This month, many advisers will be helping employers meet their compliance obligations. Advisers should also be aware of: the consultation on two aspects of the rules on partnerships; the Finance Bill 2013 measures extending the rules on close company loans to participators, which are now in force; the upcoming CT quarterly payments deadline for companies with a calendar year end; and the new Crown dependencies’ disclosure facilities.
As we approach the summer, the personal tax information-gathering season is well underway, just as that for the year-end employer tax returns begins to fade away. That said, some important deadlines need to be met, as referred to below. In addition to compliance obligations, the Finance Bill slowly makes its way through the House of Commons Committee stage; and whilst some changes will take effect from an earlier date, many will not be effective until Royal Assent (expected to be mid-July). At this time of year, we also have a flurry of consultation documents to contend with and a range of disclosure facilities.
The publication of the consultation document (Partnerships: a review of two aspects of the tax rules) will focus attention on the use (and taxation) of partnerships. The document focuses on the use of partnerships or LLPs with a mixture of individual/trust and corporate members, and advisers will need to consider the potential impact on existing structures and any restructuring opportunities before the changes come into effect (no later than April 2014). These ‘hybrid structures’ are an increasingly common arrangement, although the tax legislation relating to partnerships is, to put it mildly, extremely unclear.
The recent case of EM Ramsay v HMRC [2013] UKUT 0226 (TCC) is an interesting example of a case where the decision of the FTT has been reversed on the grounds that it had made an error of law in reaching its conclusion. The case highlights the need to consider the meaning of words (here the scope of the term ‘business’) in the legislative context in which it is being used. Specifically, Judge Berner notes that, in relation to the legislation being considered (TCGA 1992 s 162): ‘The legislation is looking at business in the context of something that is or may be carried on both by, for example, an individual and by a company’; this being quite different from that in the case of Rashid v Garcia (SpC 00348; 11 December 2002), where the context was national insurance and the alignment in the relevant legislation of business with trade, profession, office or vocation.
What is clear is that, in relation to partnerships, there is an urgent need for clarity. While the Office of Tax Simplification will be looking at ways to simplify the taxation of partnerships, action is, in the meanwhile, being taken to address ‘abuse’. In addition to the proposed measures to counter ‘disguised employment’ and ‘inappropriate profit allocations’, the Finance Bill 2013 contains measures that took effect from 20 March 2013, relating to the tax charge where loans are made to participators (the CTA 2009 s 455 charge).
Employers wishing to take advantage of a PAYE settlement agreement for 2012/13 need to agree this by 5 July 2013, or are otherwise required to include additional entries in employee P11D returns and account for PAYE and NICs as appropriate.
Employers should file their 2012/13 Forms 42, and other employment related securities returns, by the 6 July filing deadline or face penalties. A penalty of up to £300 per ‘responsible person’ is supplemented by further penalties of up to £60 per day. Penalties also apply for inaccuracies.
Penalties also apply if employers miss the 6 July 2013 deadline for filing P9D, P11D and P11D(b) returns and providing them to employees. Penalties for P11D(b) forms are based on employee numbers and are repeated for every month the return remains late.
Payment of class 1A NICs included on form P11D(b) must be made by 19 July for postal payments and 22 July for electronic payments. Automatic interest arises if payment is late. Additionally, penalties arise at 5% when payment is 30 days late, increasing to 10% after six months and 15% after 12 months.
The first instalment payment of corporation tax, where a company has a calendar year accounting period, is due by 14 July 2013. Underpayments carry interest (1.5% pa) from the installment due date to the date of payment during the period, until nine months after the end of the accounting period. The normal interest rate provisions apply thereafter (3% pa).
HMRC has recently entered into automatic tax information exchange agreements with the governments of the Isle of Man, Guernsey and Jersey, and has set up a disclosure facility. The value of this is that UK taxpayers can make a voluntary disclosure and pay the resultant tax, interest and penalties, generally avoiding prosecution. Where, despite the opportunity, taxpayers do not come forward, HMRC will target priority cases and they will face an increased risk of prosecution.
Other British overseas territories will also join an automatic exchange of information with the UK. HMRC will be provided with detailed financial and personal information about individuals, trusts and their bank accounts, including details of payments into those accounts.
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