Author Archive

Tougher disclosure regime

December 9, 2009

A consultation document has been released containing draft legislation amending the regime requiring tax avoidance schemes to be disclosed to HMRC.  These proposed measures include revising and extending the hallmarks (which identify the types of schemes that must be disclosed), bringing forward the trigger point for disclosure of marketed schemes, imposing additional information requirements on promoters and on intermediaries (who introduce scheme promoters to clients), as well as enhanced penalties.  

New hallmarks are proposed for employment income schemes, income into capital schemes and offshoring schemes.  These hallmarks no doubt target, in particular, perceived avoidance of the higher rates of income tax as well as the use of tax havens.

The consultation will run from today until 9 February 2010 and HMRC seek views on whether the proposed measures would be effective and proportionate.   This shows the Government’s intention to continue to use the disclosure regime to identify and quickly outlaw perceived avoidance structures.

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Sports tax

December 9, 2009

Recent weeks have seen both the French and the Spanish Governments withdraw their sports-related tax breaks. The French have ended their “droit à l’image collectif”, which allowed football clubs to treat up to 30% of a player’s income as a payment for exploitation of their image rights rather than salary, and the Spanish have announced their intention to withdraw the so-called “Beckham tax” which permitted foreigners, including all soccer players earning over €600,000 per annum, to pay a 24% tax rate. Perhaps this puts the UK on a more level playing field in terms of attracting key sportspersons, albeit that we will soon have some of the highest personal income tax rates in Europe (which, as has been widely publicised, the football clubs are looking to mitigate since some players are insisting that the clubs, rather than the players, bear this additional tax burden).

In the UK, it remains possible for both footballers and clubs to separate remuneration received for services provided on the football pitch from income arising from the commercial exploitation of the footballer’s image rights. Where the footballer is domiciled in a country outside of the UK, the resulting tax savings can be material. This is, however, an area where we expect greater HMRC scutiny and so careful legal implementation of well thought-out and robust structures is crucial.

Film

December 9, 2009

There was little for the film industry to get excited about in today’s Pre-Budget Report.  Thankfully, there is no further specific anti-avoidance legislation.   There was a small tweak to the film tax credit legislation to remove an anomaly which impacted upon the amount of tax credit available where film production spanned more than one accounting period.   I would like to have seen more extensive changes including extending the film tax credit to expenditure on British talent working abroad and increasing the quantum of relief available for qualifying co-productions.  The existing restriction which limits the available relief to 8O% of the UK co-producer’s qualifying expenditure has resulted in a decline in films being co-produced in the UK.

EIS/VCT restrictions

December 9, 2009

No surprises here ! After weeks of speculation the Government appear to have closed down a loophole which enabled you to circumvent the £2 million limit per EIS/VCT company by amalgamating funds through partnerships.  A new definition of small enterprise is proposed.  It appears that the Government view is that funding large projects with EIS monies intended to promote high risk start up companies is not within the spirit of the EIS/VCT reliefs.  Whilst there is little detail available rumour has it that such changes may be retrospective.  This is likely to make EIS/VCT investment less attractive which is a great shame given the proposed relaxation in some of the rules, for example, enabling companies to trade internationally

Games tax credit rejected

December 9, 2009

It is incredibly disappointing that after months of lobbying from the games industry the Government has rejected our calls for a  tax break to incentivise games development in the UK.  The UK’s position as a world leader has been eroded as other countries such as France and Canada encourage both games companies and our creative talent to relocate with the offer of targeted tax breaks.  The effect of such continued corporate migration would be a loss of revenues derived from the profitable games industry for the Treasury.  In my view we should be encouraging new and innovative games to be made in the UK.  Cross party political support for this area remains strong and I will continue to lobby alongside the industry to keep this on the political agenda.  I hope that we will be able to persuade the Government to extend the existing film tax credit regime to games on the basis we described in our recent paper.

There was a small piece of good news for the industry because changes have been made to the R&D rules which remove the IP ownership requirement for SMEs which should make it easier for games companies to claim R&D tax credits on their development spend.