more unconnected parties getting together to run a controlled foreign company. There has been some concern that the definition of "interest" would involve any person, no matter how small his interest in the controlled foreign company. However, the intention is that "interest" should relate to the broader context of the controlled foreign company legislation and should be taken to mean holders of at least a 10% interest".

(Superseded by BIM67525)

TAX TREATMENT OF LANDFILL
TAX AND PAYMENTS TO ENVIRONMENTAL TRUSTS

Landfill tax will come into effect on 1 October 1996 and will apply to waste disposed of at landfill sites in the UK which, in broad terms, are licensed under environmental law. The tax will be the liability of landfill site operators who will pay it over to Customs and Excise. It is expected that the site operators will pass on the cost of the tax by increasing their charges to their customers. There is no requirement that invoices for waste disposal separate out the landfill tax element of the total charge for the service.

It will be possible, within certain limits, for site operators to claim credits of landfill tax by making contributions to environmental trusts.

This article gives our views on the treatment for the purposes of Schedule D Case I and II of payments of landfill tax. We also consider site operators' payments to environmental trusts. In each case we have sought to address the treatment of payments in the situations which seem most likely to arise in practice.

LANDFILL TAX

This is considered with regard to both the landfill site operator and their customers.

SITE OPERATORS

We consider two possibilities.

The first is where the site operator disposes of waste for a customer and charges a commercial rate plus landfill tax. The landfill tax may or may not be separately identified on the invoice.

Where landfill tax is incurred by a site operator as a consequence of providing waste disposal facilities to others on normal commercial terms, we do not envisage that any adjustments for the purposes of Case I of Schedule D will be needed to the relevant entries in accounts drawn up in accordance with generally accepted accounting practice.

The second possibility is where the site operator generates waste and disposes of that self-generated waste so that landfill tax is charged on the weight of waste disposed of to landfill.

Where a trader generates waste and also disposes of that waste in circumstances where the trader pays landfill tax on the weight of waste disposed of to landfill, the landfill tax element will be allowed as a deduction so long as the other costs incurred in disposing of the waste are themselves deductible.

Where a credit of landfill tax is claimed following a contribution to an environmental trust (see below) only the net amount of landfill tax payable will be allowed as a trading deduction.

CUSTOMERS OF LANDFILL SITE OPERATORS

The customers of site operators will pay a global charge for waste disposal including an amount representing the landfill tax passed on by the site operator. There is no requirement that the landfill tax element must be separately identified on the invoice.

Where a site operator passes on the cost of the landfill tax to a customer who carries on a business, the landfill tax component of the charge will be treated in the same way as the rest of the charge for disposal in computing the customer's Case I or II profits. If the disposal cost is not allowed as a deduction, for example because it is capital expenditure, no deduction will be available for the corresponding increased charge to take account of landfill tax.

Since the treatment of the tax will follow the treatment of the underlying expenditure to which it relates it is immaterial whether the tax is separately identified.

PAYMENTS TO ENVIRONMENTAL TRUSTS

Our understanding is that environmental trusts will be established as non-profit distributing bodies within the private sector. They will be at arms-length from landfill site operators and have no direct relationship with Customs and Excise. They will, however, be under the control of a regulatory body approved by Customs and Excise. Trusts will be able to engage in activities related to a tightly drawn list of approved environmental objectives. They will fund projects in accordance with the approved environmental objectives but not projects which, for example, benefit individual landfill operators or environmental improvements which benefit the person who caused the environmental damage.

Landfill site operators may make contributions to environmental trusts. If contributions are made by site operators and the trust spends the money on approved environmental purposes, the site operator will be able to claim a credit of landfill tax of 90% of their contribution up to a maximum of 20% of their total landfill tax bill in a 12 month period.

The main test in establishing whether a trader can obtain a deduction is that the payment must be made wholly and exclusively for the purposes of the trade. That is a question of fact that can only be determined from all the circumstances of the particular case.

WHAT FOLLOWS IS BY WAY OF GENERAL GUIDANCE.

In most cases the answer will turn on whether the trader had a non-trade purpose for making the payment instead of, or in addition to, a trade purpose. A payment may be made for trade purposes even though there may be no direct and immediate benefit to the trade.

In the situation where a payment is made by a site operator to an unconnected trust, solely to help it finance projects in accordance with the list of approved environmental objectives, say, research into waste disposal techniques which may be of use to the operator, the payment prima facie would be wholly and exclusively for the purposes of the trade.

Conversely, if the payment was made to a body over which the site operator had some control or the income was ultimately to be received by a person connected with the site operator, it might be less clear that the payment was solely for the purposes of the payer's own trade. If payments were made to a body whose objects were insufficiently related to the site operator's trade the Inspector would wish to consider whether there was present a general philanthropic, and therefore non-trade, purpose.

(No longer relevant)
OSTRICH 'FARMING'

We have been asked about the tax consequences for taxpayers who purchase ostriches with the intention of making money out of the birds and their products. There are a number of schemes on offer to the public at present and the detailed arrangements vary from scheme to scheme. This article is inevitably in fairly general terms. It does not cover taxpayers who farm ostriches on their own land; such taxpayers are covered by the same tax rules as all other farmers. The taxpayers covered by this article are described for convenience as 'investors'. The use of that term is not intended to prejudge their tax treatment.

The key question is whether the activities of investors amount to the carrying on of a trade. The Taxes Act requires 'farming', as the statute defines it, to be regarded as a trade for tax purposes, but the activities of investors do not constitute 'farming' because they do not take place on land occupied by the investor. For the same reason their activities are not 'share farming' for tax purposes. The question therefore has to be determined by applying general principles to the facts of each case.

IS IT A TRADE?

In general, investors who have acquired one or more ostriches, which are being looked after on their behalf in a business-like way, are likely to be carrying on a trade. It follows that investors who, for example, cannot establish that they have acquired an ostrich, may not be able to demonstrate that they were carrying on a trade. It makes little difference whether the care of the ostrich is entrusted to an agent; in determining whether there is a trade, the acts of the agent will normally be regarded as if they were the acts of the investor. Likewise, the intentions of the investor are less important than what actually happens, even if what actually happens is the responsibility of an agent.

CONSEQUENCES OF TRADING

Investors whose ostrich-managing activities amount to a trade are subject to the same tax provisions as any other trader. Again, the fact that the trade is being carried on through an agent makes no difference. This means they must keep records in the same way as other traders, including details of all amounts received and expended and of all purchases and sales made in the course of the trade. They must (unless they already receive a tax return) notify their tax office that they are carrying on a trade and after the end of the tax year enter the results of their trade on their tax return.

The results should be worked out using normal accounting principles; in particular, adjustments should be made for all trading stock (that is, ostriches, chicks, eggs and any unsold ostrich products) in the same way that a farmer would. The cost of ostriches cannot be deducted immediately (the stock valuation rules for farmers are summarised in Business Economics Note 19).

Alternatively, a 'herd basis' election may be made in respect of mature ostriches kept not for sale or killing but for the eggs, chicks or feathers which they produce. The herd basis rules are complex and investors considering such an election are urged to take professional advice. Inspectors of Taxes cannot advise on whether a herd basis election might benefit a taxpayer.

LOSSES

If the investor's results for a year show a loss, it may be possible for the loss to be set against the investor's other taxable income, either for that year or another year. The necessary conditions for set-off are that the investor is carrying on a trade and that the trade is conducted 'on a commercial basis'. Investors whose activities do not amount to a trade cannot set any losses against their taxable income.

Whether a trade is carried on on a commercial basis will be a question of fact in each case. Inspectors will, in general, wish to look at the commerciality of the arrangements made by the investor with or through any managing agent. For example, has the investor paid the same amount for the ostrich as someone farming personally might pay? Do the charges made by the managing agent represent a commercial rate for the services provided? If the managing agent takes a proportion of the eggs or chicks, or a proportion of the sale proceeds of these, does this represent a commercial reward for the agent's services? The 'commercial basis' test is objective and does not depend on the investor's intention.

Where investors whose activities amount to a trade incur a loss, then to the extent that the loss is not (or cannot be) set against other taxable income of any year it can be carried forward and deducted from profits of the same trade in subsequent years until it is used up.

CAPITAL GAINS TAX

There are unlikely to be any Capital Gains Tax consequences of investments in ostrich farming schemes where an investor's only interest is in the birds and their products. If, however, they acquire an interest in any other assets used in the scheme, such as buildings or plant, the normal Capital Gains Tax rules will apply.

interpretations

! This Article Is No Longer Current (Deleted Index 2002)

SCHEDULE D CASES I & II:
DONATIONS OF TRADING STOCK
TO CHARITIES

We have been asked about the tax treatment of trading stock donated to charities, for example, surplus sandwiches and other perishables which are given by retailers to charities for the homeless.

Except for trading stock given to 'designated educational establishments' (see below) there are no special rules governing donations of trading stock, so normal Case I of Schedule D principles apply. What are these principles?

Provided that the trading stock was originally manufactured and/or purchased for sale in the ordinary course of trade, its later donation will not cause its cost to be disallowed for tax purposes. Neither does Section 577 Income and Taxes Act (ICTA) 1988 (business entertaining expenditure and gifts) cause the cost to be disallowed.

Where a donation is made in the course of trade the amount to be credited in the trader's accounts for tax purposes will be the actual disposal proceeds, that is, nil. We would accept that a donation is made in the course of trade where donation represents the most effective commercial way of disposing of the stock (for example, where it would not be commercially effective to sell surplus perishable food).

Where a donation is not made in the course of trade the amount to be credited for tax purposes will be the market value of stock at the date of disposal. This follows the normal rule which applies when trading stock is disposed of otherwise than in the course of trade. 'Market value' means the amount the stock could reasonably be expected to have realised in a market commercially available to the trader. It may be that there is no market for the stock commercially available to the trader, in which case the market value would be nil.

There is a special rule (in Section 84 ICTA 1988) for trading stock given to 'designated educational establishments' (broadly speaking, schools, colleges and universities) where the trading stock is used by the recipient as plant or machinery, for example, laboratory equipment given by a manufacturer of such equipment. The donor may claim within two years of the date on which the gift is made that (notwithstanding the normal tax rule) the amount to be brought into the donor's accounts for tax purposes should be nil.

[Sections 84 & 577 ICTA 1988]

miscellaneous

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

INHERITANCE TAX (IHT) SETTLED PROPERTY --
CORRECTION TO STATEMENT OF PRACTICE SP 10/79.

The way in which assets held in a settlement are taxed essentially depends on whether or not there is a qualifying interest in possession in those assets at the relevant time. An interest in possession to which an individual is beneficially entitled is such an interest. For IHT, assets in which there is an interest in possession are treated as being owned by the person beneficially entitled to that interest. So when the interest ceases or is terminated, the person effectively makes a transfer of those assets. A different set of rules (in Part III Chapter III Inheritance Tax Act 1984) applies to assets in which there is no qualifying interest in possession.

STATEMENT OF PRACTICE SP 10/79

Many wills and settlements contain provisions empowering the trustees to allow a beneficiary to occupy any dwelling house forming part of the settled assets on such terms as they think fit.

SP 10/79 sets out the Inland Revenue's view on the effect of the existence and the exercise of such a power for the purposes of IHT. Broadly, we do not regard the mere existence of such a power as excluding any interest in possession in the property. The exercise of the power may, depending on the relevant facts, have the effect of either creating an interest in possession or terminating such an existing interest.

However, the text of SP 10/79 as reproduced in our booklet IR 131 (Practitioners Series) "Statements of Practice" erroneously omits certain words thus suggesting that the mere existence of the trustees' power rules out any interest in possession in the property. The second sentence in the first paragraph of that text should read as follows:

"The Board do not regard the existence of such a power as excluding any interest in possession in the property."

The omission will be rectified in any future update of IR 131.

(Article deleted since index 2002)

IR150 -- TAXATION OF RENTS:
A GUIDE TO PROPERTY INCOME

The Revenue Guide IR150, "Taxation of rents: A Guide to Property Income", relating to Schedule A for income tax for 1995-96 and later years, was published at the end of March 1996.

Correspondents have helpfully taken up our invitation to comment on the booklet and some minor errors have come to light which will be corrected in the next reprint. However, readers might like to have details now of the most significant errors. They do not fundamentally alter the guidance. We are sorry for these slips and we hope readers have not had too much difficulty because of them. The paragraph numbers below refer to the paragraph numbers in the IR150:

Paragraph 183 onwards: The heading above paragraph 183 should be amended to read "Interest payable on rental business loans". Similarly, the sub-headings above paragraphs 193, 194 and 210 should also be amended to change "paid" to "payable". This reflects the fact that normal commercial accruals principles apply to determine the period in which the interest outgoing falls, as the text explains.

Paragraph 256: The final sentence of this paragraph should be amended to read "The same applies where the property is let at less than a commercial rate or isn't let on commercial terms".

Paragraph 439: Under the third bullet point, "1988-99" should be amended to "1998-99". Under the fourth bullet point "1988-99" should be amended to "1999-2000".

Paragraph 506: Insert after "property" in the first line: "and the expenses are deductible in computing the Case I or Case II profits".

Appendix 2, Example 3: The first two lines in paragraph 27 should read "Bringing Examples 1 and 2 together the transitional adjustment will be calculated as follows:" (not examples 2 and 3).

Appendix 3, Paragraph 8: Add after the last-but-one sentence of this paragraph: "The article in issue 20 is reproduced for convenience in Appendix 2 above".

There are a few more minor typographical errors we have not mentioned because the meaning is reasonably clear. We are grateful for readers' comments and suggestions. Please send any more to:

Inland Revenue
Business Profits Division
(Schedule A)
Room 433, 22 Kingsway
London WC2B 6NR

PENSION SCHEMES OFFICE
SYNOPSIS OF UPDATES

On 26 March 1996 the Pension Schemes Office (PSO) issued three further Updates to all practitioners on the PSO Mailing List.

PSO Update No 13 is concerned with several topics including:

  • Customer Service -- covers a number of issues. It announces the award to the PSO last December of a Charter Mark in recognition of the improvements made over the last two years to its customer service; it advises the PSO's 1996-97 targets for replying to correspondence and approving new applications for schemes using agreed standard rules; and it notifies a change of Customer Service Manager for the PSO with effect from 1 April 1996.
  • Mailing List Charging -- advises of a proposal under consideration to charge an annual subscription for inclusion on the PSO mailing list in order to recover the costs of writing, editing, printing and posting of publications to the pensions industry as well as the costs of collecting and accounting for the subscriptions.
  • Tax Changes 1996-97 -- reports an increase in the "permitted maximum" under Section 590 C Income and Corporation Taxes Act 1988 to £82,200 and advises the changes in Finance Act 1996 which affect pension scheme payments to reduce the basic rate of income tax to 24 per cent with effect from 6 April 1996.
  • Clarifications of Practice -- gives further clarification of PSO practice in relation to The Retirement Benefits Schemes (Information Powers) Regulations 1995 (Statutory Instrument 1995 No 3103) and advises an easement to the prohibition in Practice Notes 10.21 (a) that prevents transfers being made once the normal retirement date has been reached.

PSO Update No 14 announces certain changes/additions to the arrangements announced in PSO Update No 7 for the deferral of annuity purchase for widows/widowers and dependants of small self-administered scheme members.

PSO Update No 15 introduces administrative procedures to allow personal pension scheme providers to repay the fund to the member where the accumulated fund is insufficient to secure an annuity of at least £260 per annum or does not exceed £2,500.

Copies of the Updates can be obtained by writing to:

    PSO Supplies Section
    Yorke House
    PO Box 62
    Castle Meadow Road
    Nottingham
    NG2 1BG
     
    or by telephone 0115-974-1670.

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

INLAND REVENUE
SENIOR MANAGEMENT REVIEW (SMR)

Following the White Paper on the Civil Service (Continuity and Change) in July 1994 and the Command Paper (Carrying Forward Continuity and Change) in January 1995, all Government Departments were asked to review their Senior Management Structure.

For the Inland Revenue, Senior Management responsibilities and Head Office are being restructured in line with three main activities : operations, policy and technical work, and planning and services. As part of this restructuring, a new Compliance Division has been created and in due course, customer service will be brought within operations. During the transition to 31 March 1997, Customer Service remains a free-standing Division.

Compliance Division was formed on 1 April 1996, with responsibility for strategic, policy and technical aspects of the Department's compliance work. It will also have oversight of Special Investigations Section (SIS) and its Director will be E J Gribbon, who will also retain responsibility for Business Profits Division. (SIS 1 will have moved from Angel Court to 4th Floor, 22 Kingsway, London WC2B 6NR by the middle of July 1996.)

The Departmental Planning Division is based on the former Change Management Division. This will have oversight of all strategic planning and will provide general support to the Board and senior management.

Business and Management Services Division was formed on 3 June 1996 to provide central systems and services support to the Department. Its work will largely incorporate the work previously carried out by Management Services Division and Business Services Office.

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

INLAND REVENUE REORGANISATION
LARGE BUSINESS OFFICES

Following an internal review, the Department is changing the way it deals with the largest and most complex businesses.

The 70 tax districts which had responsibility for these businesses, the Pollard Districts, have been reorganised into 15 Large Business Offices (LBOs) .With the exception of Solihull LBO which is now part of IR South West Executive Office and Peterborough LBO which is now part of IR South Yorkshire Executive Office, there is no effect on the existing Executive Office Structure.

These changes are designed to:

  • streamline the management functions of these offices without affecting the individual Principal Inspector's authority to take decisions on cases, and
  • improve the focus and co-ordination of the Department's work on the largest businesses.

The reorganisation will result in greater efficiency and better customer service and is part of the Department's ongoing change programme.

Office details are provided in the table overleaf.

New Large Business                              Group of Pollard districts to be replaced Office by 
                                                New LBO(District Numbers in brackets)
Bristol LBO           Tel: 0117 983 8300        Bristol Bryanston (018),
Inter City House      Fax: 0117 983 8319        Bristol Soho (660),
Mitchell Lane                                   Bristol St Marylebone (642)
Bristol BS1 6DQ                                 and Bristol Temple ( 035).
City A LBO            Tel: 020 7588 4040        City 1 (160), City 2 (161),
City Gate House       Fax: 020 7588 3295        City 7 (166), City 13 (172),
Finsbury Square                                 and City 14 (173).
London EC2A 1QQ
City B LBO            Tel: 020 7588 4040        City 4 (163), City 6 (344),
City Gate House       Fax: 020 7638 8695        City 8 (167), City 9 (168),
Finsbury Square                                 City 24 (350), City 25 (351),
London EC2A 1BT                                 and City 29 (367).
City C LBO            Tel: 020 7588 4040        City 10 (169), City 19 (178),
City Gate House       Fax: 020 7256 6915        City 20 (179), City 26 (352),
Finsbury Square                                 and City 34 (763).
London EC2A 1EE
City D LBO            Tel: 020 7605 9525        City 3 (162), City 5 (164),
1st Floor,            Fax: 020 7605 9599        City 11 (170), City 21 (180),
Charles House                                   City 22 (181), City 32 (277),
375 Kensington                                  and City 36 (278).
High Street
London W14 8RQ
City E LBO            Tel: 020 8667 9797        City 12 (171), City 18 (177),
Park House            Fax: 020 8680 3517        City 23 (182), City 27 (353),
22 Park Street                                  City 28 (365), City 30 (393),
Croydon                                         and City 33 (364).
Surrey CR9 1UX
City F LBO            Tel: 020 7480 7211        City 31 (396), and City 35 (314).
6th Floor,            Fax: 020 7702 9350
Ibex House Minories
London EC3N 1HL
Edinburgh LBO         Tel: 0131 473 9200        Edinburgh 1 (832),
Meldrum House         Fax: 0131 220 0979        Edinburgh 3 (830),
15 Drumsheugh Gardens                           Edinburgh 5 (836),
Edinburgh EH3 7UY                               and Edinburgh 6 (834).
Glasgow LBO           Tel: 0141 204 8000        Glasgow 1 (854),
Hamilton House        Fax: 0141 204 8172        Glasgow Cavendish (143),
20 Waterloo Street                              and Glasgow St James (702).
Glasgow G2 6DS
Leeds LBO             Tel: 0113 244 3343        Leeds Curzon (215),
Pennine House         Fax: 0113 234 0355        Leeds Grosvenor (294),
Russell Street                                  Leeds Pall Mall (566),
Leeds LS1 5RA                                   and Leeds St George (637).
Liverpool LBO         Tel: 0151 242 8000        Liverpool Aldwych (005),
Regian House          Fax: 0151 227 3513        Liverpool Blackfriars (174),
James Street                                    Liverpool Charing Cross (144),
Liverpool L75 1AE                               and Liverpool Exchange (495).
Manchester LBO        Tel: 0161 288 6000        Manchester Central (397),
Albert Bridge House   Fax: 0161 288 6717        Manchester Deansgate (408),
1 Bridge Street                                 Manchester Euston (273),
Manchester M60 9BA                              Manchester Millbank(479),
Manchester Strand (689),
Manchester Victoria (723),
and Manchester Westminster (761).
Nottingham LBO        Tel: 0115 911 6500        Nottingham Sherwood (572)
Huntingdon Court      Fax: 0115 941 9322        and Nottingham Trent (573).
Annex
90-94 Mansfield Road
Nottingham NG1 3HH
Peterborough LBO      Tel: 01733 68941          Peterborough 3 (549)
Hereward House        Fax: 01733 898039         and Peterborough 4 (558).
Peterborough PE1 1RJ
West Midlands LBO     Tel: 0121 711 1144        Solihull Belgravia (054),
Chadwick House        Fax: 0121 711 3624        Solihull Brook (017),
Blenheim Court                                  Solihull Knightsbridge (368),
Solihull Solihull Mayfair (468),
West Midlands B91 2AA West Midlands 1 (447),
West Midlands 2 (448),
and West Midlands 3 (751).

INLAND REVENUE STATEMENTS OF PRACTICE AND
EXTRA-STATUTORY CONCESSIONS ISSUED BETWEEN
1 APRIL 1996 AND 31 MAY 1996.

EXTRA STATUTORY CONCESSIONS

Number   Title                                         Date of Issue
B48      A deduction for an employer's National Insurance
Class 1A contributions when computing profits
for tax purposes                                      30/05/96

STATEMENT OF PRACTICE

Number   Title                                          Date of Issue
3/96     Section 313 ICTA: Termination payments
made in settlement of employment claims                4/4/96
4/96     Income tax: Interest paid in the ordinary
course of a bank's business                            13/05/96
10/91    Corporation tax: Major change in the nature
or conduct of trade or business                        22/04/96
(Revised)

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, David Richardson,
Room 402, 22 Kingsway, London WC2B 6NR. We are sorry though that neither he nor our contributors will normally be able to enter into correspondence about Tax Bulletin or its contents.

SUBSCRIPTION

The subscription for 1996 is £20. If you would like to subscribe to Tax Bulletin please send your name and address together with your cheque to Inland Revenue, Finance Division, Barrington Road, Worthing, West Sussex BN12 4XH. Cheques should be crossed and made payable to "Inland Revenue".

If you would like further information regarding Tax Bulletin please contact Ms Nahid Shariff, Room 435, 22 Kingsway, London WC2B 6NR. Telephone: 020 7438 7842.

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 Ms Nahid Shariff, Room 435, 22 Kingsway, London WC2B 6NR.

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