Working Together Issue 14

Contents

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Joint Self Assessment Enquiry Workshops

Every Area Director (Compliance) has received a CD-ROM to help with planning for the joint enquiry workshops which we mentioned in the last issue of Working Together.

The Revenue and the representative bodies involved in Working Together are committed to building better working relationships in enquiry work, and have developed the material together.

Using the material in the CD, Revenue compliance staff in Area Offices and local tax advisers involved in Working Together will be able to participate in joint workshops in their Area. People will be able to discuss issues frankly, constructively and openly, in a safe environment. You can decide locally just how your Working Together groups will structure the joint event. Whether you prefer presentations and syndicate activities, or small discussion groups to look at particular issues, the CD-ROM will help by

  • giving advice on how to organise and promote an event
  • suggesting content for both presentations and discussion groups
  • providing a library of relevant reference material.

If you would like to be involved in workshops near you, contact your representative body, or get in touch with your local Revenue Working Together Contact. You can find details in the Area Directory on the Working Together featured area of the Revenue website.

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Self Assessment Returns - Additional Information

We have been asked to clarify a number of issues concerning the Revenue's position on additional information, including attachments, submitted with a Self Assessment Return (sometimes called "white space" information).

There has been no change to the policy outlined in the Revenue's paper, "Disclosure and Discovery Under Self Assessment", which was published as an annex to a Press Release dated 31 May 1996. This stated:

"It [the paper] makes it clear that where a taxpayer has made a Self Assessment for the relevant chargeable period, the Inland Revenue may raise an assessment if there would otherwise be a loss of tax resulting from the taxpayer's failure to make a complete disclosure of all the relevant facts relating to his liability to tax.The statement also makes it clear that while the new Self Assessment Return has been designed to enable the vast majority of taxpayers fully to disclose their liability without the need to submit accounts or computations, the Inland Revenue will accept any additional information sent in with the Return."

We know that some of our Offices have not had a wholly reliable system for the storage of Returns. This has meant that in some cases they have had difficulty in retrieving them and that enquiries have been raised without the Officer having had sight of the paper Return or any additional information supplied. This has led to complaints that, in some cases, the enquiry would not have been taken up had the additional information been examined. Where this has been the case, we are sorry.

We have been working with local offices to identify where there may be problems and have introduced process changes where necessary to ensure that in future full enquiries are not opened without an examination of the paper Return and any additional information submitted. Examination of the Return will include any attachments sent in with the Return. Meanwhile there may be occasions when offices might have to ask for a further copy of any attachments and co-operation here would be appreciated.

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Penalties for Late Filing of SA Returns

The Department's Receivables Management Service (RMS) have recently been given new funding, through the Chancellor's Spend to Save package, to enable them to form specialist teams to begin penalty proceedings where there is persistent delay in submitting an SA Return. Subject to the agreement of the Commissioners, the Revenue may charge penalties of up to £60 per day where Returns are overdue. This measure has been available to the Department for some time, however it has been used relatively infrequently; from September 2003 this will change.

Charging daily penalties only reflects the failure to submit the Return, so they remain due whether or not there is tax to pay. The Revenue's objective is getting the Return in, rather than charging penalties. In many cases those who haven't yet filed will be due a tax refund and where that's the case, the Revenue wants to pay it over. In other cases where tax is due for payment, the Revenue will seek to ensure that the correct amount is paid as soon as possible. The Department's emphasis is very much on opening dialogue with taxpayers and their tax advisers, giving the support they need to provide the right documentation and pay the right amount of tax. Don't wait for us to contact your clients, encourage them to act now.

Advice about specific cases can be obtained from the local Revenue Office. For more general information about the above or other RMS-related topics, we can provide speakers to attend Area Working Together meetings. Please get in touch with your local Revenue Working Together contact. You can find details in the Area Directory on the Working Together featured area of the Revenue website.

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What is RMS and What Does it do?

  • RMS stands for Receivables Management Service
  • Formed in April 2001
  • Employs 8,600 people nationally
  • Deploys specialist teams to recover debt covered by different rules and legislation
  • Accounts for all money paid to the Revenue
  • Collects over £240 billion every year
  • Pursues around one million overdue Self Assessment Returns annually
  • Actively seeks to help taxpayers who are in genuine difficulty
  • Applies consistent standards when pursuing late payment and debt

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Enabling Small Business - Inland Revenue Initiatives 2003-04

Between May and July this year, some self-assessed business clients may have received a letter from their Tax Office with advice on deductions for business expenses. This article explains the background to the issue of the letters, which are intended to help people complete a correct Return, at their first attempt.

We know that many people make innocent mistakes when filling in their Tax Returns, either through ignorance about the law or from lack of attention. The level of tax lost in many cases does not justify a formal enquiry, but when looked at collectively these mistakes result in a substantial loss of revenue. We are looking at ways to draw attention to these potential pitfalls before a Return is submitted, thus enabling people to check the accuracy of their Return, particularly on the aspect mentioned in our letter.

Accountants have asked us in the past if we would be willing to share our risk assessment tools. As a compliance safeguard, we have not agreed to this. However, the current initiative does, on a limited basis, share information of this kind with taxpayers and their agents. We will be sending letters only to people whose last Return indicated there may be a compliance risk, and that risk will be outlined in the letter and accompanying `frequently asked questions'. We have found that our customers generally have a very low awareness of our regulatory activity, unless they have already experienced an enquiry. These letters give them the opportunity to address an aspect of the Return that could give rise to a future enquiry, and, by putting things right voluntarily, they can reduce the likelihood of enquiry into that element of the next Return.

Where there are special circumstances explaining an unusual business or expenses pattern it will be helpful to draw this to the attention of the Inspector by using the additional information boxes on the Return.

During the last tax year we sent a letter, with the offer of extra help, to some people with very small businesses (where the turnover was less than £15,000). We particularly selected people who did not have an agent to help them in their dealings with us. The response was generally very positive, with the guidance considered to cover most areas of difficulty. We will be aiming to make it available on the Revenue's website later this year.

This year we are continuing this encouragement to customers to get the Return right for themselves, first time, by issuing more of these letters. We will also send letters to some business proprietors giving advice on how to distinguish business expenses from private expenditure. Where an agent is acting, we will provide a copy of the letter and advice.

And finally, we will also be sending letters, with guidance, in a small number of cases where individuals have claimed for furnished holiday lettings losses to be set off against general income and we believe that the qualifying criteria may not be met.

We have suggested that Offices should discuss these initiatives with local Working Together representatives, and hope that you will pass any feedback through your local group.

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Changes to Stamp Duty

Introduction

The Finance Act 2003 sets out the framework for stamp duty land tax, which will be introduced on 1 December 2003 to replace the existing stamp duty regime on UK land and buildings for all transactions completed on or after that date. Stamp duty in its current form will therefore cease to apply to transfers of other property for contracts entered into on or after 1 December 2003

Reform of the stamp duty regime paves the way for the introduction of e-conveyancing systems which will allow purchases of property to be effected or registered electronically, making the acquisition of property faster and more efficient.

The vast majority of individuals buying or renting residential property will see no immediate changes under the new regime, though there will be some administrative changes of which practitioners may need to be aware. In most residential purchase cases liability to stamp duty land tax should be reported and duty paid, as now, within 30 days of completion.

The reform builds on measures introduced in Finance Act 2002 to tackle avoidance of stamp duty on certain property transactions, and modernises the compliance regime for stamp duty by bringing it into line with other taxes and incorporating appropriate enforcement powers. There will be new processes for reporting the details of land transactions and for paying any tax due.

Scope of stamp duty land tax

Broadly the scope of stamp duty land tax will cover transactions involving any estate, interest, right or power in or over land in the UK. There are then a number of exclusions, including mortgages and similar security interests, licences to use or occupy land and transactions for no chargeable consideration. The charge will include completions of transfers of freehold property and leases, grants of leases (including in Scotland, missives of let), contracts for land transactions which are substantially performed before completion, transfers of such contracts, and options and rights of pre-emption in respect of land transactions.

The new regime will expand a range of anti-avoidance powers to discourage the transfer of properties into companies (sometimes called special purpose vehicles) in certain circumstances. A number of changes to the group and acquisition relief clawback provisions will be introduced with immediate effect, including extending the period in which these clawbacks can be withdrawn to three years.

It will also see the abolition of stamp duty on transactions involving property other than land shares and interests in partnerships. This de-regulation will take many transactions out of stamp duty altogether, including transfers of book debts and other receivables.

The existing stamp duty regime will continue to apply to stocks, marketable securities and bearer instruments, and transfers of land into or out of partnerships by partners or former partners, and acquisitions of an interest in a partnership. It may also apply to transactions completed and leases granted on or after 1 December 2003 where those conveyances and leases fulfil contracts or agreements entered into on or before Royal Assent of the Finance Act 2003 on 10 July 2003 (provided they have not been varied after this date).

Stamp duty land tax will also introduce the concept of a `liable person' for the purposes of the tax. In most cases this will be the purchaser or lessee - whoever is acquiring the benefit of the property.

Further consultation

Consultation will continue on certain key aspects of the regime. These are the transfer of land into and out of a partnership by a partner, and the transfer of interests in partnerships that hold UK land, the approach to large developments, including the treatment of subsales and successive transfers, sale and leaseback deals and securitisation of land. Any changes arising from the consultation may be enacted either on implementation of the new regime or in Finance Act 2004. There will also be the opportunity for further dialogue on the proposed changes to lease duty, which will only proceed if a suitable alternative is not identified.

Administration of stamp duty land tax - what practitioners will need to do

When the new system is implemented for transactions completed on or after 1 December 2003, legal practitioners will no longer need to submit documents, on behalf of purchasers, to the Revenue for stamping. Instead they will have to notify liability to tax using the new land transaction return. Payment should be sent at the same time as the return to the Revenue processing centre in Netherton. Any Revenue Stamp Office will be able to forward returns and payments to Netherton on behalf of individuals, but customers will benefit from a quicker service if they make their returns direct to Netherton. Provided information and payment are submitted in full, the Inland Revenue will issue a stamp duty land tax certificate which they or their agents will need to submit to land registries in order to register ownership of land or to record a deed, as appropriate. The certificate replaces the current stamped impressions, which are made onto documents.

In broad terms, land transaction returns should be submitted to the Inland Revenue for transactions that cover any transfer of a freehold, assignment or assignation of a lease for consideration, whether or not giving rise to a charge, any transaction for which a relief is being claimed. They should also be submitted for the grant of a lease for a contractual term of 7 years or more or which gives rise to a charge, and any other transaction giving rise to a charge.

In line with other taxes administered by the Revenue, stamp duty land tax will be administered under a `process now, check later' system. From the filing date of the return, there will be an `enquiry window' (the period during which the Revenue can open an enquiry or an individual can request that an enquiry be opened into a transaction). This will be a period of nine months for all transactions. Purchasers are obliged to keep suitable records for six years from the effective date.

Rates and thresholds

The rate of charge for all transactions other than the grant of leases depends on the amount paid for the transaction (this includes any payment or consideration for linked transactions). It is proposed that the rate of charge for the rental element of new leases is determined by the net present value of the rental payments due to be made under the lease. Consultation is continuing on this proposal. Premiums for new leases, as now, will generally be charged at the main rates.

The existing regime will broadly continue with current rates and thresholds until the modernised regime is implemented. At that point, subject to further consultation, lease duty is charged on the net present value of the rental stream of the lease, at a rate of 1% where the net present value exceeds the zero rate band upper threshold. In addition the zero rate band upper threshold will be increased to £150,000 for all wholly or partly non-residential transactions (for new leases and transfers).

Under the new regime, there will be cases where no tax is due, for instance where a relief can be claimed or where the transaction is below the zero rate band threshold. It is proposed the threshold will be £60,000 for residential property and £150,000 in other cases.

In these cases purchasers may still have to make a return to the Revenue or, in certain cases, provide a self-certificate to the land registries (which includes any register maintained by the Keeper of Registers of Scotland and, in Northern Ireland, the Land Register of Northern Ireland and the Registry of Deeds).

Reliefs

Reliefs that have been carried forward from the existing regime include transfers between group companies, transfers arising from company reconstructions, certain purchases by registered social landlords, acquisitions of land in disadvantaged areas, and Crown exemption. In addition, there will also be new reliefs for the modernised regime. These include acquisitions of dwellings by house-building companies in part-exchange for the sale of a new home, acquisition of dwellings by relocation companies, and acquisitions by local authorities or public bodies under compulsory purchase orders or under the terms of planning arrangements.

Since 10 April 2003, stamp duty will no longer be due on certain non-residential property transactions in designated disadvantaged areas. This builds on the existing exemption from stamp duty on all property in disadvantaged areas where the consideration does not exceed £150,000. A full list of qualifying areas is available on the Inland Revenue website at www.inlandrevenue.gov.uk/so. Customers who do not have access to the Internet can also receive advice on this and other stamp duty issues from the Stamp Taxes Enquiry Line on 0845 6030135.

Special rules will apply to certain transactions. They include transfers between companies and connected parties, collective enfranchisement by leaseholders and crofting community right to buy schemes, alternative property financing arrangements for individuals (which can be used, for instance, to provide "Islamic mortgages"). Also included will be acquisitions of dwellings under shared ownership schemes, and right to buy and rent to mortgage transactions.

Developing a compliance regime

The modernised regime will bring a modern, comprehensive compliance framework to stamp duty for the first time. An enquiry regime will be implemented which will mirror provisions already in place for other taxes administered by the Revenue such as Income Tax and Corporation Tax. The main enquiry regime will be underpinned by a risk assessment process. A random enquiry programme will be implemented to enable us to measure the effectiveness of our compliance approach.

We are also taking forward work related to the practicalities of the enquiry regime, including the length of the enquiry window (the length of time following notification which the Revenue has to initiate an enquiry) which it has been decided will be 9 months, a Code of Practice covering how those enquiries are to be handled and the development of an appeals process.

There is also a need to develop a compliance regime around exempt instrument transactions and stamp duty certificates.

Further information

Further details are available in the Revenue's Finance Bill 2003 press notice (REV 55) and Budget day press notice, PN05: Modernising the Taxation of Property. Both of these can be found on the Stamp Taxes' website at www.inlandrevenue.gov.uk/so/news.htm. Customers who do not have access to the Internet can also call the Stamp Taxes Enquiry Line on 0845 6030135. For more information on the further consultation we are undertaking on certain policy measures, contact Des Newman, Stamp Taxes Policy team.

A draft of the Stamp Duty Land Tax manual, which will only be available electronically, will be published on the Internet in the week commencing 22 September. We would welcome constructive feedback. Please forward your responses to:

Vivienne Scrimshire
Room 116
3rd Floor New Wing
Somerset House
Strand
London WC2R 1LB

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Benefits in Kind

We have been asked to restate our position about seeking tax/NICs on benefits in kind following an Employer Compliance Review, where the amounts involved may be small. This was brought up with Working Together some time ago and formed the basis of Register of Issues item 9.5, following correspondence about tax/NICs sought on gifts of flowers for staff on sick leave. The item says:

Issue 9.5 Pay as You Earn: Flowers for staff who are ill Current Position Additional guidance on treatment of benefits that are trivial in nature was issued to network staff in February 2000. Staff are encouraged to exercise discretion and a sense of proportion. Next Action CLEARED

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Services for Telephone Customers

On 1st September, two new Statements of Practice were published which will detail further services available by telephone.

One will detail enhanced services available to customers calling Contact Centres dealing with personal tax affairs, the other will detail the services available to callers who contact a Revenue Office which is not currently served by a Contact Centre.Both Statements of Practice will make provision for the Revenue to conduct more business by telephone but the security afforded by Contact Centre technology will allow them to provide a wider range of services. With the continuing development of telephone technology, this wider range of services will be available to all customers within the next three years.The Revenue is committed to ensuring that the information it receives is accurate and that the privacy of customers' tax affairs is protected. To facilitate this and in line with private sector best practice, callers will be expected to answer a number of security questions before we will discuss a customer's tax affairs with them or their agent. Where callers fail to satisfy the identity checks, we will ask them to put their enquiry in writing.The new Statements of Practice SP 02-03 and SP 03-03 are available.

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Offshore Arrangements Project

Following discussions with representatives of the professional bodies involved in Working Together, it was agreed that details of this project should be made available to tax advisers and their clients. The Offshore Arrangements Project is a new initiative where the Inland Revenue is undertaking risk assessment of specific offshore arrangements where it is perceived that evasion may result in a substantial loss of revenue to the Exchequer.

Over recent years an increasing number of UK resident individuals and companies have used offshore financial centres, often referred to as "Tax Havens", for tax planning, secrecy, asset protection and other financial reasons. Despite the legitimacy of many of these offshore arrangements, there is evidence of their use as vehicles for evasion. Evasion can arise from the simple operation of an offshore bank or building society account where UK residents fail to disclose annual untaxed interest and, in some cases, the taxable income they deposit in those accounts. At the other extreme complex offshore structures, often consisting of offshore companies with nominee shareholders and directors and trusts with offshore trustees, are used for financial transactions involving individuals and companies liable to UK taxes.

Many of these transactions represent legitimate tax planning where, as appropriate, returns are made to the Inland Revenue and UK taxes are paid. However, in some cases certain facts, for example the identity of beneficial shareholders and directors of offshore companies, are not disclosed. The need for secrecy may be for legitimate commercial, rather than tax reasons but based on cases seen by the Revenue the high incidence of arrangements where nominees are used to hide the identity of individuals and companies represents a potential risk to the Exchequer.

Whilst some of these arrangements are enquired into, there is concern that the Revenue fails to identify many other instances. The Department knows that companies in offshore financial centres control thousands of UK companies whilst many more hold minority shareholdings. Additionally, a significant proportion of land and buildings in the UK is owned, or has been owned, by offshore companies.

The Inland Revenue has embarked upon a programme to identify UK companies whose shares are held, in whole or in part, by companies or trusts in offshore financial centres. Those companies will be subject to profiling and risk assessment to identify those that, prima facie, represent the highest risk. The Revenue will also seek to identify all transactions in UK land and property where either vendor or purchaser is a non-UK company or individual. These transactions will also be subject to risk assessment.

Within the Department each Area has appointed one Inspector as an Offshore Consultant to co-ordinate the identification of the highest risk cases and their subsequent investigation. The consultant will be trained and charged with raising awareness of the issues and existing guidance and instructions in these Areas, identifying the highest risk cases and seeking technical advice and assistance from relevant specialists when required.

Where evasion is identified enquiries will be undertaken in accordance with current Codes of Practice. The more serious cases will be referred to Special Compliance Office.

Whilst identification and regulation are key elements of the project the Inland Revenue will monitor the number of potential enquiries and the results of those cases registered for enquiry to assess the overall risk to the Exchequer and inform future case selection policy.

Working Together Partners will be working with the Inland Revenue to produce a further article for a future issue to give tax advisers more information in relation to the issues arising and examples of specific arrangements.

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Working Together - Revenue Website

The Area Directory on the Working Together site is currently being updated to include the associated Offices within each Area.

National Working Together Team

Changes to Register of Issues

In recent months we have been looking to make the Working Together featured area on the Revenue's website more user-friendly, particularly in streamlining the way we present the issues raised both at Area meetings and direct with the national Working Together Team. From next month we will have an absolute maximum of 20 top issues on a new look Register. The Team and the Partners from the representative bodies will agree what the top issues are.

Feeding back on Issues Raised

There are several different ways in which we deal with the issues received. Just because you do not see an item appear in the Register of Issues does not mean that nothing is happening.

We will contact a subject specialist for views and, if the timing is right, may then publish a response or relevant piece

  • in the Register of Issues
  • on the What's New page
  • in the publication

Additionally, we may feed the information into any relevant review or project.

For example on the existing Register of Issues you'll see that for `Tax Credits' there are no outstanding items relating to DPTC and WFTC. But on New Tax Credits, which were launched in April 2003, we have received large amounts of feedback nationally, and all this has been fed back direct to the tax credit specialists. In response they have produced a series of Questions & Answers, (to which updates are expected over the coming months). In addition, they are using this feedback to help shape their own guidance, publications and publicity.

There have also been many suggestions about Self Assessment e.g. the layout of the Statement of Account, who should or should not receive a Return, SA payments in general, etc. Many of these have featured on the Register of Issues. All of these have been passed on to SA specialists and we will feature follow up articles in future issues of Working Together.

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Complex Personal Returns and Inward Expatriate Employees

Expansion of Complex Personal Return Teams

In Issue 9, we told you we would be creating Complex Personal Returns (CPR) teams in the period from June 2002. We had identified people with more complex affairs as needing specialist attention and would be setting up seven specialist teams within our Area Management structure. We also mentioned that the Centre for Non Residents and the Large Business Office would continue to have responsibility for some complex cases.

As planned, all seven specialist teams were set up and operational by 31 March 2003. They are responsible for all elements of the taxpayer's tax affairs - processing, customer service and compliance. Some material relating to PAYE income (such as notices of coding) still comes from the PAYE office - but under the direction of the CPR team. The customers they deal with tend to have high levels of income and actual or potential complexity (see examples in Issue 9) about their tax affairs.

These seven specialist teams will be expanding during the year to 31 March 2004. We are expecting them to take on about 7,000 additional customers. As before, we will write to them and their professional advisers to explain that there has been a change in responsibility for their tax affairs. The letter will give the name and direct line telephone number of a personal case-owner (who will be the first point of contact for any questions you or your clients may have).

For clients who are now to be dealt with by a CPR team, it would be very helpful if you could ensure that completed Self Assessment Returns are sent direct to the CPR team and not to the Tax Office which issued the Return.

Specialist Teams to Deal with Inward Expatriate Employees

Our report on the Review of Links with Business (published November 2001) included a recommendation on "expatriate director/employee issues". The report concluded that the taxation of expatriate directors and employees generated a disproportionate amount of conflict between the Revenue and large corporates in some cases. It recommended that the Revenue, supported by input from multi-national businesses, should develop a statement of good practice for handling enquiries into expatriate taxation (recommendation 26). This statement of good practice was published in Tax Bulletin 65 (20 June 2003).

As we took forward this recommendation, one of the issues we considered was current organisational arrangements for inward expatriate employee work. We already had a number of specialist teams working on the tax affairs of inward expatriate employees and their employers. However, the degree to which the work was already concentrated varied across the country. We also found differences between the existing specialist teams in the extent to which they were involved in processing, customer service, personal enquiry work and employer compliance.

We consulted with representatives of large businesses and tax advisers. Our proposal to reorganise this work into a few specialist teams, carrying out the same functions in a consistent way, received widespread support. The people we consulted also welcomed our proposal to have a co-ordinating unit with a national remit to ensure that the specialist teams achieve consistency, develop expertise, inform policy and adopt best practice.

We plan to create five specialist teams by 31 March 2004 to work on the tax affairs of inward expatriate employees. Where possible, these will build on the skills and experiences of existing teams working in this field. The plan is for these five teams to handle - as far as possible - all service and compliance work relating to the relevant employees and related employer work. We expect to say more about these teams in a later issue.

Co-ordinating Role

Chris Simpson has succeeded Geoff Lunn as Inland Revenue Director with responsibility for co-ordinating the work of the CPR teams. He is supported in this work by a small team - known as IR Complex Personal Tax Teams - based at: -

    Fifth Floor Trinity Bridge House 2 Dearman's Place Salford M3 5BA

By April 2004, Chris and his team will also be responsible for co-ordinating the work of the five specialist expatriate teams - helping them to achieve consistency, develop expertise, inform policy and adopt best practice.

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Handling Your Clients' Payments

For various reasons, some tax advisers often use the wrong or another client's payslip when sending payments to the Revenue. This causes problems for the Revenue, tax advisers and their clients.

Every payslip has the reference number pre-printed in the box on the top left-hand corner and also in the scan line at the bottom. Although tax advisers amend the reference in the box in manuscript, our banking equipment reads the scan line along the bottom of the payslip. As a result of this, a significant number of payments are allocated to the wrong taxpayer, especially following the SA peaks in January and July. In addition, this can create an overpayment on the incorrect taxpayer's record that may be repaid.

This situation usually only comes to our attention when the taxpayer, who made the payment, receives a demand or statement and complains. Putting this right involves both the Revenue and you in a considerable amount of work, and inconveniences the client, especially if an incorrect repayment has been made.

Please use the correct payslip for each individual client. If that is unavailable, please forward the payment either with a covering letter or compliment slip clearly showing the client's name and reference.

When you send payments for different clients at the same time please do not send a single aggregated payment. Instead, please send a separate cheque for each client as this saves inconvenience all round.

You can find information on methods of payment, e.g. electronic payment and payment by debit card.

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Viewing Clients' Statements of Account over the Internet

In Working Together issue 13 we published an article on viewing clients' Statements of Account over the Internet.

To access the service, your firm needs to be registered at the Government Gateway. Use the link to the Government Gateway if you need to register.

Once registered, you can view clients' statements of account by visiting `Internet Service for Self Assessment'. Alternatively, click on Internet Services on the homepage, choose Self Assessment and follow the instructions.

If you have any queries about registering at the Government Gateway or viewing Clients' Statements of Account please call the Helpdesk on 0845 60 55 999.

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Claims Involving Two or More Years - Interest Position

Item 1.20 in the Register of Issues concerns the interest position under Self Assessment where loss relief is carried back. This also applies to claims for:

  • carry back of pension contributions
  • farmers averaging
  • carry back of post cessation receipts
  • literary and artistic spreading

The Effective Date of Payment (EDP) attaching to the credit for a set off will be the date the taxpayer made the valid claim to the relief or the due date of the charge against which the relief is to be set, whichever is the later. For repayments, the EDP of the credit will be the statutory filing date of the later year's Return. Note: Freestanding Credits created automatically will show EDP of the date of the claim. Repayment Supplement will only be given from the later of the date of the claim and the fixed filing date of the later year's Return.

Further information can be found in the Self Assessment Manual under "Claims Involving Two or More Years".

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Share Options - Definition of Value

This is a query which we have received from a tax adviser via a local Working Together meeting.

"There appears to be confusion regarding the definition of `value' for share option schemes. S.135 (3)(a) ICTA 1988 defines value as 'the difference between the amount that a person might reasonably expect to obtain from a sale in the open market at that time of the shares acquired and the amount or value of the consideration given.' In this context it appears reasonable to conclude that 'amount that a person might reasonably expect to obtain' means the pound in the pocket and not market value; thus, selling costs would be deducted. Paragraph 3.14 of the Inspector's Share Scheme Manual confirms this, but the figure to be entered in Box 2.24 of the Share Schemes supplementary page (Page1) is supported by Working Sheet 9 on the share schemes notes (Page SN7). This gives no allowance for selling costs. Which is correct?"

The guidance in the SSM is now out of date following this year's Finance Act and the changes made to equity remuneration by Schedule 22.

For income tax purposes on exercise of unapproved options, market value is now defined by reference to the definition for capital gains tax purposes and means the price which assets might reasonably be expected to fetch on a sale in the open market. No allowance is made for selling costs in determining market value for this purpose.

The SSM will be rewritten this year and this will be made quite clear. The 2003-04 Return will just refer to market value.

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Tax Advisers Telephoning Taxes Contact Centres

We are pleased to offer further speed dialling numbers for tax advisers telephoning our Taxes Contact Centres.

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Pension Scheme Returns

This is a query which we have received from a tax adviser via a local Working Together meeting.

"Why are Returns issued to active self administered pension schemes with no tax liability from year to year? There must be a compliance cost and risk of late filing penalty even though no tax is due."

Each year the Inland Revenue gives tax relief on Approved Pensions of over £12 billion excluding relief on Capital Gains Tax. We have a duty to monitor that relief to ensure it is given correctly. The Tax Return and accounts enable us to do that.

The legislation providing this power is S8A (1) (a) and (b) Taxes Management Act 1970, which allows us to require the trustees of any pension scheme to make a return. We chose to restrict this normally to self administered schemes. Any penalty for late filling must be capped at the amount of tax shown in the Return.

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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 & back issues

    Back issues can be downloaded from our featured area on the Revenue website. If you would prefer a paper copy, please write to or e-mail 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 e-mail: Permission to publish extracts from Working Together