Lead article: Pay VAT electronically
Stanley Dencher: There are many developments in the world of VAT. Most of them are ‘NOGI’ (not of general interest) because they affect only a few types of business. However, most advisers need to understand the new provisions that require VAT returns and VAT payments to be made electronically. Since April 2010 most VAT-registered persons must both submit VAT returns online and pay any VAT due electronically. From April 2012, this requirement applies to virtually all VAT-registered persons, although there is exemption from this requirement.
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Recent statutory instruments
The Pensions Schemes (Application of UK Provisions to Relevant Non-UK Schemes) (Amendment) Regulations 2012 (SI 2012/1795) make amendments to the Pensions Schemes (Application of UK Provisions to Relevant Non-UK Schemes) Regulations 2006 (SI 2006/207) following the amendments to the Finance Act 2004 made by the Finance Act 2011. It ensures that the Finance Act 2011 reforms work properly in connection with members of foreign pension schemes, which contain funds that have received UK tax relief. These changes have retrospective effect back to when the Finance Act 2011 reforms came into force on 6 April 2011. They ensure that the tax rules applying to such members and schemes are compliant with EU law. These regulations come into force on 1 August 2012.
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The Income Tax (Exemption of Minor Benefits) (Amendment) Regulations 2012 (SI 2012/1808) amend the Income Tax (Exemption of Minor Benefits) Regulations 2002 (SI 2002/205), with effect from 6 April 2013, to remove the tax exemption on food or drink provided by an employer to an employee in recognition of the employee having cycled to work on designated days. These regulations come into force on 6 April 2013. 
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Delivering a cap on income tax relief
HM Treasury and HMRC are jointly consulting on the implementation of the cap on income tax reliefs announced in Budget 2012. The closing date for comments is 5 October 2012.
At Budget 2012 the Coalition Government announced a limit on currently uncapped income tax reliefs which will have effect from April 2013.
The technical consultation invites comments on the implementation and delivery of the cap, including, in particular, responses to: how an individual’s income will be defined and calculated for the purposes of the cap; when the cap will apply; how reliefs will be ordered; and the operation of the cap through income tax self-assessment (ITSA).
Following the consultation, draft legislation will be published later in the autumn.
More details are available from the HM Treasury website.
 
Simplifying charges on trusts
HMRC have issued a consultation document about whether there may be options for simplifying the calculation of inheritance tax charges (IHT) to which trusts are subjected at ten-yearly intervals and when property is withdrawn from trust. The closing date for comments is 5 October 2012.
It seeks to explore possible options for simplifying the calculation of the IHT periodic and exit charges on trusts that hold or dispose of relevant property.
More details are available from the HMRC website.
 
Use of rebated fuel for gritting in rural areas
HMRC have published a consultation document which seeks views on proposals to change the law to allow tractors and possibly other excepted agricultural vehicles to use rebated fuel (‘red diesel’) for gritting roads in rural areas. The closing date for comments is 5 October 2012.
Anyone who might wish to take advantage of such a change or who could be affected by it; anyone who is currently involved in the commercial provision of gritting services or equipment, including councils, agencies and other bodies involved in gritting public roads in the UK.
Further details are available from the HMRC website.
 
Hollande hints at u-turn on Brit holiday home tax hike
French President Francois Hollande appears to be backtracking on his plans to slap harsh new taxes on British owners of French holiday homes.
David Cameron said he was now ‘reassured’ over his well publicised vow to slap harsh new taxes on British owners of French holiday homes. Hollande’s apparently calming words were delivered as the two leaders met in London on 10 July 2012, and appear to signal a u-turn on his socialist government’s decree to increase taxes on all foreign-owned second homes.
The plans sought to increase tax on rental income from 20 per cent to 35.5 per cent, and capital gains tax on property sales from 19 per cent to 34.5 per cent.
In a clearly light-hearted speech, the President said:
‘Tax is not that different between us. The top rate in Britain is 45 per cent, in France it is 41 per cent. That does not entice British people to move to France - except for holiday homes, which are not going to be taxed more.’
However, it is not yet clear that this represents a definitive policy shift. It is estimated that some 200,000 Brits own second homes in France.
 
Commission sets up EU VAT Forum
The European Commission has created the EU VAT Forum which aims to enable business representatives and tax officials to share their experience in a bid to improve the way the EU VAT system works and slash tiresome administrative burdens.
The forum will be chaired by the Commission and consist of the member states' tax authorities and organisations representing business or tax practitioners. Authorities and organisations within member states will nominate their representatives.
A call for applications for the selection of the members of the forum was published on 6 July 2012.
More information is available from the EC website.
 
Spain raises VAT rate to 21 per cent
In a multi-pronged bid to slash the huge Spanish public budget by 65bn euros (£51bn), the country’s PM Mariano Rajoy announced VAT will rise from 18 per cent to 21 per cent.
He also said there would be a 3.5bn euro cut in local authority budgets as a precursor for a eurozone bank bailout and an extension to its deficit reduction targets.
EU finance chiefs have agreed to inject 30bn euros into Spain's fragile banks.
 
Gang jailed for £176m carousel fraud
A gang convicted of a £176m carousel fraud has been jailed, with the ring leader receiving the longest sentence for such fraud in UK history.
Dilawar Ravjani, 34, received a 17 year sentence for his involvement in the complex tax scam in which fraudsters import goods VAT-free from other countries, then sell the goods to domestic buyers and charge them VAT. The sellers then disappear without paying the tax to the Government.
The fraud concerned the selling of high-end mobile phones with Ravjani’s gang, numbering 15 people, claiming to have sold £1.7bn worth of the communication gadgets, when in many cases the phones did not even exist, including 250,000 which had not been launched in the UK.
 
Tax agents and advisers - agent account managers service
Agents registered for the agent account manager service can now request an HMRC speaker on reducing costs for small business, HMRC's reviews and appeals process, and using PAYE in real time.
HMRC set up a UK-wide team of agent account managers (AAMs) to help tax agents and advisers deal with the department more effectively.
Further details are available from the HMRC website.
 
Online tax guide for farmers
HMRC have issued an online tax guide for farmers. Working closely with farming bodies, such as the NFU, its Starting your own Business e-learning tutorial, covers a wide range of issues including an overview of tax, NI contributions and VAT, registering as self-employed and help with completing tax returns.
The guidance is available on the HMRC website.
 
Testing time for fuel fraud
An international search for a new fuel marker to help in the fight against diesel fraud has been announced by HMRC and Revenue Ireland.
Submissions aimed at finding a replacement for the current fiscal fuel markers, which are added to fuels with lower duty rates are being sought.
Millions of pounds in revenue are lost each year in the UK and the ROI through fuel laundering - the removal of the chemical markers from low duty diesel - to sell it on as road fuel.
Further details are available from the HMRC website.
 
HMRC brief
Brief 21/12 Aggregates Levy: European General Court judgment provides details about the implications for the Aggregates Levy of the March 2012 judgment of the European General Court in the case of British Aggregates Association v the European Commission. HMRC will continue to administer and collect the tax as normal. There is no change to registered businesses’ legal responsibility to pay the levy. Where registered persons withhold payment of the levy declared as due on their returns late/non-payment penalties and penalty interest may become due. 
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HMRC notice
Notice 69 Report and clearance by ships' masters explains the report and clearance procedures for commercial vessels arriving in, or departing from, the UK. This notice replaces Notice 69 (May 2004).
The updated notice is available from the HMRC website.
 
HMRC VAT Information Sheet 06/12
VAT Information Sheet 06/12 tells you about a change to the Latvia VAT rate. On 1 July 2012 the standard VAT rate decreased from 22 per cent to 21 per cent.
Further details are available from the HMRC website.
 
Updated VAT Toolkits published
HMRC have published the updated VAT Partial Exemption, VAT Input and VAT Output Toolkits to assist agents when completing their clients' returns.
These toolkits provide guidance on areas of error that HMRC frequently see in returns and set out the steps needed to reduce those errors.
Further information is available from the HMRC website.
 
On the HMRC website
The following items have recently appeared on the HMRC website: 

• tax agents and advisers - external e-mail pilot - HMRC have provided an update on the pilot;
• PAYE for employers - HMRC reminds employers that PAYE payment is due on Sunday, 22 July 2012;
• category 1 crude oil values - crude oils that are valued using Price Reporting Agency data, updated June 2012 have now been published;
• fuel markers - invitation to make submissions briefing sessions. 
   

COURT OF APPEAL
Schofield v R & C Commrs
The Court of Appeal upheld a decision of the Upper Tribunal ([2011] BTC 1,800; [2011] UKUT 306 (TCC)) that the capital loss claimed by a taxpayer in his 2002-03 tax return arising from certain option transactions, which formed part of a tax avoidance scheme, was not an allowable loss within TCGA 1992, where the option transactions were to be treated as a composite transaction applying the principle in WT Ramsay Ltd v IR Commrs [1982] AC 300.
 
Court of Appeal (Civil Division)
Judgment delivered 11 July 2012 
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EUROPEAN COURT OF JUSTICE
Société d’investissement pour l’agriculture tropicale SA (SIAT) v Belgium (Case C-318/10)
Belgian income tax legislation was contrary to art. 49 EC (freedom to provide services) where it prevented the deduction as business expenses of payments to foreign establishments which were not subject to income tax or were subject to an appreciably more advantageous tax regime, unless the taxpayer proved that such payments related to genuine and proper transactions and did not exceed the normal limits. The restriction on the freedom to provide services was disproportionate because it was contrary to the principle of legal certainty, since a rule framed in such terms did not make it possible, at the outset, to determine its scope with sufficient precision.
 
European Court of Justice (First Chamber)
Judgment delivered 5 July 2012 
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FIRST-TIER TRIBUNAL
VAT: Supply was made outside the UK
The First-tier Tribunal considered whether the appellant supplied the services of accountants, rather than administrative services.
 
First-tier Tribunal
Decision released 24 April 2012
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