KPMG LLP Sarah Robert
Steve Wade
BDO Andrew Bailey
Amanda Sullivan
PwC Eleanor Meredith
Simon Morris
Baker Tilly Martin Benson
Grant Thornton Peter Ashby
Matthew Fox
Deloitte & Touche Philip Paur
Ernst & Young Rosemary Martin
H W Fisher Hugh Morgan
Travers Smith Victoria Nicholl
IPPM Elaine Gibson
Khafayah Abdulsalam
ICAEW David Treitel
CBI Rosa Tomo
BP plc Noorie Sazen
LCCI Philip Fisher
Shell plc Ishbel Huggins
British American Business John Havard
CAR (Expats) Colin Gibson
Martin Dwyer
Christine Edge
Karen Fowler
Pat Kelly
CAR Residency Jane Burke
Craig Mason
Ed Stuart
CAR Pensions Stephen Webb
Business Customer Unit Don Macarthur
PAYE NICs Pol Tech Mark Frampton
CAR ESSU Jon Clarke
PSN Graham Lewis
Richard Garth
Central Policy Neil Johnson
Don Macarthur opened the meeting by inviting the attendees to give their customary introductions. He reminded them that in order to ensure that all items on the agenda received a fair hearing he and his co-chairman would be allocating reasonably strict timings and that any matter requiring considerable attention would be considered for referral to a sub-group in order to ensure that all business to be handled at the Joint Forum meetings may be covered in sufficient detail.
Some of the matters arising would be discussed as agenda items but feedback was provided in respect of the following:
1. Short term business visitors and EP Appendix 4
HMRC have not yet arranged for the issue of the letters to employers drawing to their attention the new text of EP Appendix 4 and the associated 'What’s New' article following the change of methodology for counting days for treaty residence purposes effective from 6 April 2009. However, HMRC had identified 654 employers who were believed to be using EP Appendix 4 arrangements and suitably worded letters would be issued to these employers over the next few weeks advising them of the changes and asking them to apply the new wording retrospectively from 6 April 2009.
2. Communication with large employers
The Manchester Expatriate team have commenced issuing letters to large employers notifying them that the Manchester office now has responsibility for handling employer and employee matters relating to the inward expatriates. Shirley Davies of HMRC has already issued an email to Joint Forum delegates explaining the approach HMRC intend to take in this respect and IPP have also included helpful details in an article published for the benefit of employers generally.
3. UTR requests where form P46(Expat) is inappropriate
HMRC accept that the form P46(Expat) is directed at international secondees assigned to work in the UK and that there will be certain new employees outside this category who nevertheless meet the current HMRC definition of an inward expatriate and who will need to be notified to the Manchester Expatriate team. In particular, if a UTR is needed for someone that meets the current HMRC definition but who does not have a UK host for PAYE purposes, an agent should write to Sue Gribbin, Non Enquiry Technical Team Manager in Manchester’s Expatriate Team, setting out the relevant circumstances and she will take the matter forward and arrange for notification of the UTR.
4. Late repayments
This issue has now been responded to via the Q and A Log (question 12.3). Although there will be inevitably some delays due to the mandatory checks that are applied by HMRC to combat repayment fraud, the position on the Manchester Expatriate Team has improved dramatically. Shirley Davies has offered to look at particular cases which are still causing problems if advisers or representatives will provide her with the individual’s UTR. Delegates suggested that what appeared to be a seasonal problem might be alleviated if HMRC would take more account of the particular circumstances in which repayments were sought on behalf of tax equalised employees. HMRC responded that they took such factors into account where they could, but repayment fraud was a serious problem for the Department and national guidelines had to be applied.
5. Bonuses
External delegates explained that following the HMRC reorganisation which had resulted in former Complex Personal Return cases being transferred to Local Compliance, a number of open enquiries relating to the bonus issue still needed to be resolved. Concern was expressed that the Local Compliance Enquiry offices may not be as familiar with the considerable dialogue exchanged regarding the taxation of bonuses as those within the CAR Expatriate team. HMRC accepted that this may well be the case but Martin Dwyer pointed out that the outcome of the debate, which had been principally carried out at a sub-forum level, had been the issue of revised guidance within the Employment Income Manual which was available to all of HMRC and externally. Advisers were free to make reference to this guidance in support of their arguments on particular cases but where difficulties persisted, Martin Dwyer did confirm that these could be referred for him to intervene.
6. Reporting foreign tax payments made in tax equalised cases
HMRC confirmed that a number of helpful replies had been received from the Big 4 on this issue and a further response had been promised by the end of the month. Once this had been received, HMRC would consider all the information provided and give some feedback on this issue at the next meeting.
| Q12.6: | |
|---|---|
12.6 Clause 59 of the Finance Bill includes: 804G Reduction in credit: payment by reference to foreign tax (1) This section applies if— |
HMRC will give a verbal statement at the Forum Meeting on 16 July 2009.
Ed Stuart |
HMRC confirmed that clause 59 of the Finance Bill had been amended and as a consequence the concerns expressed within this question no longer applied.
| Q5: | |
|---|---|
ITA 2007 s 828A (Finance Bill 2009, Clause 52) ITA 2007, s 828A will provide an income tax exemption for the years 2008-09 onwards for a limited amount of non-UK earnings and non-UK investment income of an individual working in the UK. In order to qualify for the exemption, the individual must not file a tax return for the year (s 828B(6)). However, the tax paid during the year on the UK earnings (under either the normal PAYE procedures or a Modified PAYE arrangement) is unlikely to be correct, because the proportion of the earnings for non-UK duties used for a direction under ITEPA 2003, s 690 is estimated. In this situation, in the absence of a tax return what is the mechanism for dealing with any overpayment or underpayment of tax on the individual’s UK earnings? |
The purpose of s53 FA 2009 was to relieve non-domiciled workers on low
incomes (and therefore basic rate taxpayers) of the need to file an SA
return and was not intended to be available more widely.
It removes the obligation to file a return by exempting their foreign employment and savings income below certain levels from tax in the UK – but in practice there would be no tax saving, since to qualify for the exemption all their non-UK income must be subject to a foreign tax. If an employee wants to file an SA return, either to claim an overpayment through PAYE or for any other reason, that option will be available. This would mean that they will no longer be able to take advantage of the admin savings otherwise delivered by s53. Craig Mason
|
External delegates expressed concern that inward expatriates who needed to submit a repayment claim would lose the income tax exemption provided by Section 828a, ITA, 2007 if such a claim was made in the form of an SA Return. In addition, further guidance was required regarding what HMRC meant by ‘subject to a foreign tax’.
HMRC sought to clarify the intention behind the new legislation which was to remove the obligation on overseas migrant workers on low incomes to file an SA return in cases where there was little or no tax to pay in the UK. It was true that such individuals would no longer qualify for the tax exemption if they filed a return to claim a tax repayment, but the tax exemption was merely the vehicle for delivering the administrative saving. External delegates failed to understand why the exemption should also be lost if the individual filed not a tax return but an R40 to claim repayment of PAYE on UK income.
HMRC also confirmed that the term ‘subject to a foreign tax’ did not necessarily mean that there had to be an actual foreign tax liability: it was possible that, in some jurisdictions, the income would be taxable at a rate of zero percent or covered by overseas personal allowances. Both these matters would be made clear in guidance when it is revised to take account of the new provisions introduced in the 2009 Finance Act.
| Q6: | |
|---|---|
CGT and Schedule 7 (affects 2008-09) If the account is a mixed fund (as it has gains 'accruing in it' to use HMRC speak) does the £330k represent foreign chargeable gains not subject to tax or employment income. As a US person cannot make a capital gain by exchanging dollars for GB Pounds it will not be a gain subject to US tax. It must mean that IF the fund is mixed then the order of transfers, according to Section 809Q(4) ITA 2007 are First (e) foreign chargeable gains As such the gain is calculated as Sale proceeds £330,000 that is $500,000 Therefore the remittance of £330k is first gain of £80k and then income of £250k which has been subject to tax. In answering the question would HMRC say whether the fund can actually be a mixed fund because as long as the account consists of dollars there has been no gain realised. The gain is only realised when the dollars are sold and sterling is acquired thus making the transfer a transfer of employment income only, that is the remittance is £330,000 of employment income. If you agree there is a remittance of employment income but not a remittance of gain, can the remittance be simultaneously a remittance of gain and employment income? Finally, how do you identify the dollars being sold so as to identify the gain arising on the transfer of the $500,000 into the UK to be converted into £330,000? There appear to be no statutory rules on this. |
The account as described is not identifiably a mixed fund. There is no gain in the mixed fund – it is the transfer that creates the FOREX gain and immediately before the transfer/remittance to the UK (which is when you look at the composition of a mixed fund) there is no foreign exchange gain. So £330,000 is taxed as employment income. If the account were a mixed fund for other reasons (for example maybe it has income from more than one tax year), then the £330,000 would be from s809Q(4) para (f) employment income subject to a foreign tax. In addition, there is a (part) disposal of one asset (the dollar-denominated credit balance) for consideration received in the form of a new, sterling-denominated, asset. So it is necessary to compute a gain on this disposal. It is a foreign chargeable gain (assuming the individual is a remittance basis user) and in view of the fact that the consideration is received or used in the UK condition A of s809L is plainly met. Condition B is also met, because the consideration is (in part) the chargeable gain. So there is a remittance of the gain, as an entirely separate matter from the remittance of the employment income. There is no obstacle to both being remitted as two consequences of the same events. Strictly, the pooling rules apply to identify base cost. The ‘cost of acquisition’ is determined in sterling on the date of each acquisition. HMRC recognises the difficulties this may entail in certain cases where credits are frequent, and will usually accept a reasonable and sensible practice to determine base cost, as long as it was applied consistently. Hayley Denoual/Rob Clay |
A number of external advisers did not believe that the answers provided in response to this question recognised the unreasonable practical consequences of applying the answer given. The inference to be drawn was that every transaction of the type included in the question would need to be analysed and the extent of any capital gain associated with the foreign exchange calculated. Inward expatriates could have many such transactions in a year. External delegates also believed that taxing the same payment both as income and capital gain could not be correct.
There were also concerns regarding the suggestion that the pooling rules applied in these circumstances and advisers requested direction to the legislation which confirmed this to be the case.
Peter Ashby agreed to summarise these areas of concern within an email and refer this to HMRC for consideration in due course. The general feeling was that application of the approach suggested by HMRC’s answer to question 6 was unrealistic
| Q13.3: | |
|---|---|
13.3 Can we have some clarity of when we convert foreign currency into sterling. Can we assume, for example, that when a bonus is awarded in a foreign currency, the sterling equivalent on the day of the award is the amount of the bonus to be taxed, leaving the issue of remittance basis or arising basis to be determined separately? |
HMRC’s long-published position is that to determine the sterling amount of foreign income for tax purposes, income taxed on the arising basis is converted into sterling on the day it arises, income taxed on the remittance basis, on the day it is remitted. Hayley Denoual |
External delegates did not agree that the answer given by HMRC to this question was consistent with what HMRC required to be included on Tax Returns and accordingly did not see that this approach represented 'HMRC’s long published position'. By way of an example, the SA Tax Return requires details of earnings to be included together with confirmation of the extent to which any of these have not been remitted to the UK. It is therefore necessary to quantify the amount of the earnings not remitted for SA Tax Return purposes so it is incorrect to suggest that such quantification only needs to take place on the day it is remitted. It would not be possible to accurately complete the Tax Return on this basis. It was also argued that while, in strictness, remittances are converted at the exchange rate on the date of remittance, account should also be taken of the rule that you cannot remit more income than you receive (measured at the exchange rate on the date of receipt).
| Q13.2: | |
|---|---|
13.2 Can we have an update on the application of SP10/84 please? In particular, if an expat has a number of bank accounts and switches funds from one account to another, has this triggered a disposal of the foreign currency such that a capital gain or loss may have arisen? |
What the expat has done is to dispose of one asset denominated in a foreign currency and receive as consideration another asset also denominated in a foreign currency. Absent SP10 or other special provisions, this is indeed a disposal for the purposes of s1 TCGA and a computation of a gain is necessary, and necessarily in sterling. Rob Clay |
Again there was some debate regarding the accuracy of the answer provided. Peter Ashby agreed to include examples of his concerns regarding the implications of this answer within the email which he intends to submit. The question was asked whether a disposal arises where money moves from one account to another.
| Q10: | |
|---|---|
Accountancy fees in regard to partially tax-equalised employees The notes mention 'due to tax equalisation arrangements, the employer pays for accountancy services' which perhaps suggests the precise nature of the equalisation arrangements is not in point. However, Appendix 6 of HMRC’s Employment Procedures Manual – 'Modified PAYE' arrangements – says that those arrangements may be applied only to tax-equalised employees and, for that purpose, 'tax-equalised' means that: '………. the employer must equalise liability to UK Income Tax on all general earnings (see note) subject to the rules in part 2 Chapters 4 and 5 ITEPA applying to employees resident, ordinarily resident or domiciled outside the UK. Note: Where the employee is tax-equalised on all general earnings but not, for example, on taxable awards of securities options or the award of securities at undervalue (which is specific employment income) the employee may still be included within the arrangement as long as all the other conditions are satisfied'. It would seem rather restrictive to take the same approach in relation to accountancy fees as an employee’s tax equalisation computations can be just as (possibly more) complex if only part of the earnings are equalised. |
It is the case that the guidance contained within the Forum meeting notes of 18 September 2008 was intended to relate to ‘fully’ tax equalised cases including those capable of inclusion within an EP Appendix 6 agreement. Where partial tax equalisation applies it seems to me that the extent to which the accountancy advice directly benefits the individual rather than the employer must increase and I would expect this to be reflected within the level of benefits reported. As in the case of tax equalised individuals, where HMRC wishes to check the amounts reported we will look at the amounts paid for the basket of services provided and seek to establish those parts of this basket which directly benefit the employer. It should then be possible to calculate a benefit in kind figure by reference to the balance on a per head basis. Martin Dwyer |
HMRC were asked to give clarification regarding whether or not the levels of accountancy fees, clarified at the meeting held on 18 September 2008, could be applied in respect of the 2008-09 SA Tax Returns. Martin Dwyer confirmed that these amounts were intended to reflect levels below which HMRC perceive there to be a risk and above which it was unlikely that HMRC would make an enquiry into the matter of accountancy fees relating to Tax Return preparation. They were not intended to represent mandatory levels of benefits which should be included on Tax Returns as HMRC accept that there will be cases where the true level of benefit varies from the figures provided for guidance. Against this background, however, HMRC confirmed that the same guidance could be extended to apply to 2008-09 SA Returns. As was confirmed in the answer to Q10, however, that guidance was intended to relate to fully tax equalised cases, including those capable of inclusion within an EP Appendix 6 agreement. Whilst it was accepted that this would include cases where tax equalisation applied to all employment income other than share based remuneration, the guidance was not intended to apply to circumstances where partial tax equalisation arrangements are in place which can often apply to a small proportion of the overall compensation package.
Issues log
There were no questions or comments raised in respect of the Issues log.
Proposed future handling of Q and A log
Martin Dwyer explained that some delegates had asked whether or not it would be possible to have more frequent exchanges of Q and A's between Forum meetings. Whilst he recognised that the Q and A log was a useful tool for all sides, there was a limit to how much time HMRC were able to devote to this. Nevertheless, Dwyer accepted that the current arrangements which involved the issue of the completed Q and A log immediately prior to the quarterly Forum Meeting had its drawbacks. Accordingly, he suggested that he would be prepared to issue updated versions of the Q and A log throughout the quarter as and when HMRC were able to provide answers to the questions raised. This would give delegates longer to consider the implications of the answers in advance of the Joint Forum meetings.
All parties agreed that this would represent a helpful move. Dwyer confirmed that he would introduce it going forward but asked delegates to limit the flow of follow up questions relating to the answers published as there was only so much resource which could be devoted to providing this service.
Penalties modernisation
HMRC then gave a short presentation in the form of an overview of the new penalties for late paid in-year PAYE. Copies of the slides associated with this presentation are attached and are self explanatory. Clarification was requested regarding how modified PAYE arrangements within EP Appendix 6 impacted on the new penalties regime. Attention was drawn to the answer given to question 8 on the Q and A log
| Modified PAYE | |
|---|---|
It would be useful to understand how HMRC envisages that the new penalties for failure to pay PAYE on time will apply to Mod PAYE schemes. The FB 2009 Schedule 56 rules will not come into effect until April 2010 but employers will want to know well before then what the impact will be. For instance will it be accepted that PAYE is operated correctly if tax is paid correctly by reference to estimated earnings, even if the estimates turn out too low? What if a bonus is paid in January but tax on the bonus is not paid, until the annual true-up occurs in March? Will that be treated as a failure attracting a penalty, if it is not the first default? |
These arrangements are entered into with the full agreement of HMRC and it would not be reasonable to penalise an employer for complying with an agreement they have made with us. Therefore, if someone paying under one of these modified agreements pays amounts which subsequently transpire to be too low, we should not be raising a penalty for the late paid amount. If we have reason to think they are knowingly underpaying in-year, the situation would be different, but when this happens, we can withdraw the agreement and apply the normal rules. Richard Garth |
which confirmed that where EP Appendix 6 arrangements have been entered into by mutual agreement, the penalties for late payment should not normally apply. HMRC pointed out that these modified PAYE arrangements had benefits for both sides. HMRC noted that in return for relaxation of PAYE reporting requirements, employers provided undertakings regarding the reporting and payment of all residual income tax liabilities not settled through the modified PAYE arrangements. HMRC expected employers to honour this commitment but where this is found not to be the case, the likely outcome would be that the modified arrangements would be moved. Any employer who operated without approved modified PAYE arrangements would find themselves caught by the PAYE Regulations in all respects, including those relating to the new penalties for late payment of in-year PAYE.
Clarification was requested in respect of small payrolls where the numbers of employees would not automatically facilitate quarterly payments. HMRC confirmed that any employers below the quarterly threshold would be assumed to be quarterly payers for the purposes of applying the new penalties for late payment of in-year PAYE.
Attention was drawn by external delegates to the possibility that PAYE payments might be made late where it emerged after the year end that certain short-term business visitors had failed to qualify for PAYE exemption under EP Appendix 4 arrangements. Also, PAYE payments might be received late because a UK employee sent abroad had unexpectedly failed to break residence.
Overview of new penalties for late paid in year PAYE (PPT 110K)
Pensions issues
CAR (Pensions) passed on their thanks to those who took the time to comment on the draft guidance previously circulated.
The current intention is to incorporate the guidance into the Registered Pension Scheme Manual. This will allow the creation of links to the guidance from other parts of the HMRC website. It will also make it easier to create links from the guidance into other parts of the RPSM where more technical detail is provided.
Responding to the feedback asking for more on the position when immediate tax relief is not available, the guidance material will be expanded to include sections on National Insurance contributions and employer-financed retirement benefit schemes as they relate to people who come to the UK and make pension contributions.
Some responses asked for the note to have more in the guidance about transfers from one overseas pension scheme to another, where the transfer included funds in respect of a current or recent assignee in the UK, for example on a change of employment abroad. HMRC responded that commenting on transfers goes beyond the purpose of the note which is to talk about the reliefs the UK gives for pension savings through non-UK schemes. For this and other topics with international relevance, such as the special annual allowance charge, HMRC propose having brief summaries that link to relevant parts of the RPSM on the HMRC website.
Some responses asked for more explanation of European issues and of the language the note used. The decision not to cover these aspects in more detail is based on the target audience. The main aim is for it to be accessible to employees, employers and scheme managers to flag up the options and factors to be considered when making pension arrangements and claims for relief. HMRC’s view is that the added explanations requested may make it less digestible for this main target audience. So HMRC are not planning to refer to European legal issues in the guidance and while the language used will naturally be kept under review HMRC do not intend including analyses of phrases (like 'on behalf of').
Jane Truelove will respond directly to the feedback she has received and is happy to receive further contributions. Hopefully the final note will be available in September 2009.
The government has announced restrictions on tax relief for individuals with high incomes from 2011. There is legislation in this year’s Finance Bill to prevent the people affected from increasing their pension savings before relief at higher rates is withdrawn. Contributions less than £20,000 are not affected, nor are individuals with income less than £150,000. HMRC estimate this will cap reliefs to £2 billion less than would otherwise have been the case.
This move has been designed to strike a balance between avoiding loss to the Exchequer and allowing most people to continue to save in the same way as before, while minimising the administrative burdens it imposes on schemes and employers.
HMRC reckon there are more than 5,000 members of overseas schemes who have high income and are given UK tax relief. The average personal contribution is just under £10,000. Where the employer is contributing as well, the average is over £20,000. This group is just as much a risk for forestalling as members of UK schemes and could not be left out. So regulations will be laid to makes sure the rules work properly for members of non-UK schemes.
There were several developments at Report Stage. The Bill was amended to increase the £20,000 threshold if annual and other irregular contributions since A day average between £20,000 and £30,000 a year. The most the allowance can be is £30,000. This was to keep the cost within what is acceptable. Ministers also made commitments to regulations providing extra flexibility for arrangements agreed on or before Budget day and changes of provider post Budget.
If these additional changes need modifying to cater for members of international schemes, they will be.
Update from the workshop on EU admin commission decision re NI processes for posted workers
Mark Frampton confirmed that the meeting with external representatives had been extremely useful. A series of questions had been compiled and referred to Brussels for a response which had yet to be forthcoming. The replacement for form E101 would be a Form of Attestation. This was likely to contain details very similar to those previously contained on the form E101. The publication of the new regulations was imminent. HMRC intended to publish guidance by October but as and when answers to some of the detailed questions which had been put forward by external delegates were available, Mark Frampton would circulate these to interested parties. HMRC is looking to build consensus with other countries and the discussion paper written by Mark Frampton has been circulated amongst other Governments. The new arrangements will apply from 1 March 2010 across all States within the EU. Switzerland is expected to accede. The UK is the only country which will opt out of applying the regulation to third country nationals.
NIC treatment of bonuses
Unfortunately there was little progress to report in this respect. The issues were still in discussion with lawyers and it was hoped that there would be more information to offer at the next meeting of the Joint Forum.
Update on the new Manchester Expatriate Team
HMRC confirmed that the Manchester Team now owned all PAYE records for established expatriate cases and that from 1 August 2009 would own all SA and Employer Compliance records for all expatriate customers. Employers and advisers were asked to send all future correspondence relating to these customers to the Manchester site rather than any alternative office that may have previously been responsible for handling the affairs of this customer base. Unfortunately, these changes had created some arrears which the Manchester Team were attempting to clear. HMRC asked employers and agents to be as patient as possible and to only chase up delays in an emergency. HMRC explained that they expected to clear the backlog of correspondence within three months and will let customers know when this is achieved. Further clarification will be provided no later than the next quarterly meeting of the Joint Forum.
Employers were reminded that they must use forms P46(Expat) rather than forms P86 or lists to notify new starters. Unfortunately, there were some employers who were still sending in forms P86. HMRC explained that going forward we would require the proper form of notification and would not be dealing with UTR requests for customers for whom a P46(Expat) had not been received.. The form P46(Expat) is aimed at international assignees rather than individuals engaged locally. It was not appropriate for use in the case of migrant workers who come to the UK and find work here. IPP offered to publish a message clarifying the circumstances in which form P46(Expat) should be used within one of their publications.
For future correspondence, advisors and employers needed to take care when addressing post to the Manchester Expatriate Team and needed to use only the following postcodes to ensure that their correspondence was received without undue delay:
For non-enquiry correspondence – M3 5BG
For enquiry correspondence – M3 5BW
Using the HMRC software to find an office address would not provide the correct postcode for Manchester Expats, it would provide the post code for Manchester Customer Operations. The reason for this is that the three figure office number (951) is the same.
Residence and domicile
1. SP1/09 migrating from SP5/84
HMRC confirmed that the plan is to legislate the application of the mixed fund rule to R/NOR employees as set out in SP 1/09 in Finance Bill 2010. It was also HMRC’s intention to publish draft legislation in the autumn 2009 for consultation. They also intended to issue an informal consultative document to selected stakeholders in order to obtain some early feedback to help inform that draft legislation.
Big 4 representatives explained that as advisers, they were getting questions regarding interpretation of SP1/09 and were trying to deal with issues in real time, including the completion of SA Returns. There were many areas upon which there remained a lack of clarity. Agents noted HMRC had indicated that compliance activity relating to SP1/09 and the remittance basis would be handled with a light touch for 2008-09. They asked for confirmation of whether or not it was intended to extend this light touch approach to 2009-10. HMRC representatives present felt that this was likely but undertook to seek definitive clarification for publication with these notes.
Since the meeting HMRC have confirmed that the ‘light touch’ compliance approach will not be extended to 2009-10. The latitude that HMRC are advising will be available in relation to 2008-09 errors (where the error relates to a change in the rules or in HMRC guidance) will not apply for 2009-10, given that the legislation has been in place in its final form since July 2008 and the guidance has been out since March 2009.
2. HMRC6
HMRC were grateful for the helpful feedback received in connection with the HMRC6 guidance. There was a lot of material to go through and although it was the intention to issue an updated version of HMRC6 following Royal Assent it will take a bit longer to go through it all thoroughly. The guidance is for a wider variety of stakeholders and not all feedback agreed in respect of the changes requested. A precise date for the issue of this updated version was therefore not yet available. This new version would take into account the representations made within all the feedback provided to HMRC, however received, but responses to individuals will not be issued.
3. Genovese case
Unfortunately HMRC were not able to make any comment despite being pressed hard on whether an appeal was going forward. Concern was expressed that practitioners were finding it extremely difficult to give advice where there appeared to be a lack of clarity regarding HMRC policy in the light of the Genovese decision, and to whether HMRC6 had been drafted with a full and final consideration of the decision in mind.
4. Statutory residence test
HMRC reported that the work group looking at this were continuing to explore possibilities and digest feedback from the Minister. The remit continues as before, to work on the possibility of a test that would be simple, fair and revenue neutral. Their next meeting was scheduled for 28 July 2009 but has been postponed due to holidays. One of the CBI representatives confirmed that the Minister responsible had indicated a genuine interest in the views of employers which was most welcome.
5. Form P86
HMRC confirmed that it was the intention to remove form P86 following some testing of revised arrangements involving targeted forms for various groups of customers. No firm time lines had yet been agreed but feedback would be provided to the forum once available
Update on Green Card US economic employer issue
HMRC confirmed that the UK would not give relief under the UK/US DTA for US tax paid under the Article 1(4) savings clause by Green Card holders. However, the UK believes that the effect of the foreign tax minimisation requirement (s795A ICTA 1988) results in the UK giving relief to Green Card holders who are treaty resident in the UK, but taxed on a worldwide basis by the US, to the same extent only that relief is given to US citizens. This issue was now on the agenda for discussion with our US counterparts and may be put beyond doubt by an exchange of notes. However, it is not certain when the next discussions will take place with the US and this item could be displaced by higher priorities.
Economic employer issues
This had been going on for some time. As far as the 're-sourcing' question under Article 24(6) of the UK/US DTA is concerned, HMRC were applying what they considered to be a pragmatic view. Where an individual works in the US for a UK company and the UK company picks up the costs, HMRC will not give credit until we are satisfied that the employers have changed the position through making a transfer-pricing adjustment in their corporate tax return under Schedule 28AA ICTA, or by recharge.
HMRC are working on the basis that employers are free to change the position and can do so if they wish. HMRC will seek evidence of the existence of transfer pricing or recharging adjustments but if these are absent will not give credit for any US tax paid. HMRC intend to write to the US authorities clarifying our position in the near future.
During previous meetings, external representatives had expressed views that the HMRC guidance on economic employer issues was inconsistent. HMRC accepted that further clarity was required but did not feel that the guidance needed to be re-written. However, it did need to be applied correctly and where there appeared to be inconsistency or problems experienced in this area, these could be reported to Ed Stuart for his intervention.
Interpreting EP Appendix 5
HMRC confirmed, for the avoidance of doubt, that the presence of tax equalisation arrangements were not a bar to the use of EP Appendix 5 where all other factors were in place. The arrangements within EP Appendix 5 were intended to address cash flow difficulties where payroll withholding was required in two States on the same earnings. Where such double withholding took place and tax equalisation applied, the employer was suffering the cash flow consequences. EP Appendix 5 could be used in these circumstances to alleviate the position.
Migrants Advisory Counsel – proposed ICT restrictions
The external co-chairman expressed his concern at proposals of the Migration Advisory Council which may result in a very significant restriction of ICT work permits for workers posted to the UK from outside the EU. After a brief discussion it was decided that this was not really an issue for the Forum to comment on. There were separate channels through which feedback in respect of these proposals had been invited and any of the representative bodies were free to do so.
Extra Statutory Concessions – consultation document
HMRC referred to Q and A 13.6 and pointed out that the consultancy document had recently been issued via the HMRC website.
See Extra-statutory Concessions for more details.
These notes, read in isolation, cannot be relied upon to give a true view of the HMRC position on any issue. This is because:
Nor should the notes be read as acceptance by external delegates of positions outlined by HMRC, unless expressly indicated.
