Michael Steed, Garry Buick and I took part in a webinar in the latest developments in Transfer Pricing and Diverted Profits Tax. With about 250 ongoing investigations in this area, this has become a major headache for FTSE 350 companies. You can access the webinar at http://bpp.adobeconnect.com/pl9cgcmkjuc2/
It is clear that enforcement in this area by HMRC is increasing, partly fuelled by the public disquiet over the Corporation Tax bills of certain large companies.
I run two courses with BPP on Transfer Pricing.
The first course, Transfer Pricing Fundamentals gives a more general background to Transfer Pricing and the Diverted Profits Tax.
The second course, Transfer Pricing Planning and Documentation explores Transfer Pricing in more depth but also looks at the documentation that companies should assemble in order to assess their risks and protect themselves in the event of an HMRC enquiry.
This is from a famous song involving the IRS but HMRC seems to be catching up on its surveillance method.
In a recent case “Anthony Peck, Sally Peck”  UKFTT 770 (TC), HMRC showed not only that they receive large amounts of information but they are able to both analyse it and use it effectively.
The case involved a question of residence. In this case, HMRC sought to prove that the taxpayers had retained residence in the UK:
“Extensive analysis was provided by HMRC of expenditure by Mr and Mrs Peck while in the UK. This showed regular trips to supermarkets, main high street retailers such as Boots and John Lewis, and occasional trips to restaurants and hotels for meals with friends.”
This should be a warning to anyone who believes that they can escape HMRC’s attention. Unless they adopt the strategy of “Jack Reacher” in disposing of all their cards and depending on cash, HMRC can find out an enormous amount of information about you.
Primondell is running a series of courses on HMRC powers and tax investigations
Jeremy will be speaking at the FT Adviser Tax Efficient Investing conference on 31 January. As the Finance Bill which enacts the new rules for domicile will have been passed, Jeremy’s talk will be on the implications for non-UK domiciled investors.
The decision of the Supreme Court in favour of HMRC is not particularly surprising. Given the way that the EBT was set up the documentation and the communication to the footballers, my only surprise is that the taxpayer managed to win at the First Tier and Upper Tier tax tribunals.
Now that The Supreme Court has upheld the decision of the Court of Sessions, one should look at the judgement which will be very useful to HMRC in the future. Quoting the words of Lord Hodge, “The tax code is not a seamless garment. As a result, provisions imposing specific tax charges do not necessarily militate against the existence of a more general charge to tax which may have priority over and supersede or qualify the specific charge.”
What this means is that if the Courts believe that a payment or a benefit is earnings then they will allow HMRC to tax it as such even if they cannot find a specific taxing element under the tax code. This follows and is fairly similar in its effect to the PA Holdings case where the justices at the court of appeal decided that the dividend should be taxed as earnings. Practitioners should be aware that HMRC now has a totemic decision allowing it to strike down remuneration planning that it disapproves of much more easily. This will have consequences well beyond the settlement of EBTs.
Jeremy Mindell is giving the employment tax update at the CIOT conference in Warwick 8th-10th of September 2017 which includes a review of the forthcoming changes to termination payments.
Employers who embark on redundancy and restructuring programmes will find it much more costly from April 2018.
Following a “revenue neutral” review by HMRC, they are proposing that from 6 April 2018:
1. All Payment In Lieu of Notice payments (PILON) will be taxable
2. Employers NIC will be imposed on payments above £30K
3. Abolition of Foreign Service Relief
This will potentially make restructuring a business costlier to both employees and employers.
An interesting point is that tax payers will pre-empt government decisions. So, for example, the jump in Self-Assessment revenues in January 2017 to a record level was caused by owner managers of businesses paying themselves large dividends before the dividend-tax rise came into effect.
One might be a bit apprehensive about what pre-emptive action that may be taken by companies in advance on the new rules on termination payments due to come in on the 6th of April 2018. If decisions are delayed until after the start of the new tax year, these will result in much higher national insurance bills for companies and less tax relief for individuals. If we see a spike in redundancies and restructurings in the first quarter of 2018, don’t be surprised.
Jeremy Mindell is giving the employment tax update at the CIOT conference in Warwick 8th-10th of September 2017 which includes a review of the forth coming changes to termination payments.
Jeremy Mindell is delighted to be giving the Employment Tax Update at the CIOT Conference on the 8th-10th September. This is one of the premier events organised by the leading tax body in the UK and always attracts a range of speakers from different backgrounds.
Jeremy has entitled the talk, “Ready for the April 2018 squeeze?”. As the Government seeks to bear down on the deficit, it is looking for new and increased sources of revenue. After the 2015 General Election it was landlords who bore the brunt of considerable tax rises. It appears that employers will find their burdens increased over the next few years.
Some measures such as on termination payments have already been announced, others such as the response to the Taylor Report are yet to come. Jeremy will be looking at how these changes will affect employers and how they should plan to deal with the new obligations.
I spoke at the FT Adviser seminar on tax efficient investments in London on 25 January. There is another session on 31 January in Birmingham. The main subjects of interest were how to use AIM shares, investments in unquoted companies as well as the Enterprise Investment Scheme and the Seed Enterprise investment Scheme to mitigate one’s clients tax liabilities. All these initiatives are encouraged by the Government and indeed at the same time that I was speaking an MP was asking to Theresa May at PMQ’s whether HMRC could look at simplifying the rules for the EIS plan so that more companies could receive the benefit of additional investment.
My main topic was the impact of the new rules for non-UK tax domiciles; some of whom will become domiciled in the UK for the first time on 6 April 2017. My main message was twofold. First one needs to understand that the new rules overlay the old ones and that the old rules regarding domicile of choice for example and the 17/20 years’ rule for IHT may mean that a client who thinks that they will become domiciled in the UK on 6 April 2017, might already have become domiciled in the UK.
Secondly, I talked about the Business Investment Relief (BIR) which allows non-UK domiciles on a remittance basis to bring in funds to the UK and invest them without triggering a tax liability. These rules are being changed to make it more attractive for non-UK domiciles to bring their money into the UK to invest in the UK. The motivation of the Government is clear- they want to see more investment in the UK. How the rules will play out still needs to be finally decided but it is clear that BIR will become more attractive for many non-UK domiciled individuals or those who are forced to keep funds outside the UK because they been taxed on remittance basis in the past.
Jeremy will be speaking at two Financial Times events on Tax Efficient Investing in 2017 in London 25th of January and Birmingham 31st of January.
An assortment of speakers will be discussing the tax changes as a result of the UK’s decision to vote for a Brexit this past June. There will be talks on tax planning strategies and solutions, as well as how to maximise your clients income.
This event is for financial intermediaries only.
For more information and to register, see the FT Advisor page here.
To update participants on current developments on transfer pricing. This includes the methodologies used in assessing transfer pricing.
Outline of the course
The course will include the following topics:
- The forms of HMRC enquiry in this area.
- The methods by which a company can defend its position.
- A discussion of pricing models and generally accepted practices.
- The impact of the diverted profits tax on the current transfer pricing environment.
Know your rights
HMRC is stepping up its assault on evasion, avoidance and tax planning. Stung by criticism from Parliament, HMRC is looking to demonstrate that it is not a soft touch when it comes to avoidance and evasion. Using a combination of:
- The new senior staff that it is recruiting
- The Connect Computer System
- The automatic exchange of information provisions
- The new criminal and civil penalties
The environment is likely to become significantly more difficult for taxpayers who are caught under their microscope.
HMRC increased prosecutions in the year to 5th April 2015 to 1,258 people which was a 58% rise on the previous year. The investigations yielded £26 billion of additional tax and 400 years of custodial sentences.
The new criminal offences for failing to declare offshore income and for corporations that fail to take adequate steps to prevent the facilitation of evasion will undoubtedly increase the number of prosecutions further in the years to come.
This course looks at the whole area of tax investigations including:
- Sources of information for HMRC
- Their new powers
- Taxpayer rights
- How to avoid criminal sanctions
- Tactics in dealing with HMRC
- Case law on the conduct of investigations
- The appeals process
- Fee protection
- The international context
Tax investigations cause substantial strain to both the taxpayer and potentially their advisors. This seminar also looks at the human element which is often overlooked in an investigation.
In an age when there is less tolerance for those who allegedly do not pay their fair share of tax, this course will look at the remaining defences which a taxpayer can deploy against ever more powerful authorities.