October tax news in brief: HMRC makes tax credit provision

An at-a-glance round-up of the latest tax news.

Online betting companies want lenient tax rate
Peter Dean, chairman of the new Gambling Commission, has told the Financial Times that online gaming companies will stay out of the UK, unless the government sets a favourable tax rate. Although the Gambling Act 2005 is designed to attract internet casinos from offshore locations such as Gibraltar, the tax rate needs to be lenient if the aims of the new law are to be achieved, said Dean.

"It behoves the Treasury to be mindful of the fact that we can't force companies to come here," he told the Financial Times in a recent interview. "The simple point is that if the [tax] rate is set at a level that deters companies from coming here then the Gambling Act 2005 will be frustrated." He added that if online betting companies don't relocate to the UK, then punter's won't be able to gamble on a website approved by the British regulator.

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Avoid rejection of Stamp Duty forms
Since 30 September, HM Revenue & Customs has been rejecting Stamp Duty Land Tax black & white returns which do not have the 2-d barcode. The Revenue has issued guidance this week on how to avoid rejection.
HMRC will reject your return if:
* All of the pages of the SDLT1 are not barcoded
* There are manual amendments on the barcoded forms
* You have sent the Agent's copy
* If you are using 3rd party software forms but it is not the correct approved and updated version
* You are mixing / matching pages from the un-barcoded and barcoded version
* Effective date is a future date
* It is a photocopy

For more information, see the HMRC website

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Taxman warns online shoppers
HMRC has issued guidance on the VAT and duty implications of buying goods from abroad over the internet. The guidance has been issued in response to complaints from the public, who are either unaware that they may have to pay charges on internet purchases costing more than £18, or mistakenly assume that the £145 'passenger's allowance' applies.

"We don't want to put people off internet shopping, where there are undoubtedly bargains to be found. However, we do want to make sure that online shoppers are quite clear about the full costs involved, and that there are no unpleasant surprises when the postman knocks at the door," said customs anti-smuggling manager Phil Colclough.

For more details see the HMRC website.

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Isle of Man and Netherlands sign tax deal
The Isle of Man and the Netherlands have signed a tax and trade deal that is the first of its kind between a small international business centre and an OECD member. The deal, signed on 12 October, includes agreements on shipping and aircraft taxation, company taxation, tax information exchange, and a 'transfer pricing' agreement to ensure certainty of treatment for companies with operations in the two territories who move goods and services between them.

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HMRC apologises for late notices
HM Revenue & Customs have apologised for a computer error that resulted in the late issue of notices to employers, asking them to start, stop or amend tax credit payments to an employee. According to the Tax Faculty at the Institute of Chartered Accountants of England & Wales, the error resulted in the late issue of around 40,000 PVE notices. Some of them were so late they were retrospective. HMRC has issued a statement via the Tax Faculty outlining the action employers should take if they received a late notice (i.e. giving less than 42 days' lead time).

Read the full statement on the Tax Faculty website.

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Funded pension schemes: VAT timetable change
The start date for changes to the VAT treatment of funded pension schemes has been put back from January 1, 2006, to a date yet to be determined to allow a consultation process with the asset management industry to be completed. Employers can continue to use their existing VAT recovery arrangements in relation to funded pension schemes.

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HMRC makes tax credit provision
HMRC has announced a £481 million provision for tax credit overpayments for 2003/4 and 2004/5

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Land tax would be "nail in coffin" for farmers
The controversial land tax would be "another nail in the coffin" for struggling farmers, says accountancy firm Saffery Champness. The proposed tax - officially the Planning Gain Supplement - would apply to the increased value of development land when planning permission is obtained. It was first suggested in the Barker Report in 2003 and some predict that it will appear in November's pre-budget report.

With farming profits poor, it is common for farmers to diversify by selling redundant farm buildings. "It would be advisable for any farmers with planning applications currently in progress to try and push ahead with urgency," says partner, Mike Harrison.

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UK companies fund business tax research centre
A unique research centre focusing on business taxation policies is being set up at Oxford University, with £5 million funding from The Hundred Group, representing the UK's largest listed companies. The Oxford University Centre for Business Taxation is expected to be up and running by September 2006.
For more information visit the Oxford University website.

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CBI calls time on tribunal reforms
Despite falling numbers of cases going to tribunal a new report from bosses' group the CBI has expressed concern about the complexity of the new procedures.

Reforms were brought in last October to provide 'cheap and effective resolution of workplace disputes'. But according to the CBI, too many firms are settling cases when they might win for fear of rising tribunal costs.

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Anti-avoidance measures for life companies
Ivan Lewis MP, Economic Secretary to the Treasury, has announced two new anti-avoidance measures, designed to stop life assurance companies creating artificial losses or reducing taxable profits. The measures will:
* prevent companies which have ceased to be mutual from reducing taxable profits or creating artificial losses
* prevent companies which have no with-profits business reducing their taxable profits or creating artificial losses
Further information, draft clauses and Explanatory Notes can be downloaded as a PDF file from the HMRC website.

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Witch wins spell-making tax course case
A Dutch witch who took tax authorities to court over their refusal to declare spell-making lessons tax deductible has won her case. Tax officials have now agreed that the £1,500 year-long course is tax deductible because the anonymous woman used the training to extend her professional knowledge so she could run workshops.