Tax News
February 2010
Film partnerships alive and well and making money
According to an article in The Times, a number of well-known “British sports stars and celebrities will rake in a share of nearly £250m from the success of Avatar, the Hollywood blockbuster, after investing in a scheme that allowed them to cut their tax bill”.
The scheme was set up by Ingenious Media, a film finance house that has funded hit after hit using investment money raised from such personalities as Andrew Flintoff, Wayne Rooney, David Beckham, Peter Gabriel, Bob Geldof and Andrew Lloyd-Webber.
If one invests in films via an Enterprise Investment Scheme (EIS) it is possible to achieve a 20% income tax credit, earn all gains tax-free, avoid inheritance tax and make unrelated capital gains tax savings.
VAT ruling loses taxman lots of lolly
Appeal judges have decided that Dr Oetker, the maker of the Onken Biopot yoghurts and frozen pizzas, can zero-rate its ‘Choco lolly kits’.
The taxman believed that lolly-making kits should be rated for standard VAT, and issued an assessment. However, judges found that an essential feature of the case was Dr Oetker’s selling the kits to customers “who are put in a position to make an item of food which would be zero-rated if bought already manufactured”. The judges also ordered HMRC to pay Dr Oetker’s costs.
HMRC wins important case against contractor
HMRC has won a High Court case against an IT contractor, Robert Huitson, who used a tax-avoidance scheme on the Isle of Man, set up by Montpelier Tax Consultants, which paid an annual fee for being the owner of a life interest in an offshore trust. The FT reported that the court heard that scores of other people had participated in the scheme and that some faced bankruptcy as a result of claims for backdated tax from HMRC. The Professional Contractors Group, a body that represents IT contractors, said: “For a seven-year period up to 2008, HMRC failed to take any action before the law was changed, despite being well aware of these arrangements. Whilst PCG in no way encourages offshore tax arrangements we object in the strongest terms to taxpayers being retrospectively penalised for arranging their tax affairs in a way which was entirely legal and proper at the time they undertook to do so.”
Taxman clamps down on soccer clubs
HMRC has announced it will be clamping down on payments to agents relating to player transfers being made through offshore structures.
Agents are expected to pay 40% of their fees in income tax if they are unincorporated. According to a report for the Barclays Premier League, clubs spent £70.7m on agents’ fees last season in 803 transactions. The figures relate to payments to agents for the period 1st October 2008 to 30th September 2009.
Late tax returns can be blamed on snow
HMRC will not charge late-payment fines to tax filers if their submission was delayed by adverse weather conditions. The taxman confirmed those who suffered genuine problems because of the snow should be able to avoid the £100 late-filing penalty. However, HMRC will want evidence that steps were taken to submit documents on time if filers want to avoid paying the penalty.
More Swiss account data for sale
An anonymous informer is asking for €2.5m for confidential data relating to 1,500 German individuals with Swiss bank accounts. Investigators believe that the information could bring the German government, which has been offered this information, up to €100m of unpaid tax, the Frankfurter Allgemeine Zeitung reported. In 2008, Germany bought data on tax evaders from an informant about clients of a Liechtenstein bank.
Record number of returns filed online
Over six million self-assessment returns were filed online this year, compared to 5.7 million last year. The returns had to be filed by 31st January.
US government plans crackdown on offshore tax avoidance
According to an article in the FT, the US government is planning a crackdown on US-based multinationals that transfer brands and patents to foreign affiliates in order to reduce or avoid tax. The intention is to make a surcharge on the excess returns on those assets. The government has also announced a potential crackdown on companies’ rights to take immediate tax deductions on the interest payments when borrowing cash to invest overseas.
HMRC computer causes coding crisis
The BBC reported that the HMRC computer in charge of issuing the tax codes that tell taxpayers how much their employers and pension firms will deduct in income tax in the coming financial year has made a number of errors. According to the Chartered Institute of Taxation, taxpayers could be asked to pay up to £108 a month too much. Additionally, taxpayers are receiving two or more coding notices which are different. It is not clear how many incorrect tax codes have been sent out or may be distributed in the coming weeks.
Offshore disclosure opportunity now closed
HMRC has not yet announced how many UK taxpayers decided to take advantage of the latest offshore disclosure opportunity, which closed on 31st January. However, a spokesman for HMRC told the BBC that it had “received lots of last-minute calls”.
Those who have come forward now have two months to calculate not only the unpaid tax going back 20 years but also the interest payable on it, and a 10% penalty.
The taxman expects to raise £500m from customers of about 300 UK and foreign banks. A 2007 offshore disclosure campaign eventually raised £450m from 45,000 people, though at the time another 17,000 people said they would pay up but then failed to do so.
It is not illegal to have offshore accounts, but anyone who receives savings and investment income from abroad needs to declare it on their tax return.
Currently, those caught with undeclared offshore income or gains who have not availed themselves of the disclosure opportunity face 100% fines. However, in the pre-Budget Report, Chancellor Alistair Darling proposed a new 200% maximum fine that would come into effect next year.
