However, the Chancellor did have time to announce that the government would legislate against what has become known as ‘income shifting’. In response we have found the time to write a standard letter for you to send to your clients. If, like us, you are also busy you’ll be delighted to learn the letter will be accompanied by our summary of the draft legislation along with action points you may wish to consider. The tax team have also been busy reading the draft Capital Allowances legislation and Residence and Domicile legislation consultation - where will it end?
The Money Laundering Regulations have been keeping the lecturing team busy with many of you requesting
in-house updates. Again, if you’re pushed for time you can keep on top of things with our summary of the key changes arising from the
new Regulations promised in our November newswire. See Money Laundering news below.
Finally may I take this opportunity to draw breath and wish you all a happy, healthy and prosperous New Year.
Nicola Hurley
Director
nicola.hurley@mercia-group.co.uk
Income shifting - the proposals following the Arctic Systems case - New client letter available 7 January 2008
In the Pre-Budget Report the Chancellor announced that the government would legislate against what has become known as ‘income shifting’. This announcement followed HMRC’s final defeat in the Arctic Systems case.
Keep your clients informed of developments by purchasing our standard letter. To ensure that you are fully aware of the issues, the letter will be accompanied by our summary of the draft legislation along with action points you may wish to consider.
The letter costs £39.95 (£35 for members) plus VAT for unlimited usage. To order a copy click here. Please note the letter will not be available until Monday 7 January but you will not be invoiced until you have received a copy of the letter.
Audit and Accountancy Issues
Money Laundering News
You are no doubt aware that the new Money Laundering Regulations 2007 came into effect on 15 December. Since our last newswire the CCAB has issued its final anti-money laundering guidance for the accountancy sector and we’ve been busy emailing our money laundering compliance manual subscribers with news of what’s changed since the draft version. Three main changes have been made in respect of:
- the tipping off provisions;
- clarification of the requirements for the identity of beneficial owners; and
- an appendix showing the underlying law which sets out the specified disclosure obligations.
In our November newswire we promised you a summary of the key changes arising from the new Regulations. If you would like to see a copy, which has been taken from our money laundering training material, please click here. The original seminar pack that the material has been taken from is part of our money laundering compliance manual subscription, which also includes a digital copy of our latest money laundering update course. You can find out more about this manual here.
Companies Act Implementation Timetable Update
Following November’s announcement that the final implementation date for the Companies Act 2006 will be October 2009, rather than October 2008, the government has now set out the final timetable for the Act’s implementation. A number of provisions will be commenced with effect from 1 October 2008, including the repeal of the restrictions under the Companies Act 1985 on financial assistance for acquisition of shares in private companies, including the "whitewash" procedure and:
- sections 155 to 159: provisions relating to corporate directors and under-age directors
- sections 175 to 177: general duties of directors in respect of conflicts of interest
- sections 182 to 187: declaration by a director of an interest in an existing transaction or arrangement
- sections 641(1)(a) & (2)-(6), 642, 643, 652 and 654: new procedure for private companies to make capital reductions supported by a solvency statement instead of by a court order.
Stop press! The next commencement order
News of the next commencement order of the new Companies Act reached us as we were preparing this month’s newswire. A copy of the final statutory instrument was not available at the time of going to print so we’ll have more on this in the New Year. We can also look forward to a separate commencement order in 2008 to bring into force the repeal of provisions in the 1985 Act relating to the audit of small charitable company accounts as well as another commencement order in respect of provisions to be commenced in 2009, which should be published in draft in late spring 2008.
Other news
It’s been a busy month! You may find the following of interest:
- The APB has published a revision of Practice Note (PN) 16 - Bank reports for audit purposes in the United Kingdom
- The APB has published a discussion paper ‘The Auditor’s Report: A Time for Change?
- The FRC has published consultation draft guidance on the use of agreements between companies and their auditors to limit the auditor’s liability, as provided for under the Companies Act 2006.
- And finally, if you’re not too busy over the holidays you might like to take a look at the new IFAC guide that assists practitioners on the audit of small and medium-sized entities and aims to help promote consistent application of the ISAs - all 399 pages of it! You can access a copy here.
Advocate-General’s opinion predicts success for Marks & Spencer and may signal the end of the three year cap
The Advocate-General has issued his opinion in the case of Marks and Spencer. The case involved the refusal by HMRC to repay over £3 million in VAT as the error occurred over three years prior to the claim. The retrospective introduction of the three year time limit by the UK infringes EU law in the opinion of the Advocate-General.
The long awaited end to the debate on the lawfulness of the three year cap may be on its way with a favorable result for the taxpayer. If you believe that any of your clients have had claims restricted to three years now is the time to submit them.
If you would like to read more about recent tax investigation and VAT developments, please click here for this month’s IVC news round-up.
Paying a fairer share: a consultation on residence and domicile
In the Pre-Budget Report the government announced a package of reforms affecting the residence and domicile personal tax rules. The government has now published a consultation document which contains further detail on these changes.
http://www.hm-treasury.gov.uk/media/1/2/consult_residenceanddomicile061207.pdf
Income shifting consultation
Following the Arctic Systems case, the document ‘Income shifting: a consultation on draft legislation’ has been published.
http://www.hm-treasury.gov.uk/media/1/D/consult_income_shifting.pdf
Changes to the advisory fuel rates from 1 January 2008
The advisory fuel rates have been changed with effect for all journeys undertaken on or after 1 January 2008.
http://www.hmrc.gov.uk/cars/advisory_fuel_current.htm
A clearances pilot from January 2008
HMRC have announced that, from Budget 2008, they will provide business with a view of the tax consequences of significant commercial issues wherever there is uncertainty, regardless of when the legislation was enacted. They have also committed to responding to clearance applications within 28 days as the norm.
HMRC have also announced that they will run a clearances pilot from January 2008, which will encompass cover
- business customers in the retail sector whose tax affairs are handled by the Large Business Service; and
- business customers, across all sectors, whose tax affairs are handled by offices within the North West & Midlands group of Local Compliance.
For these businesses, HMRC will ask them to demonstrate the commercial significance of the transaction where the clearance relates to direct tax legislation older than the last four years and respond within 28 calendar days as the norm. Business customers handled by Local Compliance’s North West & Midlands group will submit their applications, using the draft guidance, to a central team.
http://www.hmrc.gov.uk/largecompanies/clearance-pilot.html and http://www.hmrc.gov.uk/cap/links-dec07.htm
Revised guidance on the settlements legislation
Shortly after the House of Lords judgment in the Arctic Systems case, HMRC issued interim guidance about the application of the settlements legislation to cases similar to Arctic Systems.
HMRC also promised to issue further, more detailed, guidance in the autumn. This guidance is now available in the Trusts Settlements and Estates Manual at TSEM 4000 onwards.
http://www.hmrc.gov.uk/manuals/tsemmanual/TSEM4000.htm
Corporation tax enquiry window
HMRC has sent a letter to agents who act for corporate clients, advising them of the changes to the enquiry window for corporation tax self assessment. The letter explains the changes, including:
- for accounting periods ending on or before 31 March 2008, the enquiry window for returns filed on time closes 12 months from the statutory filing date;
- for accounting periods ending after 31 March 2008, the enquiry window for most returns delivered by the filing date will close 12 months from the day on which HMRC receive the return;
- there is no change for companies in groups that are not ‘small’ and the enquiry window for such companies is still linked to the statutory filing deadline. Companies in groups that are not ‘small’ will have to identify themselves on their company tax return. There is a new box on the front page of the CT600 return form and a similar option for returns delivered electronically; and
- for all companies that file late, there is no change. The enquiry window still closes on 31 January, 30 April, 31 July or 31 October next following the first anniversary of the day on which the return is delivered.
Revenue & Customs Brief 70/07
28 November 2007
This Brief reminds companies that claims to Research & Development (R&D) tax relief for accounting periods ending before 31 March 2006 must be made by 31 March 2008.
http://www.hmrc.gov.uk/briefs/company-tax/brief7007.htm
HMRC guidance on which pension schemes need to file
HMRC decided not to issue self assessment tax returns (form SA970) to all pension schemes from 6 April 2007, to reduce costs to both HMRC and the pensions industry. Previously the return was issued to all self administered schemes but, with effect from 6 April 2007, it will only be issued if there has previously been any tax liability or a repayment has been claimed.
http://www.hmrc.gov.uk/pensionschemes/newsletter25.htm
New form to transfer unused Inheritance Tax nil rate band
The new claim form IHT216 to claim a transfer of unused IHT nil rate band is now available to download.
http://www.hmrc.gov.uk/cto/iht216.pdf
Office Gossip and Idle Chat!
Christmas Holidays
The office will be closed from midday on 21 December until Wednesday 2 January.
Party time
If you are reading this newswire during Friday lunchtime we will be enjoying our Christmas lunch. We’ll make sure we report anything of note in our January newswire but I’m sure we will all be on our best behaviour.
A new course for 2008?
In our national brochure of 2008 courses and conferences we always include an index that lists the courses by title and topic in alphabetical order (ie Acting for Doctors - An Update will also be listed under Doctors). When proof reading the content we found something spell checker did not - Time management for the busty professional. The mind boggles! You’ll be pleased to know it hadn’t gone to print so our blushes were spared.
The answer to this month’s trivia question is ‘On Her Majesty’s Secret Service’
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Nicola Hurley
Mercia Group Ltd
Best House, Grange Business Park, Enderby Road, Whetstone, Leicester LE8 6EP.
Tel: 0116 2581200 Fax: 0116 2581250.
Email: nicola.hurley@mercia-group.co.uk Website: www.mercia-group.co.uk
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