Working Together - Issue 20 February 2005

Contents

Improvements for New Employers

We are improving the service we give to new employers. As a result of customer feedback, we will send new employers a letter giving them

  • their employer’s reference numbers
  • their IR office name and address details and
  • useful contact details.

We plan to issue the letter within two working days of contact with the New Employer’s Helpline. Where a New Employer’s Starter Pack is requested, the letter will be included in it.

We will start these improvements in mid-February 2005 and hope to eliminate delays experienced between employer registration and the creation and issue of references.

We will also issue payslip booklets more quickly.

From 6 April 2005 the New Employer’s Starter Pack will have greater emphasis on electronic business and less reliance on paper. So the Pack will focus on guidance and tools that are useful to new employers available on the Employer’s CD-ROM.

The 2005 CD-ROM has all the features from the 2004 CD-ROM plus a few extras

  • a “New Employer’s” section with guidance and pointers on a variety of subjects
  • a “Learning Zone” containing Teach Yourself programs for Tax and NICs, SSP, Student Loan deductions, PAYE Online and Paying Working Tax Credit
  • calculators for PAYE Tax, NIC, SSP, SMP, Car and Car fuel benefit and Student Loan Deductions
  • an improved section for Online Services, including an online filing video
  • an improved and updated “Forms and Guidance” section containing most of the forms and Helpbooks needed day to day.

This will be contained within a colourful new 16 page "Start Here" booklet with "at a glance" guidance designed to help the new employer.

You can find a copy of the Employer's CD-ROM 2005 in the Employer's Pack which will be sent out in February.

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Contact Details For Reorganising Areas

We told you in the last edition of Working Together about several Area reorganisations and how you could find up to date contact details on the Revenue website. There are three more reorganisations planned for next month. New contact details for each of these should appear on the Revenue website on the (ready for service) dates shown below.

 
Area Office
Local Area Offices affected
New Area Name
Ready for
service
Wey Valley Woking, Guildford(IREC),
Farnham, Basingstoke,
Staines, Epsom,
Walton on Thames 		Surrey and N Hampshire 7 Mar 05
Gloucester Chippenham, Cheltenham,
Swindon, Stroud 		Glos and
N Wiltshire		 14 Mar 05
Waterloo/Woolwich none South East
London 		21 Mar 05

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2004-05 Tax Returns and Return Guides

From 6 April 2005, the 2004-05 Tax Returns will be available to view on the Revenue’s website. You can however view the changes in advance by visiting the Practitioners’ Zone and then the software developers’ link. These are draft versions, which are provided for software and substitute form developers to create their products.

The main changes for this year are

  • boxes have been added boxes for disclosure of tax avoidance schemes, following the legislation introduced in the 2004 Finance Bill
  • we have added boxes to the Land and Property and Foreign pages for the new Landlord’s Energy Saving Allowance.
  • we have revised the guidance on the employee costs boxes 3.33 and 3.51 of the Self-employment pages
  • there are changes to the Share Schemes Notes.

Tax Return Guides

Copies of the

  • SA1000 Self Assessment Tax Return Guide for Individuals (including the Short Tax Return)
  • SA1001 Self Assessment Partnership Tax Return Guide
  • SA1002 Self Assessment Trust and Estate Tax Return Guide

incorporating related forms, notes and helpsheets are produced and issued on an annual basis, as a service to tax advisers and Revenue staff.

For 2004-05 we will be using the agent details held on the Self Assessment system for bulk mailing purposes. We will send at least one copy of these guides to any agent with more than five clients on the Self Assessment database. If you previously ordered extra copies then we will do our best to send you the correct number. If you have requested "top up" guides, these should be with you within 10 days of your initial delivery.

If you need extra copies after your supplies have been delivered, you can order them by

  • visiting the St Austell Orderline page
  • faxing your order to the SA Orderline on 0845 9000 604
  • telephoning the SA Orderline on 0845 9000 404
  • completing the tear-off re-order card that will come with your supply of the guides and send it to:

    SA Orderline
    PO Box 37
    St Austell
    PL25 5YN

Any additional orders must clearly state how many copies of each of the three guides (Individual, Partnership or Trust) are required and where they are to be sent. Also, as last year, you will be asked to supply your Agent Code (located on the Client’s Account Information sheets sent out in December and June).

Please allow sufficient time for your order (initial, plus top up) to be received before contacting the Orderline. Please note that the SA Orderline will not be able to process any orders for Return Guides before 6 April 2005.

Inland Revenue Offices do not hold any copies of the SA Guides for issue to tax advisers. However, if you find that that the name and address details shown on the distribution are incorrect or if there is a duplication, please contact your Inland Revenue Office and ask them to correct the details held on the Self Assessment computer system.

We do not intend to do another print run so order sufficient guides to meet your needs. After 6 April 2005, you’ll be able to view the forms, notes and help sheets and download them from the Self Assessment area.

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Tax Returns - New Guidance

In April 2004 the Revenue published new guidelines for those who should complete Tax Returns. You can find out more about Self Assessment by reading our Self Assessment guides. The new guidelines ensure that people with straightforward tax affairs, whose tax liability can be met through PAYE deductions, will not normally be asked to complete Tax Returns in the future. An article containing further details about the new guidelines and information about the Short Tax Return is due to be published in the April edition of Tax Bulletin. We will carry a link to the article on the Working Together pages of the Revenue website.

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Small Business Letters

For the past three years the Revenue has sent letters to a number of business people, with brief guidance on how to avoid common errors when completing the self-employment pages of the Tax Return. This article describes the approach for letters to be issued between May and August 2005, in an exercise which follows on from the enabling letters exercise in 2004.

The letters cover common errors that

  • lead to understatements of business profit
  • affect a significant number of Returns
  • present a real risk of tax loss to the Exchequer, and
  • increase the burden of tax for other taxpayers.

By providing guidance on these particular areas of error, we aim to help people get things right when they submit their 2005 Return. It is part of the Revenue’s duty of care and management to ensure that we help as many people as possible to make an accurate Return of their business income. Where we have been notified that an agent is acting, we will send a copy of the letter to the agent. The letters will be sent to some small businesses with turnover up to £150,000.

Working Together, whilst supporting the thrust of the initiative, has made the Revenue aware of dissatisfaction which arose out of last year’s exercise. As a result of this feedback and of ongoing discussions with partners engaged in Working Together at national level, we have made significant changes to address some of the major concerns. Whilst the Revenue has not been able to action all the suggestions made by Working Together partners, we believe these changes will be seen as representing considerable improvements over last year’s exercise.

The Difference Between Guidance Letters and Enquiries

We carry out enquiries to check for, and if necessary put right, any errors, mistakes or omissions. By contrast these letters are not enquiries. They are to provide taxpayers and their agents with the opportunity to consider the next Return so as to minimise the risk of enquiry.

Selecting Individuals to Receive a Letter

We select people to receive a letter by certain pre-identified criteria based on the Standard Accounts Information that we capture electronically from the Return. These criteria have been identified with the help of Inland Revenue research analysts. They identify features that commonly suggest inaccuracies in Returns over one or more years.

If you consider that features of the particular business result in an unusual pattern you should flag this up in the notes space on the Return. Unless Returns are filed by Internet, additional information supplied is not stored electronically, but we always review it before we open an enquiry so it is always helpful to include it.

Before any case is selected for full enquiry, the local office undertakes an individual review. No decision to begin an enquiry would be taken solely because an individual was among those who receive the letters described in this article. Our reasons for selecting an individual case may not in any way reflect on the work of the agent or adviser nor does issue of a letter necessarily mean there is something wrong. However, our research into the outcome of completed enquiries suggests that significant numbers of expense claims are incorrect, even when an agent is acting. So we cannot exclude represented taxpayers from direct contact where we have genuine reasons for considering that there may be errors or oversights. We think it is in everyone’s interest to avoid an enquiry, especially for taxpayers whose turnover and profits are at the lower end of the spectrum.

Before Completing the Next Return

The letters will include a telephone number so that you can make direct contact if you or your client would like to discuss the next return with someone from the local compliance team. The officer will have some general information about the criteria used in selecting people to receive a letter, but will not be able to “signpost” a Return box as requiring attention. This is in accordance with current policy that the Revenue does not disclose its risk assessment processes. The officer will be able to help with questions or uncertainties about allowable deductions, about record keeping, or about where and how to access leaflets or technical guidance published by the Revenue.

If one of your clients receives a letter, we suggest that you take the opportunity to consider the 2005 business Return with them. For example

  • whether records are adequate
  • the accuracy of any estimated figures
  • whether business expense claims are technically correct
  • whether private use adjustments have been properly made and
  • whether all income is included.

Discussion through local Working Together groups will be scheduled for meetings taking place over the next few months. You will be able to obtain a sample copy of the letter and guidance through local Working Together groups after 31 March.

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Research and Development Tax Reliefs

Since the R and D tax credits were introduced for SME sized companies in 2000 and for other companies in 2002, there have been a number of legislative changes to improve the schemes. Knowledge and experience has also developed both within the Revenue and among tax advisers and their clients.

We are therefore using this issue of Working Together to update you on recent issues and commonly arising problems.

If you would like to discuss R and D tax reliefs in more detail, you may wish to raise it with your local Tax Office as a potential topic for future Working Together meetings.

What are R and D Tax Reliefs?

Very simply, R and D tax reliefs allow a company to deduct an enhanced amount in its tax computation for qualifying revenue expenditure on Rand D. The enhanced deduction is 150% under the SME scheme and 125% under the large companies scheme.

Where an SME is loss making it can, in certain circumstances, surrender tax losses in exchange for a payable credit of up to 16% of those losses.

We forecast that around 4,500 SMEs are eligible to claim each year. Since 2000 there have been almost 13,000 claims totalling over £700 million.

A fuller introduction to R and D tax reliefs can be found by visiting the Research and Development area, and detailed instructions in our Corporate Intangibles and Research and Development (CIRD) manual

What Changes Have There Been Recently?

A number of changes were made in 2004

  • In April an easier to use definition of R and D for tax purposes was introduced. This has been welcomed by many tax advisers and can be used for periods prior to April 2004 (see CIRD81900).
  • Also in April, the range of qualifying expenditure was extended to include revenue R and D expenditure on computer software, power, water and fuel. This change takes effect for the large company and SME scheme for expenditure incurred on or after 1 April 2004.
  • In December a substantially updated CIRD manual was published. The R and D material was almost completely rewritten and includes areas not covered in the previous guidance. It takes into account much of the practical experience gained in dealing with R and D tax relief claims and answers many of the questions asked by tax advisers and companies.
  • Also in December, taking effect for accounting periods ending on or after 1 January 2005, the definition of a SME was changed, enabling more companies to access the SME scheme. The new definition is set by the European Commission and can be found at CIRD92800.
  • There have been changes consequent on the introduction of International Accounting Standards. Full details are at CIRD81450.

What Practical Issues are Tax Advisers and Inspectors Encountering?

From an inspector’s point of view there are a number of risk factors present in R and D tax relief claims, e.g.

  • Is the project R and D within the definition for tax purposes?
  • Have the rules on eligible expenses been met?
  • Is the company an SME or not?

While there is no legal obligation to send information in support of an R and D tax relief claim, doing so can sometimes avoid an enquiry.

Providing only the claim figure with no supporting information may make an enquiry more likely because whether an enquiry is appropriate is judged on the information available.

If an enquiry does commence, both the Revenue and tax advisers have found that a meeting with the company can be helpful, particularly if the company’s technical staff is involved.

In dealing with an enquiry it is helpful to remember that the inspector needs to be provided with facts, evidence and reasoning. Unsupported assertions will not be helpful in concluding an enquiry. It may also be helpful to provide information or documentation in addition to that requested by the inspector where it is relevant in substantiating a claim.

What Errors are Commonly Found in R and D Tax Relief Claims?

Frequent errors are set out at CIRD80540. These include

  • Claiming expenditure outside the qualifying categories
  • Claiming overheads that do not qualify as consumable items or consumable stores
  • Claiming under the SME scheme when other Notified State aids received.
  • Claiming a payable credit above the total PAYE/NI liability of the R and D company for the relevant year.

What Information is Needed to Determine Whether R and D Has Taken Place Within the Definition for Tax Purposes?

You will need to compare the project to the guidelines on the meaning of R and D. Some of the questions that you might want to ask your client are

  • What the R and D project was
  • The scientific or technological uncertainties involved in the project
  • How the uncertainties were overcome
  • Were the methods of overcoming the problems scientific or technological advances, and if so what?
  • In what way does the project go beyond what was the current state of knowledge?
  • Why was the knowledge being sought, not readily deducible by a competent professional?
  • When the particular uncertainties were overcome

CIRD80560 sets out the kinds of records that companies might maintain and that could provide evidence R and D was taking place.

What if Agreement with the Inspector Cannot be Reached?

It is sometimes the case that disagreements remain even after the relevant facts have been established.
The normal appeal routes apply to R and D tax relief claims. Also normal complaint rules apply if you or the company are unhappy with the Revenue’s conduct of your case, as opposed to the Revenue’s technical view.

Where Can I go for Further Information?

If you want further information on R and D tax reliefs, click on the links to our web page and CIRD manual in this article. Or raise the subject with your local Working Together group for discussion at the next meeting.

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Retirement Annuity Contracts

It has been brought to our attention that for some non-UK resident taxpayers we have not been correctly handling the calculation of "Excluded Income" referred to in S128 Finance Act 1995

This may affect your clients who are

  • non-resident in the UK for tax purposes and
  • are liable to higher rate tax and
  • receive an annuity under a retirement annuity contract or trust scheme

These annuities are "excluded income" for the purposes of determining the liability to tax, calculated by the alternative method provided for by S128 FA 1995. But because they are not specifically identified as such in the Return, the Revenue-generated tax calculation may, in some limited circumstances, be incorrect.
For 2004-05 onwards, Help Sheet IR300 will point out that the calculation may not be correct where this type of annuity is received and advise taxpayers or their advisers to ask the Revenue for a manual calculation.

It is not possible for us to identify customers who may be affected for earlier years. If you think it may affect any of your clients, please contact their Inland Revenue Office. If tax has been overpaid, as a result of this issue we will arrange for it will be repaid for all relevant years from
1996-97 onwards.

We are sorry for any inconvenience and additional work this may cause.

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PAYE Online for Agents (and payroll bureaux) – Internet

You can register online to use the Internet on behalf of your client. Once registered, you can use this online service to perform any or all of the following

  • send and receive a range of in-year forms
  • file Employer’s Annual Returns
  • receive statutory notices (tax codes, etc) and reminders on behalf of your client
  • view and download lists of your authorised client
  • arrange for other users and assistants within your organisation to have access to the services you want them to use.

This article gives you more information about registering for the service and other important features that will be of interest to you. If you have already registered for the service, you will know what information you need to login to the service. However, please read on because you may be unaware of some of the features the online service can offer you.

The following information uses the term “agent” to mean both tax agents and payroll bureaux.

If you are sending forms and returns for your own business, visit Online Services for more information.

Getting Started

Obtain an Inland Revenue Agent Reference

Before you can register for PAYE Online for Agents – Internet, you will need an Inland Revenue Agent Reference. To obtain one visit the Agent Registration page and provide the information requested.

You must wait four working days after using the Inland Revenue Online Agent Reference Service, before registering.

Registration

Registration is a straightforward process that involves a number of safeguards designed to protect your privacy – much like the process you would go through to open a bank account.

When registering you will be asked for your

  • full name - use your own name rather than a business name
  • organisation name
  • e-mail address (optional but supplying one does mean you will receive online acknowledgements)
  • office type
  • number of clients
  • choice of password, which you should keep safe as you will need it every time you login to the service
  • your Inland Revenue Online Agent Reference Number
  • office postcode

To register, visit the main registration page. At this stage there are a few steps that take just minutes to complete.

During registration you will, for security reasons, create a password and be given a User ID. The User ID is first displayed on-screen and then the Government Gateway will post you confirmation within 7 days. A card is provided showing the User ID. Do keep this safe along with your password because you will need them every time you login to use the online service(s).

At the end of the registration process, you are also told that the Government Gateway will post to you, within the next 7 days, an Activation PIN for each service that you have registered to use. You must activate the service(s) within 28 days of the date of the letter or the PIN will become invalid and you will need to register again. Do note that your client(s) will not be able to authorise you to act on their behalf until you have activated PAYE Online for Agents - Internet.

An Activation PIN is needed only once, and can be destroyed after use but do not destroy your User ID.
Please register and activate in plenty of time so you can file your client’s Employer’s Annual Returns online by their filing dates.

You can view more information about registration at PAYE Online services (Internet)

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Client Authorisation

Online Authorisation - Gateway Agent Identifier

Currently the Inland Revenue must receive authorisation from your client before they can accept PAYE forms and returns from you online. Your client can provide this authorisation online - but they will first need to register for PAYE Online for Employers-Internet. Following activation, your client can appoint you as agent at the Government Gateway. The Government Gateway is a centralised registration service for e-Government services in the UK.

Following activation, your client can visit the Government Gateway and appoint you as an agent by logging in and selecting "Add Agent", then entering your Gateway Agent Identifier.

The Gateway Agent Identifier is provided to you online at the end of the registration process. Half of the Gateway Agent Identifier will be made up from your organisation name, and the other half by the Government Gateway. When you enter your organisation name, this should be the name you want your client to see when they select you as their agent.

You must pass your agent name and Gateway Agent Identifier to your client to enable them to authorise you online to act on their behalf.

Paper authorisation – FBI 2

The preferred option is online authorisation as outlined above. This enables an agent to be authorised much quicker.

Alternatively, your client may complete form FBI 2 and send it by post to the Inland Revenue. They do not have to register for the online service and don’t need to have Internet access. Visit the Form and Guidance for FBI page to download form FBI 2.

Please note:

  • you must use form FBI 2 not the 64-8

Users and Assistants

You can set up users and assistants in your organisation to access and use the services you have chosen. Users can act on your behalf for the services you have registered for and activated as well as register for new services. Assistants can send your organisation’s forms and returns to the Inland Revenue using appropriate software but cannot change things such as the services you have registered for or add/remove users.

Employers, agents and payroll bureaux may wish to have more than one user

  • to allow for holidays, sickness and any other reasons for absence
  • because different people are responsible for different processes, for example one user may handle Employer’s Annual Returns (P35, P14s, P38A) and another may handle expenses and benefits (P11Ds, P11D(b))

If you are registered as an organisation or agent, and you want to set up users and assistants, visit the Government Gateway and select either "Manage Users" or "Manage your assistants".

Secure Mailbox and Output

When you have successfully activated Inland Revenue Online Services, we set up a secure online mailbox for you. This is the delivery point for the online messages we send you.

We will automatically use the secure mailbox to deliver your PAYE statutory notices and reminders over the Internet. These notices will have the same legal status as paper statutory notices. Because we will no longer be sending you notices and reminders on paper, you will need to check your secure mailbox for delivered items regularly.

If you would prefer to continue receiving PAYE notices and reminders by Electronic Data Interchange (EDI), magnetic media or paper, you can opt out of receiving these to your secure mailbox. You do this after activating PAYE Online for Agents - Internet and once clients have been added to your client list. Select “change your statutory notice option” from your PAYE service page. These changes can be made for individual clients or for your entire client list.

More . . .

Although the focus of this article has been on PAYE, Inland Revenue Online Services also provide you with easy ways to file company tax returns, individual, Partnership and Trust Returns on behalf of your clients over the Internet quickly and securely.

We are continually looking at ways of expanding, improving and adding to our range of online services. Visit Online Services: practitioners (Agents) to find out more about the services we offer.

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Corporation Tax

The Inland Revenue will soon be sending a letter to agents who have clients liable to corporation tax. The letter will remind agents that for full communication with the Revenue they need formal client authority. Without authority the Department cannot talk to or write to an agent, or send them copies of notices and other forms. Nor can an agent use CT Online services.

There will be a list of company clients enclosed with the letter showing which have authorised their agents to act for them, either by a form 64-8 or by other written authority. The Revenue would like agents to

  • check the lists and make sure that the details shown are correct, up-to-date, and complete
  • obtain written authority where necessary and
  • notify the relevant Revenue Office of any changes so that computer records can be corrected.

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Changes to the Guidance Notes for Group Payment Arrangements

Introduction

We have just revised our Guidance Notes for Group Payment Arrangements (GPA). Finance Act 1998, Section 36, allows companies that are in a group to enter into a GPA. A GPA is entirely optional. Companies that enter one are entering into a contract (the Arrangement Document) with the Board of Inland Revenue.

What is a GPA and Why Should a Company Join One?

Any group can enter into one. A GPA enables the group to

  • manage any uncertainty over the corporation tax liabilities of individual companies between the instalment due dates and the filing of the tax returns, and
  • when the arrangement is closed and the money allocated between the member companies help mitigate any potential differential interest charges

Who Can Join?

Entry into a GPA is at the Revenue’s discretion. The proposed members must

  • have a 51% group relationship
  • be up to date with their filing and payment obligations
  • share the same relevant accounting period
  • not be entered into more than one GPA for the same relevant accounting period

Who Pays the Tax?

A GPA makes one company liable to discharge the corporation tax liabilities of all the companies participating in the GPA. However, being in a GPA does not alter the fact that each company is liable for its own corporation tax. Companies in a GPA which are not liable to pay corporation tax liability by instalments do not become liable to do so simply by being a member of a GPA.

Guidance Notes

Each group of companies must decide what is right for them and whether they want to be in an arrangement. We issued Guidance Notes when we introduced GPAs. The notes have now been brought up-to-date. They provide more information on the GPA terms and conditions, and how a GPA is administered. The Notes clarify some of the more complex clauses of the arrangement. They also provide explanations of some of the main terms used in the arrangement.

In particular, the notes deal with

  • payments, claims for repayments and apportioning payments,
  • adding or removing companies from the GPA, and
  • termination of a GPA by either the group or the Revenue.

The Notes have no effect on the terms of the GPA itself. They are for guidance only. Companies, and groups, have to carefully consider the Arrangement Document itself before deciding to proceed. The terms of the GPA cannot be negotiated. Some of the GPA provisions are designed to help recovery tax in certain circumstances, but a group with up-to-date returns and no tax outstanding will not normally have to concern itself with those provisions.

Further Advice and Information

You can read the Arrangement Document and the Guidance Notes

The Group Payment Teams (GPT) can provide any further clarification that you may need.

Group Payment Team
Receivables Management Service
Accounting And Payments
Accounts Office
St Mungo’s Road
Cumbernauld
Glasgow
G67 1YZ

Telephone: 01236 783488
Fax: 01236 785353

Group Payment Team
Receivables Management Service
Accounting And Payments
Accounts Office
Victoria Street
Shipley
West Yorkshire
BD98 8AA

Telephone: 01274 539561
Fax: 01274 539669

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Contacting the Revenue

Did you know that the links and navigation on the Revenue website have recently been improved to make our contact details easier to find?

Click on contact us in the green banner at the top of the screen to find out more about contacting us by post, by phone, by e-mail or face to face.

If you want to telephone us about a particular client, click on “specific enquiries” and then choose the type of client you are representing (individuals including partnerships and partners, employers or businesses and corporations). You can search for the appropriate telephone number in each customer group by using either the current Area name e.g. “Beds and West Herts Area”, the former name e.g. “Bedford 1” or the three-digit office numeral which appears as part of our reference on correspondence e.g. “053”.

We also have a large number of Helplines for general enquiries that cover subjects such as Charities, Contracted-Out Pensions, National Minimum Wage etc. Save this link as a favourite so you have the full list readily to hand.

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Educational Support Services for Business

At present both the Revenue and HM Customs and Excise have education programmes for business. These services are organised and managed independently and are provided on very different basis, and at different times of the business lifecycle. This gives the appearance of being disjointed, and may not provide the most effective service for business or the Departments. So as one of the first actions in creating the new integrated Department, HM Revenue and Customs, we have set up two pilot schemes, in the East London and Lothians Area Offices. These will provide an integrated education service for new businesses and for established businesses that take on new obligations.

How Will the Pilot Schemes Work?

Our aim is to create a personal service for business that looks at the whole educational need of the customer rather than promotion of specific educational products. When a business in the pilot area notifies us that it has either set up or taken on a new obligation (e.g. registers for VAT or becomes an employer) we aim to make contact with that business within two months. The purpose of the call will
be to

  • confirm that the information we have is correct
  • establish what experience the business has of tax matters and whether they use professional advice
  • discuss their need for tax education (including whether assistance is needed on how to access our online services)
  • outline the options available to meet the identified need and
  • make the necessary arrangements for them.

We may not be aware at the outset that the business is represented by an agent. So if you represent businesses whose affairs are handled by either East London Area or Lothians Area, we may be contacting your clients. We will evaluate the pilots after 31 March 2005 to ensure that we have the right products before extending them to other areas.

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Working Together - Archiving

Over the next few months, the Working Together Team will be reviewing past editions of the publication and archiving those articles which are obsolete or updating those which are out of date. We will alert you to any changes. We will alert you to any amendments on the Working Together pages of the Inland Revenue website.

Back issues of issue 1 to 10 are now no longer available in paper form.

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Discovery - Guidance on the Decision in Langham v Veltema

The Court of Appeal judgement in a recent case, Langham v Veltema, raised concerns in the accountancy press. The main concern was that taxpayers could not be certain that the risk of a Revenue enquiry disappeared at the end of the twelve month enquiry period following the Self Assessment filing date of 31 January.

Guidance has been developed in consultation with representative bodies, including Working Together partners, to help taxpayers achieve finality for most practical purposes.

In summary

Most taxpayers who use a valuation in completing their Tax Return and state in the Additional Information box on the Return that a valuation has been used; by whom it has been carried out; and that it was carried out by a named independent and suitably qualified valuer if that was the case; on the appropriate basis; will be able, for all practical purposes, to rely on protection from a later discovery assessment, provided those statements are true.

Most taxpayers will be able to gain finality with exceptional items in accounts. An example might be a deduction in the accounts under Repairs. If an entry in the Additional Information box points out that a programme of work has been carried out that included repairs, improvements and new building work and that the total cost has been allocated to revenue and capital on a particular basis, The inspector should not enquire after the closure of the enquiry period unless they become aware that the statement was patently untrue or unreasonable.

Taxpayers, who adopt a different view of the law from that published as the Revenue’s view, can protect against a discovery assessment after the enquiry period. The Return would have to indicate that a different view had been adopted by entering in the Additional Information space comments to the effect that they have not followed Revenue guidance on the issue or that no adjustment has been made to take account of it.

More detailed advice is given at:

and there are background notes at:

editorial

Working Together is a partnership with the CIOT, ICAEW, ATT, ACCA, ICAS and AAT. Although the material in this publication obviously reflects discussion and consultation with these bodies, the Revenue is solely responsible for its contents and for the views expressed in it.

contact details and back issues

Back issues can be downloaded from our featured area. If you would prefer a paper copy, please write to or email the address below. Working Together is covered by ©Crown Copyright. There is no objection to firms copying the publication for their own use. Anyone wishing to re-publish Working Together or extracts more widely, should write for permission to

Greig Rattray, Working Together Team, 5S South West Wing, Bush House, London WC2B 4RD
or email: