Arctic Systems – The Verdict

August 2007

The long running saga of Geoff and Diana Jones and their company, Arctic Systems Limited, has recently been back to the courts for the final time to the House of Lords.

Just in case you need a reminder, the case concerned a company owned by a husband and wife, Geoff and Diana Jones, and hinged on whether dividends paid by the company to Mrs Jones (who was not a higher rate taxpayer) should be shown on her husband self assessment return and taxed as his income at a higher rate of tax. You may recall that the case went to the Court of Appeal where the taxpayer won.

The 33 page final judgment delivered a resounding victory for Mr and Mrs Jones with all five of the judges unanimously agreeing that HMRC’s appeal against the previous judgment should be dismissed. We have included a link to the full judgment at the bottom of this article.

Anne Redston, who is the Chartered Institute of Tax (CIOT) spokesperson, said:

“The CIOT is delighted that, after such a long battle, the House of Lords has confirmed that HM Revenue & Customs (HMRC) were wrong to attack husband and wife businesses in this manner. The CIOT has always considered that HMRC were wrong to use this obscure legislation against small businesses like the Jones’s, and the House of Lords has now agreed with us.”

If the case had gone in favour of HMRC then this may have resulted in many husband and wife businesses being liable to additional tax charges going back up to six years.

Internet Links: PCG article and House of Lords judgment

Delays in VAT Registration

August 2007

According to HMRC’s website it is currently taking an average of 38 days to process new VAT registration applications. The reason given for the delay is that HMRC have to carry out anti fraud checks in some cases and this leads to significant delays.

The additional checks are being carried out in response to ‘carousel’ or ‘Missing Trader’ fraud. You may remember that we have previously written about this type of fraud in enews. The fraud occurs through contrived transaction chains involving supplies of high value goods. The tax loss occurs when the VAT charged by the supplier is not paid to HMRC but can be reclaimed by the recipient.

The current VAT registration threshold is turnover of £64,000. If your business is approaching this annual threshold or is likely to make supplies of £64,000 in the next month please do get in touch.

Internet Link: HMRC advice on registration

Phishing Scams

August 2007

HMRC have been made aware of certain so-called ‘Phishing’ scams targeting taxpayers in an effort to fraudulently obtain personal information from them.

In an effort to address this problem and increase awareness of taxpayers to the scam, HMRC has set-up a ‘Phishing’ section on its website. The page can be found by visiting the link below.

The way in which the fraudsters operate vary and the website details recent scams which include the issue of ‘fake’ forms and payment demands.

If you receive any correspondence which you believe is suspicious, please do get in touch.

Internet Links: HMRC phishing page and HMRC fraud attempts

Offshore Disclosure – HMRC Follow Up

August 2007

Recently in enews we reported what has been widely reported in the press as HMRC’s ‘Tax Amnesty’. As previously explained the term amnesty is misleading as it only applies to the penalty that would be charged on undeclared tax relating to the offshore accounts, which HMRC have promised to cap at 10% if a voluntary disclosure is made. HMRC could in theory impose a 100% penalty. The tax and penalties due will need to be paid by 26 November 2007.

The deadline for notifying an intention to disclose passed on the 22 June. HMRC say they had some 70,000 disclosures by that date. They apparently hold 400,000 pieces of information, so HMRC believe that a number of individuals may still have things to discuss.

HMRC suggest they will seek punitive penalties if they discover non-disclosure and, in some cases, prosecute. However, if an individual has something to disclose there is considerable merit in meeting the November reporting deadline. It will be very difficult to sustain an argument for higher penalties if the report and payment is made by the end of November.

To minimise any liabilities it is important that anyone who is concerned that they may have something to disclose gets in touch with us as soon as possible.

Internet Link: HMRC website

Advisory Fuel Rates

ugust 2007

HMRC have issued advisory fuel rates for company car drivers. These take effect for all journeys undertaken from 1 August so employers should advise affected employees and update any expense forms as soon as possible.

Engine size Petrol Diesel LPG
1400cc or less 10p (9p) 10p (9p) 6p (6p)
1401cc – 2000cc 13p (11p) 10p (9p) 8p (7p)
Over 2000cc 18p (16p) 13p (12p) 10p (10p)

Other points to be aware of about the advisory fuel rates:

  • employers do not need a dispensation to use these rates
  • employees driving company cars are not entitled to use them to claim a deduction if employers reimburse them at lower rates. Such claims should continue to be based on actual costs incurred.
  • the advisory rates are not binding where an employer can demonstrate that the cost of business travel in company cars is higher than the guideline mileage rates.

If you would like to discuss your company car policy, please contact us.

Internet Link: HMRC advisory fuel rates