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9am Lowdown: Rangers FC, Welsh taxes & AI

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5th Jul 2017
Editorial team AccountingWEB.co.uk
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Good morning and welcome to the mid-week 9am Lowdown.

In the news

The Supreme Court is set to rule in the long running Rangers tax case today. Stay tuned to AccountingWEB for more on this story. (BBC)

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The public is being asked for ideas on what potential new taxes should be introduced in Wales. (BBC)

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Mel Stride, the new financial secretary to the Treasury, writes in Devonline about his work on the emergency finance bill and clamping down on large corporations who avoid tax.

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David Gauke has ruled out “fundamental” changes to pensions tax relief, conceding that the fragile government majority was likely to mean radical reforms would not succeed. (Financial Times)

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The ICAEW looks at the rise of artificial intelligence, its impact on the accountancy profession and how it can be utilised by accountants in its new report: Artificial Intelligence and the future of accountancy

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Tweet of the day comes from Richard Asquith who spotted the strange music choice to accompany the Indian prime minister’s VAT announcement.

What’s new on AccountingWEB

The lack of unanimity in accountancy bodies’ responses to the Making Tax Digital late submission penalty consultation paper suggests this could be a difficult circle to square for the Revenue.

The complexity introduced into the tax system by new allowances for dividends, savings and the moveable personal allowance have proved to be too much for HMRC’s SA tax return software standards.  

Over on the blogs Jennifer Adams vents her anger at the machinery of HMRC preventing her doing what’s best for her clients.

And on Any Answers, Akkountant wants to know how they can satisfy their client’s data security concerns.

And on their Industry page Webexpenses looks at some successful strategies to ensure that your finance team has an expense policy that’s fit for purpose

Replies (5)

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By Justin Bryant
05th Jul 2017 20:03

https://www.supremecourt.uk/cases/uksc-2016-0073.html

Bad judgment in my view. This line from the summary (and para 33 of decision) is particularly bad, as the word "even" should not be there and confuses things (see para 39, where this point was not even being argued by taxpayer).

"It held that income derived from an employee’s work is assessable to income tax, even if the employee agrees that it be redirected to a third party"

Also, when the 1st line of the decision reads "This appeal concerns a tax avoidance scheme" there is only going to be one result!

Furthermore, the extract below from the 1st para is inconsistent with the "pay my aunt" equivalence argument, as in that aunt case you very clearly have a definite prior entitlement to the money, which is why you can instruct your employer to redirect it to your aunt in the 1st place (i.e. you don't say to your employer in that situation where you have a prior entitlement "pay my aunt at your absolute discretion", since that would be a different kettle of fish altogether indicating no definite prior entitlement, coz the employer could then choose at his discretion to pay aunty nothing, which the employee would never have agreed to - unless he wanted to make a gift to his employer of his services) so it is nowhere near being equivalent to this case where they confirm below there is no prior entitlement (i.e. it's a million miles away from the classic "pay my aunt" case).

"The appeal raises a fundamental question about the nature of the income tax charge on employment income. That question is whether an employee’s remuneration is taxable as his or her emoluments or earnings when it is paid to a third party in circumstances in which the employee had no prior entitlement to receive it himself or herself."

Thanks (1)
Replying to Justin Bryant:
By DotasScandalDotOrg
05th Jul 2017 15:21

Justin Bryant wrote:

Also, when the 1st line of the decision reads "This appeal concerns a tax avoidance scheme" there is only going to be one result!

I'm sure there was no political pressure applied at all from anywhere.

Thanks (1)
Replying to DotasScandalDotOrg:
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By Justin Bryant
05th Jul 2017 20:37

The judgment is a bit of a joke in my view. They are overruling Sempra by eliding a properly administered EBT subfund/loan arrangement with an obviously employment taxable payment to your aunt instead of you at your request (see para 39), combined with a fudge argument that just because the person is not defined as the employee in s62 that makes all the difference. That lack of “employee” in s62 point deals with the aunt Agatha type payment (obviously), but surely it is stretching that aunty analogy to breaking point to say it is also intended to apply to such discretionary EBT arrangements (and any other discretionary payment presumably e.g. a discretionary payment to a charity instead of the employer paying you for your work coz you have too much money as it is so don't need it) and it seems they are now being examined with the benefit of hindsight, regardless of how unlikely a discretionary benefit to an employee may have been from the outset. The only good thing is that they accept there should be no double tax (although under s554Z6, any P7A charge is already reduced by the amount of the s62 charge).
As I said above, the aunty payment point was accepted and never argued by the taxpayer (as it is a totally obvious point a million miles away from the facts - for the truly discretionary payments at least). Still, full credit to Julian Gosh QC for succeeding with that argument (even with the obvious SC HMRC bias). It basically stuffs anything where there is a pre-set scheme to benefit a particular employee (even if he does not get a benefit). Most people would describe that as a significant judicial gloss on s62, which is ironic as the judges seemed to think they were applying no gloss at all there (and just a modern day purposive interpretation of the legislation applied to the facts). It's gloss applied with a very broad brush indeed I think (justifying it mainly with the inappropriate and misleading "pay my aunt" argument).
They will be saying black is white next!
To do the scheme down they could have at least written a better judgment and it's a shame someone really clever like Lord Sumption was not on this case, as I doubt he would have put his name to this badly reasoned judgment (i.e. the false logic of the SC effectively saying the no pre-existing right point is irrelevant as it's the same as the "pay my aunt" case, even though there is obviously a definite pre-existing right in the latter case, so the latter case cannot be the same or even similar for that very reason and therefore is a totally irrelevant and unsuitable comparator case as justification here). They’ve literally just made up law from one authority which is a non-binding PC decision dealing with NZ income tax!

Thanks (3)
Replying to Justin Bryant:
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By MattH
07th Jul 2017 11:27

Couldn't agree with your post more, I feel it opens up a dangerous precedent for employees to be taxed on income they may never receive. Does this now mean that company's can't fund an EBT used to run a share option scheme?

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RLI
By lionofludesch
06th Jul 2017 15:53

Are you saying we shouldn't trust the establishment to make impartial decisions?

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