Other Measures
Bank payroll tax
A new bank payroll tax is being imposed with effect from 9 December 2009. It is a targeted measure to be imposed on banks and building societies and other members of banking or building society groups that carry on certain investment or financial trading activities. Both UK resident companies and overseas companies with UK branches engaged in the above activities will be affected. Insurance companies, brokers and other companies in the wider financial services industry are not included.
The Payroll Tax of 50% will be levied on the bank or other taxable company from 9 December 2009 to 5 April 2010 for all contractual or discretionary bonus awards unless there was a contractual obligation, with no discretion as to the amount of the bonus, in existence at the time of the announcement. The Government has indicated it will consider extending the period of charge beyond 5 April 2010.
The tax will apply to the aggregate of bonuses over £25,000 per employee awarded during the above period, including bonuses in the form of benefits or loans. Regular salaries and benefits will not be affected.
The tax will be payable on 31 August 2010 and is not deductible for corporation tax purposes. Detailed provisions, including anti-avoidance provisions, are available on the HMRC website, www.hmrc.gov.uk.
Landline duty
HM Treasury, HMRC, and the Department for Business, Innovation and Skills will shortly consult on the implementation of the landline duty.
The landline duty of 50p per month for each line is being introduced to help fund the roll-out of superfast broadband (Next Generation Access) to 90% of the country by 2017. The Digital Britain White Paper committed to introduce the new duty in the financial year 2010/11.
SDLT ‘holiday' to end
A stamp duty land tax (SDLT) ‘holiday' was announced on 2 September 2008 for all houses costing up to £175,000.
The ‘holiday' will end as planned on 31 December 2009 and the threshold for houses will revert to £125,000 (or £150,000 in disadvantaged areas) from 1 January 2010.
Seafarers
Legislation will be introduced in the 2010 Finance Bill to extend, from 6 April 2011, the Seafarers' Earnings Deduction to EU and EEA resident seafarers.
Equitable liability
The current law does not allow HMRC to forgo tax that is legally due. By a concession published in Tax Bulletin 18 in August 1995, HMRC has not pursued amounts when a taxpayer can prove they would not have been due if he or she had filed a return on time. The concessionary treatment applies only where a taxpayer:
- shows that the figure of tax due is excessive;
- shows what the correct amount should have been; and
- brings his or her tax affairs up to date, including payment of tax, interest and penalties.
The concessionary treatment can usually only apply to any taxpayer on one occasion although it may cover a number of years. The current concession will continue to apply until legislation is introduced to formalise it.
Anti-avoidance measures
Offshore bank accounts - New Disclosure Opportunity
Following a recent tribunal decision, HMRC is receiving details from over 300 financial institutions in the UK regarding offshore bank accounts. Alongside this, the Government is offering the New Disclosure Opportunity (NDO), giving those with undeclared assets a final chance to come forward to pay tax, interest and a reduced penalty. The notification window for the NDO runs until 4 January 2010, with a final disclosure and full payment required by 12 March 2010.
The Chancellor has also proposed that there will be a requirement to notify HMRC when opening offshore bank accounts in certain jurisdictions, supported by a separate penalty regime, which would treat offshore evasion as a "deliberate" tax offence and could lead to penalties of up to 200% of the tax evaded.
Inheritance tax avoidance schemes
Draft legislation has been published to close two schemes designed to avoid inheritance tax charges on relevant property trusts. First, where a person transfers property into a trust in which they retain a future interest they will be charged inheritance tax if they become entitled to an actual interest under the trust. Second, where a person purchases an interest in a trust, that interest will be treated as part of their estate for inheritance tax purposes.
These measures will counter the popular "Melville" schemes. The Government has announced it is also examining ‘wider solutions' regarding the use of trusts to avoid inheritance tax charges. This could have an impact on the use of "pilot" trusts, which have become a useful tax planning tool.
Disclosure of Tax Avoidance Schemes
Regulations will be introduced to extend the Disclosure of Tax Avoidance Schemes (DOTAS) to require the disclosure of certain stamp duty land tax (SDLT) avoidance schemes that concern residential property with a value of at least £1 million. Users of all SDLT avoidance schemes, for both commercial and residential property, will be required to report the use of the scheme to HMRC.
Other anti-avoidance measures
Other announcements include measures to:
- counter avoidance through the artificial creation of excess capital allowances
- ensure that the tax exemption for the inflationary return of an index-linked gilt cannot be exploited for avoidance purposes
- prevent leasing schemes that generate artificial tax losses in excess of the value of taxable income taking income out of the charge to tax
- prevent companies using consortium arrangements that attempt to deliberately circumvent the sale of lessors anti-avoidance legislation
- prevent life insurance companies manipulating the rules in relation to "non-profit funds" to produce profits that escape tax.
- remove the exemption from stamp duty or stamp duty reserve tax where new shares are issued within the EU and subsequently transferred to a depositary receipt system or clearance service outside the EU.
