News round up… November
W/C 29th November
Innocent loses VAT battle
Innocent has lost its battle to reclaim VAT charged on its 100% fruit juice smoothies. The company, which is part-owned by Coca-Cola, argued that charging 17.5% VAT on the smoothies was unfair when the raw ingredients of the drinks were not subject to the charge. However, HMRC classifies Innocent smoothies as a ‘beverage’, and not an ‘essential’ food or drink, so are liable to pay full VAT. Innocent’s founder and CEO Richard Reed described the tribunal’s findings as ‘crazy’. He continued, ‘This ruling is definitely not in the interest of the nation's health. It's absurd that smoothies, which contain two portions of fruit and help people live more healthily are subject to VAT at full rate when junk food like burgers, chips and doughnuts are sold tax free.’
Treasury outlines plans to stem flow of companies leaving UK
The government has outlined plans to lower corporation tax, in a move designed to slow the rate of companies leaving the UK for tax reasons. Companies currently escape the UK’s 28% corporation tax, by putting finance functions into offshore accounts. Rather than deeming all offshore income to be UK income, the Treasury revealed it would only consider a third of the income as such. This means that when UK corporate tax rate falls to 24%, it will effectively be just 8%. Corporation tax expert at Deloitte, Bill Dodwell, said, ‘Some people will think that's excellent, a perfectly acceptable tax rate for finance income… Others will say, 'We are currently paying 1% tax on financial income – why would we think it's great to move to an 8% rate?'’
W/C 22nd November
Vodafone let off ‘£6bn’ tax bill
A protest over Vodafone’s tax write-off saw several Vodafone shops across the UK to close for the day. The action, organised as part of ongoing campaigns on Twitter and Facebook, came as an investigation by Private Eye magazine claimed HMRC had dropped an attempt to reclaim £6bn from the telecoms giant. The Eye’s calculations were sourced from publically available accounts, which showed Vodafone purchase a German firm supposedly through a Luxembourg subsidiary to avoid paying any tax to Britain. HMRC have dismissed the £6bn figure as an ‘urban myth’, while a Vodafone spokesperson described the store blockades as ‘misguided’.
Study identifies easiest tax systems in the world
A PricewaterhouseCoopers study in association with the International Finance Corporation and World Bank has identified the Maldives as the easiest place in the world to pay tax. The annual study, imaginatively titled Paying Taxes, measured the administrative process of paying taxes, which included the average number of tax payments and time taken to comply, as well as employers’ and companies’ tax liability as a percentage of pre-tax profits. The Maldives, Qatar, and Hong Kong came first, second and third respectively. The UK was ranked joint sixteenth with Switzerland, while the most difficult country in which to pay taxes was Belarus.
W/C 15th November
Administration a ‘distinct possibility’ for Sheffield Wednesday
Sheffield Wednesday could go into administration over an unpaid PAYE tax bill of £600,000. The League One team face a petition in the High Court this week to secure the funds. The club is also fast approaching the December deadline for the payment of £300,000 in VAT arrears. With administration a ‘distinct possibility’ , The Owls have been approached by three potential buyers, one of whom is willing to put £5 million into the club immediately. The Wednesday’s creator, the Co-operative Bank, now has to decide whether ort not to accept the bid, which would at least keep the club operational for the rest of the season.
UK taxpayers to bail out Ireland?
There are increasing concerns that Ireland will have to ask for a bailout from the EUs emergency fund; a move that could cost the UK billions of pounds. The UK’s contribution makes up 13.6% of the emergency fund, meaning taxpayers could be liable for £6.8bn. Ireland has denied reports that it will seek a rescue package and the UK government has refused to comment so far. The total emergency funds available to EU leaders totals €750bn. However, any bailout for Ireland would likely be tapped from the €60bn ‘community facility’ set up by the EY earlier this year.
W/C 8th November
HMRC cuts helpline services
HM Revenue & Customs has announced it will reduce telephone helpline hours on Saturdays and axe the service altogether on Sundays. HMRC say that the move is to ‘realign’ its service with demand, and is part of a long-term bid to migrate services online. However, the plans also fall nicely in line with cutbacks outlined in the government’s spending review, which announced 15% reductions in HMRC resource spending and a 33% cut in administration spending. While weekday opening hours remain 8am – 8pm, services on Saturday’s will close at 4pm and there won’t be any call centre help at all on Sunday. The new opening hours will be active from 29th November.
Tax allowance review prompts mass cull on loopholes
An official review into tax allowances has unearthed more than 1,000 different reliefs and loopholes. Dozens, or possibly hundreds of these are expected to be closed by the Chancellor, George Osborne next year. The Office of Tax Simplification and HMRC have spent months compiling the list of allowances. Among them are 87 reliefs offered to those paying inheritance tax and more than 200 different income tax allowances, including a range of loopholes. John Whiting, who is heading up the review said, ‘Many [allowances] have a clear and highly valued benefit… Others, however, may simply no longer be used, or are too complex and burdensome to be properly effective, so it is these that I want my team to focus on.’
W/C 1st November
New tax duty sees flight prices soar
This weeks has seen a huge hike in air duty rates, which has seen flight tax for some rise by a massive 50%. While previous Airport Passenger Duty (APD) rates were calculated according to whether the passenger was flying long or short haul. New duty looks at exactly how far they are flying in a group of four distance bands, A, B, C and D – where D is the most costly. Passengers flying the shortest distance in economy class will be affected the least, but they will still see a rise in the cost. Travel agents have warned holidaymakers to check that advertised travel prices include the new taxes. Phil Salcedo, publisher at Travelzoo UK warned, ‘Travellers need to be extra wary and make sure the price they expect to pay doesn't massively increase when they get to a page of taxes.’.
Six-year-old tax demands
HM Revenue & Customs has admitted it is struggling with a backlog of 17.9 million cases, with 2 million of those dating back as far as six years. In attempt to recoup the £3billion in underpaid taxes in the last six years, it is also chasing £2bn from a further PAYE blunder. Last year HMRC introduced a new computer system to identify discrepancies that have led to over or under payments. A Government aide said, ‘The previous government's policy was to simply ignore these cases every year and let them build up. The coalition’s policy is to actually deal with them which is what we are doing.’ However, HMRC has confirmed it will abandon around five million outdated cases they can no longer trace.