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Legislative Change Legislative Change Practitioners SeminarPractitioners Seminar
INCOME TAX DIVISION
The TreasuryMARCH 2003
AgendaArrangements Alice MartinIntroduction Ian KellyIncome Tax Bill (No 2) 2003
- Consultation Exercise John Williamson & Ian Kelly
QuestionsBreak
Income Tax Bill 2003 John Williamson & Ian Kelly
QuestionsClose Ian Kelly
Arrangements
• Fire Exit
• Questions
• Mobiles turned off please
• Copies of Slides available– On ITD website – Business card
Introduction
• Purpose of meeting
• Background to consultation document, illustrative clauses and IT Bill 2003
• Timescale
• Form of response– Write to John Williamson– Email to [email protected]
INCOME TAX (No 2) BILL INCOME TAX (No 2) BILL 20032003
INCOME TAX DIVISION
CONSULTATION EXERCISE
Topics
A. Anti avoidance - Differential rates of tax
B. Power to call for documents
C. The Income Tax Commissioners
D. Land and property transactions
Anti-AvoidanceDifferential Rates of Tax
Directors and Participators Loan Accounts
Treatment of Loans
Loans through intermediaries
Release of Debt
Associated Companies
Directors and Participators Loan Accounts - Clause 38
• Companies which are chargeable at less than the higher rate chargeable under Section 1 (2A)
• Loans or advances to participators, officers and their associates
• Assessment on the company• Charge at the Section 1 (2A) rate• Exclusion of commercial loans• Clause 40 extends provision to intermediaries
etc
Treatment of LoansClause 39
• Loan includes incurring debt to the company and assignment of debt
• Excluding normal commercial relationships
• Excluding “small loans” to employees who do not have a material interest
• Repayment relief provision• Material interest set at 5%
Release of DebtClause 41
• Where loan is released or written off – Income tax charge on beneficiary
subject to credit
– No repayment of income tax
• Provisions in death cases
DefinitionsClauses 42 & 43
• Associated companies– Based on control
• Participator– Relative– Associate– Director– Loan creditor
Comments on Part A
• See commentary on page 3 of consultation document– Views on draft clauses in general– Views on how to prevent impact on
insignificant cases
• Views also welcome on (see A10)– Acceptable distribution policy– Loss relief
Power to obtain information
Clause 19 - 23: Power to call for documents
Clauses 24 - 27: High Court Orders for information
Clause 28: Falsification of Documents
Clauses 29 - 30: Entry with Warrant
Clause 31: Production and Auditing of Accounts
Clause 19 - 23: Power to call for documents
• Clauses 19 & 20 Documents of taxpayer– Reasonable opportunity to produce – Notice in writing with reasons– In persons possession (copies acceptable)
• Clauses 21 – 23 Protection and Limitations– Six year time limit other than fraud– Right of referral to Income Tax Commissioners– Protection for auditors and tax advisers– Specific exclusions for named documents
Clauses 24 - 27: High Court Orders for information
• Provision for High Court Order for failing to comply with written notice
• Notice of intention to apply for an Order
• Destruction of documents
• Protection for specific documents
• Documents in electronic or magnetic form
Clauses 29 - 30 : Entry with Warrant
• Requires authority of a Deemster
• Offence involving a suspected fraud
• Evidence to be found on premises
• Restrictions e.g. time of entry etc
• Procedure for removal of documents
Other Measures
• Clause 28 – Falsification etc of documents is an offence
• Clause 31 – Production and auditing of accounts– Ability to call for accounts – Ability to have accounts audited– Circumstances in which Treasury meets
audit cost
The Income Tax Commissioners
• The Tribunals Bill 2003
• Constitution of the Body
• Status of the Chairman
• Restrictions on Appointment
• Appeal from Commissioners Decision
• Amendment of Assessment
• Human Rights
Land and Property Transactions
• Income Profit or Capital Gain
• Artificial Transactions
• Serial Transactions
QUESTIONS
coffee
INCOME TAX BILL 2003INCOME TAX BILL 2003
INCOME TAX DIVISION
The Treasury
Arrangement of the Bill
Pt 1 : Personal Allowance Credit
Pt 2 : Protection of Information
Pt 3 : Information: International Obligations
Pt 4 : Miscellaneous Amendments and General
• Trading Profits (Temporary Tax Order)• Benefits in kind : valuation • Husband and Wife: assessment and allowances
• Bribery and collusion• Power to pay awards• Unlawful assumption of character of officer
Part 1 Personal Allowance Credit
Clause 1 : Purpose
• Repayment of unused personal allowances
Clause 2 - 4 : Quantification • Resident - Age 18 yrs• Married couples• Deaths - marriages - separations
Clause 5 - 8 : Calculation of credit• Formula• Married couples• No returns• Revision
Part 1 - Examples
Personal Allowance Credit
Example 1 : [Individual - 18 yrs - resident for tax year]
Low income point £6,000 : Gross income £5,500Maximum credit £200
Example 2 : [Individual - 18 yrs - resident for tax year]
Low income point £6,000 : Gross income £7,500Maximum credit £200 less (£1500 /10) ie £150 = £50
Example 3 : [Married Couple - 18yrs - resident for tax year]
Low income point £12,000 : Gross income £15,000Maximum credit £400 less (£3,000 /10) ie £300 = £100
Part 1 (cont’d)Personal Allowance Credit
Clauses 9 - 11 : Claim and payment• Claims form - return - information• Issue of a credit notice• Payment - interest on late payment
Clauses 12 - 16 : General• Disregard for other purposes• Set - off• Regulations• Calculation of gross income• Commences 6 April 2003 re 2002/03
income
Part 2Protection of Information
Clause 17 : Confidential Information• Disclosures updated and extended
Clause 18 : Supply and use of information• New S 106C : Disclosure to DHSS• New S 106D : Disclosure to Enforcing
Authorities• New S 106E : Disclosure by Authorities• New S 106F : Definitions
Part 3 Information - International
Clause 19 : International Information Exchange• Ratification process• CoMin Order - approval of Tynwald
Clause 20 : Restriction - incoming information• only for tax purposes
Clause 21 : Restriction - outgoing information• confidentiality - tax purposes
Clause 22 : Interpretation
Part 4Miscellaneous
Clause 23: Trading Profits
• Temp. Taxation Order 19 March 2002
• Non-Trading Income
Clause 24 : Benefits in Kind : valuation
• Anti avoidance
Clause 25 : Husband & Wife
• Assessment and allowances
• Year of Marriage / Year of Separation
Part 4 (cont’d)Miscellaneous
Clause 26 : Unlawful Assumption of
Character of an
Officer
Clause 27 : Bribery and Collusion
Clause 28 : Power to Pay Awards
Clause 31 : Coming into operation
QUESTIONS
What Next?
• International– OECD– EU: Savings Directive and Code of
Conduct
• Legislative Programme– Income Tax changes– Corporate Tax– Consolidation?
Reminder
• Comments on consultative document
• Copies of slides– On ITD website– Leave your business card
Thank you
Legislative Change Legislative Change Practitioners SeminarPractitioners Seminar
INCOME TAX DIVISION
The TreasuryMARCH 2003