July 2013 News
Café received £1bn tax bill
HMRC has been forced to say sorry to the owner of a Greater Manchester café after incorrectly sending it a tax demand of £1bn. Florence Coke, owner of Mamma Flo’s in Gorton, received a tax bill of £979,092,858 in March. HMRC said the bill was sent in error, adding they have since sent a corrected bill and apologised to Coke.
Conservative MPs call for 10% tax rate
The Free Enterprise Group of Conservative MPs, an influential group of 40 senior Conservatives headed by Charlie Elphicke, has published a report calling for a simplified tax system in which the corporate tax rate is cut to just 10%. The group also believe that much of the tax code should be re-written in order to compel foreign businesses to contribute the same amount as UK companies. Slashing the corporate tax rate to 10% would increase the UK’s competitiveness, and would be paid for through abolishing tax reliefs and international avoidance structuring. “Such a change would be radical yet it would make the UK one of the lowest tax jurisdictions in the world with a loophole free system fit for the internet age,” the report adds.
LLPs could be hit by higher tax rates
The government has published proposals that could lead to certain members of limited liability partnerships (LLPs) including accountancy firms paying higher tax and national insurance contributions. HMRC is consulting on the tax rules governing partnerships with the intention of clamping down on the use of LLPs to disguise employment relationships, and the artificial allocation of profits and losses to secure tax advantages.
Under current tax rules, the tax position of partners is that they are self-employed and taxed as such. The tax treatment has made it attractive for LLPs to treat some staff as self-employed partners, but who are, technically, employees. As a consequence of removing the LLP’s obligation to pay employer’s NI contributions, a significant tax saving is made. HMRC has asked for comments before 9 August.
Country by country reporting is ‘daft’
Bill Dodwell, Deloitte’s head of tax policy, has told the House of Lords Economic Affairs Committee that a formulary apportionment tax system (aka as country by country reporting) is a “completely daft idea”. Such as system sees profits made by multinational corporations declared in each jurisdiction they operate in and taxed accordingly, with the aim of preventing profit shifting and tax base erosion. However, such a system could see the UK relinquish tax sovereignty to the EU or another international body. The US operates a similar system between its states, which sees employment driven from one state to another for tax efficiency purposes, the lords heard.
Saab directors arrested
The former chief financial officer of Saab Automobile, Karl-Gustav Lindstroem, as well as former chief executive Jan-Aake Jonsson and former general counsel Kristina Geers, have been arrested in Sweden on suspicion of accounting fraud. According to court documents filed in Vaenersborg the three were detained for questioning on suspicion of “grave attempts to complicate tax controls” during 2010 and 2011. Saab Automobile is not part of the Saab Group that makes fighter jets and other defense security equipment.
Apple defends tax policy
Tim Cook, CEO of Apple, defended the company’s tax strategy in a stormy public meeting with a US Senate subcommittee. “We don’t depend on tax gimmicks,” said Cook, adding that Apple doesn’t move intellectual property offshore and sell back into the US. Cook called for a simpler tax system, and in turn a lower US corporate tax rate. “The tax code has not kept up with the digital age.” According to the subcommittee: “Apple wasn’t satisfied with shifting its profits to a low-tax offshore tax haven. Apple sought the Holy Grail of tax avoidance. It has created offshore entities holding tens of billions of dollars, while claiming to be tax resident nowhere.” The company said it is one of the US’s biggest taxpayers, contributing $6bn to the country’s coffers in 2012.
Several large firms in the US have faced criticism for their reluctance to repatriate their foreign earnings as they face a top tax rate of 35%.
US corporation tax is one of the highest in the world at 35%. Companies, though, usually pay far less, thanks to various deductions and exemptions.
Lower corporate tax boosts investment
A report by fDi Magazine, part of the Financial Times group, has found that lower corporate tax rates increases the amount of foreign investment into a country. Although a country’s GDP is the biggest determining factor in attracting inward investment, the sample of 46 countries found that corporate tax rates also correlated with inward investment. With the OECD and G7 looking at ways to counter multinational tax avoidance, changes to tax rates could directly impact on inward investment, the report suggested.
Don’t name and shame
Frank Haskew, ICAEW head of tax faculty, has told House of Lords Economic Affairs Committee that the naming and shaming of promoters
of tax avoidance schemes may not have the desired deterrent effect. Instead of discouraging boutiques from marketing schemes – and clients approaching them – it may have the opposite effect. In fact, he suggested, it could be seen as free advertising.
Taxman charged with taking bribe
It has been alleged that Jonathan Hall, a press officer at HMRC, was paid £17,475 by the Sun newspaper’s Whitehall editor Clodagh Hartley in exchange for information about the government’s spending plans, including decisions relating to the 2010 Budget. The Crown Prosecution Service confirmed on Tuesday that Hartley would be charged along with Hall and his partner Marta Bukarewicz, who is not a public official.
Accountant jailed for tax fraud
Ronald Moncrieff, a Nottingham based accountant, has been jailed after an investigation conducted by HM Revenue & Customs found he had claimed fraudulent expenses totalling £153,000. Moncrieff claimed fictitious expenses in his own tax returns as well as falsifying returns on behalf of his wife and son. He pleaded guilty to charges of completing false tax returns of £153,000 plus £18,000 interest. He has been jailed for 18 months.
Transfer pricing raises £4.1bn
HMRC says that its Transfer Pricing Group, formed in 2008, has so far secured an additional £4.1bn of revenue. The object of the group is to ensure that multinationals value and purchase goods and services moving across international borders from one of the group’s corporate entities to another on an ‘arm’s length’ principle.
September 18 2014 is the date set for the Scottish independence referendum but whatever the result from 2016 the Scottish parliament will be obliged to set a Scottish rate of income tax (SRIT). Forming part of the UK tax system and administered by HMRC, it isn’t a fully devolved tax, but is nevertheless a fundamental shift in how the country manages its tax affairs, gifting the Scottish government unprecedented powers. The SRIT will apply to ‘non-savings income’, including employment, rental and pensions income, with the rate added to the main UK rate bands by the Scottish government after the income tax rate applying to Scottish taxpayers is reduced by 10p. Scottish taxpayers will be issued with a tax code prefixed by an ‘S’, before the start of the 2016/17 tax year and the SRIT applies to Scottish taxpayers no matter where their employer is based.