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In brief: FB 2014; RTI; interest on NIC; pro fees; parent subsidiaries; BEPS; FTT; guidance

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A round up of other tax news:

Finance Bill progress

FB 2014 Sch 8 introduces some changes to the legislation relating to venture capital trusts (VCTs). These changes include a restriction on the scope for a VCT to return capital to investors, after the investors have had tax relief on their investment but before the VCT has been required to invest the monies in qualifying holdings. On 2 May, the government tabled four amendments to provide clarification as to the effect of the new legislation dealing with returns of capital and to provide scope for greater flexibility in respect of the treatment of VCT mergers.

RTI and expatriate employees

HMRC has published a list of FAQs to assist employers of expatriate employees. For this purpose, ‘expatriate employees’ includes both employees sent to the UK on assignment and UK employees sent overseas on assignments. Although the guidance stresses that RTI must be operated in relation to expatriate employees, it notes that HMRC will adopt ‘a common sense operational approach’. HMRC will therefore accept delays in reporting and in payment where a reasonable excuse can be shown. The same will apply to employees receiving employment-related securities. However, HMRC expects late reporting to take place no later than the next regular monthly payroll date. The guidance also covers practical issues such as estimating overseas earnings for the purpose of the monthly FPS, pre-assignment earnings and data field entries.

Interest on NIC

The Social Security (Contributions) (Amendment No.3) Regulations, SI 2014/1016, which came into force on 6 May 2014, amends the principal regulations (SI 2001/1004) in relation to the payment of interest on class 1 NIC arising from FA 2009 ss 101 and 102.

Relief for professional fees

The Income Tax (Professional Fees) Order, SI 2014/859, which came into force on 6 April 2014, allows tax relief: for the trainee registration fee payable by the dental specialty trainees to the body which recommends specialty trainees to the General Dental Council for the award of a certificate of completion of specialist training; and for annual registration fees paid by veterinary nurses to the Royal College of Veterinary Surgeons.

Parent-subsidiary Directive

At a meeting on 6 May 2014, the EU Council discussed a proposal to close a loophole that has allowed corporate groups to exploit mismatches between national tax rules so as to avoid paying taxes on certain types of profits (‘hybrid loans’) distributed within the group. The proposed amendment to the EU’s Parent-subsidiary Directive (2011/96/EU) would prevent double non-taxation by providing that the member state of the parent company will only refrain from taxing profits from the subsidiary to the extent that such profits are not deductible by the latter. The presidency intends to seek adoption of the amending directive at the Council’s meeting on 20 June 2014.

BEPS update

The OECD will hold a public consultation on the discussion draft on transfer pricing documentation and country by country (CbC) reporting on 19 May 2014 at the OECD Conference Centre in Paris, France. Action 13 of the BEPS action plan calls for a review of the existing transfer pricing documentation rules and the development of a template for CbC reporting of income, taxes and economic activity for tax administrations. On 30 January 2014, the OECD published a discussion draft containing revised guidance on transfer pricing documentation and CbC reporting. The written comments, which were received by 23 February 2014, were discussed by Working Party No. 6 of the Committee on Fiscal Affairs at its March 2014 meeting. Further discussions will take place during the Working Party’s May meetings. The 19 May public consultation event on the discussion draft is open to the public and press. Registration for the meeting is now closed. This meeting will also be broadcast live on the internet and can be accessed online (for which no advance registration is required).

EU financial transaction tax

The participating member states have reiterated their commitment to the EU financial transaction tax (FTT) and laid down their roadmap for its implementation, with ten of the 11 members of the bloc pressing ahead with the FTT and committed to introducing it by 2016. It is understood though that Slovenia, the 11th member, did not sign the joint declaration because it was unable to as it currently has no government. The intention is to work on a progressive implementation of the FTT, focusing initially on the taxation of shares and some derivatives. 

HMRC guidance

New HMRC guidance is available from HMRC’s website, including:

  • Budget 2014: supplement to VAT notes 2014, setting out the VAT changes announced in the Budget 2014;
  • an update to the National Insurance manual, which includes a rewritten section on payments of damages from a third party, and a new section on refunds of NIC paid at the non-contracted-out rate;
  • an update on the new scheme reconciliation service for contracted-out pension schemes;
  • updated guidance for employers on eligibility for employment allowance to cover independent pharmacies;
  • DOTAS six-monthly statistics;
  • updated list of reporting offshore funds;
  • an updated Notice LFT1: A general guide to Landfill Tax (April 2014);
  • Customs information papers on export control system and new computerised transit system and on shipwork end-use and processing of goods; and
  • Tariff stop press notices 20/14, 21/14, 22/14, 23/14, 24/14, 25/14, 26/14, 27/14, 28/14, 29/14 and 30/14.