The principal UK tax event in December 2012 was the publication of the draft 2013 Finance Bill, and the Autumn statement. However, there have also been other tax developments as well, some of the most interesting of which relate to VAT, and these are discussed briefly below:
VAT Registration Changes
The new rules for UK VAT registration of non-established taxable persons (NETPs) came into effect on 1 December and there is now no registration threshold for NETPs making taxable supplies in the UK. This means that:
- From 1 December 2012, any NETP which makes taxable supplies or intends to make taxable supplies in the UK in the next 30 days has 30 days from the date it formed that intention to notify HMRC that it is required to register for VAT.
- The registration will be retrospective and take effect from the date the business makes or intends to make such supplies, though no earlier than 1 December 2012.
This has no impact on the rules for distance sales or acquisitions, or sales where the UK customer accounts for the VAT under reverse charge. Neither have the place of supply rules changed. Thus the NETPs likely to be affected will be the ones making B2B supplies of goods in the UK under the old threshold, and those making B2C supplies of services, where the place of supply is the UK rather than where the supplier belongs (such as UK land related services).
Change of HMRC View re: TOGCS
HMRC have issued Brief 30/12 outlining the TOGC policy change following the Robinson Family Tribunal case stating there is a TOGC if the new owner is put in possession of a going concern that he can continue without interruption. Essentially most property ‘transfers’ that have previously been excluded from the TOGC relief because a new asset has been created will either involve the granting of a new very long lease and retention of the freehold which will then have a minimal value (the example HMRC give in the Brief), or they will involve the carving out of rather shorter interests.
The change of view by HMRC could mean that for any TOGC cases which happened in the last four years where the assets included a property transaction that was outside the TOGC relief because a new lease was granted rather than the old owner’s existing interest being transferred, then it may be possible to revisit the transaction and claim relief.
If the VAT charged on the property interest was deductible then the main opportunity is likely to be for the purchaser to reclaim the additional Stamp Duty Land Tax that will have been paid as a result of the transfer being taxable rather than desupplied (as SDLT is paid on the VAT inclusive amount).
This change of policy should have no impact where the property transfer fell outside the TOGC relief for reasons other than it being a new asset instead of the transfer of an existing interest (e.g. where the transferee has not opted to tax in time or cannot give the necessary declaration of taxable use).
End of mixed PAYE schemes
The introduction of RealTime Information (RTI) has been described as the greatest change to the PAYE system since 1944. All employers should be routinely submitting information under RTI to HMRC by October 2013. One of the changes that this will entail is that mixed PAYE schemes will end and new schemes will need to be set up.
A mixed scheme is one where the same PAYE reference is used for both tax equalised expatriates included in a modified Appendix 6 Scheme together with other employees. RTI will eventually have automatic penalties and more automatic chasing of late tax and NIC payments etc and these automatic systems will be unable to deal with the different deadlines for different employees under the same PAYE reference number – as is the case with mixed scheme and so such schemes will have to end. Practically, this means the existing mixed scheme will need to be split into two with one having a new PAYE reference.
FATCA and Information Sharing
The draft Finance Bill gave HMRC power to issue regulations to give effect to the UK- US intergovernmental agreement implementing the US Foreign Account Tax Compliance Act. Draft regulations and guidance were published by HMRC on 18 December 2012, and comments are requested by 13 February 2013. The move towards automatic exchange of information between the UK and its Crown Dependencies seems to be gathering momentum. On the 7th December the Isle of Man and the UK issued press notices to confirm that a tax information sharing agreement will be signed between the two governments.
The reports both refer to an agreement that effectively mirrors the Inter- Governmental Agreement currently in negotiation between the Isle of Man and the US as part of the FATCA initiative. It is also explicitly stated that the agreement will be concluded to the same timetable in order to avoid excessive burdens on the financial institutions affected.
Aspects of the Draft UK Finance Bill
While the draft Finance Bill will be covered elsewhere in Accountancy Ireland, a few positive highlights likely to be most relevant to small and medium UK companies / Irish groups include:
- Announcement of plans to extend Entrepreneurs’ Relief to shares acquired through the exercise of Enterprise Management Incentive share options where an individual holds less than 5 percent of the ordinary share capital.
- The period to which the first year expenditure on designated energy saving and environmentally beneficial technologies must be incurred and where the first year tax credit may be claimed has been extended from 31 March 2013 to 31 March 2018
- The Annual Investment Allowance – a 100 percent allowance on qualifying expenditure up to the specified annual limit - will increase from £25,000 to £250,000 for a temporary period of two years from 1 January 2013
- Expenditure incurred on cars with low CO2 emissions or electrically propelled cars will continue to benefit from the 100 percent first year allowance for an additional two years as the allowance has been extended to 31 March 2015. Currently, 100 percent first year allowances are due on cars with CO2 emissions of 110g of CO2/km or less, and from April 2013 the proposed rate is 95g/km.
- The proposals to extend the scope of the interest withholding tax rules to certain intra-group Euro-bonds and ‘short interest’ have been dropped
- An above the line payable R&D tax credit will be introduced – so making the UK a more competitive regime when competing for international investment.
- A ‘dis-incorporation’ relief will be provided for small corporates – this is proposed to be by election, but the currently proposed threshold is very low – currently proposed at £100K of assets transferred
- The main rate of UK corporation tax will reduce to 21% from April 2014 – perhaps we will see a rate of 20% by the end of this parliament