CTA News Jan 2005 - CIOT - The Chartered Institute of Taxation

CTA News
January 2005
The membership newsletter for all Chartered Tax Advisers
New CTAs at London’s
historic Guildhall
75th ANNIVERSARY
1930 - 2005
Christmas
Carol Service
The Carol Service was attended by
over 60 Members and guests.
The CIOT celebrated the
festive season with its third
Carol Service (jointly with ATT)
held at St Peter’s Church, Eaton
Square, London SW1 on
Monday 13 December 2004.
Father Desmond Tillyer
conducted the service and John
Beattie (CIOT President), Les
Beckett (ATT President), Natalie
Miller and Patrick Stevens
(CIOT Council Members) and
CIOT and ATT staff, read the
nine lessons.
The President, John Beattie, and new
Chartered Tax Advisers in the Old Library at Guildhall.
London’s historic
Guildhall once again
provided a splendid
backdrop to The Chartered
Institute of Taxation’s
Admission Ceremony. The
eighth ceremony was held
on Friday 29 October 2004.
The evening started with the
presentations to the prize
winners of the May 2004
sitting of the Chartered Tax
Advisers examination, while
one prize winner from the
November 2003 sitting was
also honoured. This
Admission Ceremony also
offered an opportunity to
award the first prize winner
from the first sitting of the
Advanced Diploma in
International Taxation
examination. A presentation
to two new Fellows of the
Institute followed. The total
attendance, including guests,
came to over 250.
The President, John Beattie,
made the presentations and
welcomed the new Members
and Fellows. He was optimistic
about the future of the
profession of tax adviser and of
the Institute which now has a
membership of over 13,300
Chartered Tax Advisers.
The formal presentations were
preceded by a reception in the
Guildhall Art Gallery and
followed by another more
relaxed one in the Guildhall’s
crypts, at both of which lively
music was supplied by a band
from the Royal College of
Music.
The highlights of this memorable
evening are displayed in the
photos on page 3.
The Guildhall will be the venue
for the next Admission
Ceremony to be held on
Friday 29 April 2005.
Also in this issue:
• Commerce and Industry
meeting with Inland
Revenue International
• Admission Ceremony
• CTA Members -
In Memoriam
• Members Offers
• Tax Journal Christmas Party
The first lesson was read by Jude
Maidment, Deputy Head of
Education at the Institute.
A small reception with mulled
wine and mince pies, held at
the church after the service,
concluded the evening.
The CIOT hopes to see many
more of its Members at the
Carol Service on 12 December
2005. Put the date in your
2005 diary.
After the Carol Service: The
President , John Beattie, with
younger guests.
The Chartered Institute of Taxation is the professional body for Chartered Tax Advisers

Commerce & Industry Group Meeting with Inland
Revenue International
On 22 September 2004 the Commerce &
Industry group held an afternoon
discussion with a team from Inland Revenue
International on the areas of (i) permanent
establishments, (ii) transfer pricing (iii)
disclosure regime and (iv) EU issues and
current tax competition.
Diane Hay, the newly appointed Deputy
Director of Inland Revenue International (on
her second day in the position) introduced
her team and described some of the
organisational changes being undertaken at
the Revenue. Responsibility for tax policy
development was being moved to the
Treasury, while the role of tax policy
maintenance and implementation will
remain with the Revenue. As part of this
process several people from the Inland
Revenue International had moved to the
Treasury. In Diane’s opinion the combining of
Revenue and Customs (still in progress)
would lead to a more seamless service
available to the government’s taxpaying
‘customers’.
Ian Menzies-Conacher of Barclays Group
provided an industry perspective of the areas
to be discussed, drawing on his extensive
interaction with government bodies and the
OECD through the British Bankers Association,
the CBI and the CIOT. Diane’s team
responded to these points and to others
raised by the audience.
Permanent Establishments (PE)
Ian highlighted industry concerns on potential
administrative burdens arising from the
determination of a dependent agent PE,
commenting that this could affect both nonfinancial
and financial organisations. On the
attribution of capital and profits to PE’s,
uncertainty surrounding the determination of
key entrepreneurial risk factors, the
possibilities of double taxation arising and
differences of opinion due to the lack of one
agreed method were discussed.
Kate Ramm, who had recently moved from
the Revenue to the Treasury, provided some
further background to the development of
the PE legislation and the discussions that had
taken place at OECD level. She clarified that
article 5 of double tax treaties and OECD
model tax convention dealt with whether
there was a PE for tax purposes, while the PE
working hypothesis developed at OECD level
dealt with the interpretation of article 7 on
the attribution of profits. Whilst the work at
the OECD confirmed the UK was out of line
with its major treaty partners on the
attribution of capital, the legislation
introduced into Schedule A1 ICTA88
incorporates existing OECD principles into
UK legislation rather than the principles set
out in the working hypothesis. Her colleague
Mike Hogan from the Inland Revenue team
was on hand to deal with specific questions
on PE’s the resolution of which depended in
many cases on the facts and circumstances.
Kate provided further background on the
development of the three possible methods
of attributing capital to a PE, and did not
anticipate the application of these methods
by other Revenue authorities would result in
unacceptable results from a UK perspective.
She also mentioned that where a Revenue
authority in the host state applied the OECD
PE hypothesis using one of the approved
capital attribution methods, then provided
this achieved an arm’s length result then this
should be accepted by the Revenue authority
in the home state. The risk of double taxation
should therefore be minimised. She also
commented that Inland Revenue had spoken
to some other jurisdictions to try and resolve
certain double taxation issues.
Transfer pricing
Ian commented on the background for the
introduction of the UK:UK transfer pricing
regime asking for clarification on how the
policing of this regime would be operated at
district level and for guidance on
documentation. He also highlighted
difficulties around transfer pricing arising
from the Waterloo case concerning options
granted to employees and where the cost of
remuneration would be recognised.
Andrew Page from the Inland Revenue
transfer pricing team commented that
taxpayers should consider adopting a more
interactive dialogue with Revenue officers
assigned to their cases. He suggested
taxpayers discuss transfer pricing proposals
and related risk assessment with their
revenue officer. He stressed it was not the
government’s intention to create unnecessary
extra documentary and record keeping
requirements for tax payers, but equally it
did not anticipate providing a general
clearance procedure for this area.
Andrew also commented on the Revenue’s
attitude to the use of the cost-plus
methodology and cost sharing. On cost-plus
methodology he commented the Revenue
did not see this being restricted in its
application so that it could never apply to
transactions involving (for example) research
& development. He encouraged a further
review of the Inland Revenue international
manuals for guidance on cost sharing and
transfer pricing methodology. On risk
assessment he commented that transactions
with low tax jurisdictions, and with
jurisdictions where defensive documentation
on transfer pricing policies was used, were
two examples which would be regarded as
high risk from a UK transfer pricing
perspective.
Disclosure
Ian commented that the introduction of the
new disclosure rules provided an example of
how industry and the professions had
provided significant input into the practical
application of this new legislation and
improved it as a result. He commented that
in his opinion it was still very subjective in
parts and therefore would not always be easy
to apply in practice. He anticipated further
development of this legislation over time.
Ray McCann provided more background on
the introduction of the new rules,
highlighting the government’s concern of the
time lag between implementation of
avoidance schemes and the government
being able to review these through the tax
return and the enquiry system. Ray is in
charge of the new disclosure team at the
Revenue and commented that the
registration system would permit the
government to make a much earlier
assessment of the impact and application of
certain schemes. He commented that
experience from the US and Australia on the
introduction of this type of reporting
requirement had led to a perceived
reduction in the use of avoidance not
originally intended by government.
EU Issues
Ian commented that many of the decisions
coming for the ECJ were destructive rather
than constructive in their effect on taxing
authorities’ rights. The imminent European
cases of Marks & Spencers (loss relief across
border), Cadburys (application of CFC
legislation) and the decided cases of De
Lasteyrie du Saillaut (C-9/02) and Manninen
(C-319/02) and their potential impact on UK
legislation were highlighted.
John Connors who had also recently moved
from Revenue to Treasury, commented that
the focus of the UK government was to work
with its European partners to create a
business and administrative environment that
promoted efficient economic development,
while enabling sufficient revenue to be raised
for the electoral agenda. He commented
that UK were in favour of achieving an
outward focussed European business
environment as opposed to a protectionist
environment. With that background he also
commented that while the UK did not
believe its own legislative systems to be
divergent from the EU treaty, there was
always a willingness to review suggestions for
improvements and re-design.
Conclusion
The meeting was attended by over 50
delegates who raised many points of interest
throughout the meeting. The facilities and
catering for the meeting provided by Shell
were of the highest standard, and for future
meetings with similar attendance levels,
microphones will be available to improve
amplification of presentations. The next
meeting of the commerce & industry group,
which starts at 5pm is on 27 January 2005,
focusing upon US/UK cross border tax issues.
To register for this meeting please email
chrislall@aol.com
ii
The Chartered Institute of Taxation is the professional body for Chartered Tax Advisers

At the Admission Ceremony
Friday 29 October 2004
The President, John Beattie, with the prize winners for May 2004
(unless otherwise indicated).
Back row, left to right: Stuart Farrow-Smith (Ian Walker Medal for
Paper I), Katherine Alexander (John Wood Medal for Paper IIC) and
Matthew Rees (Avery Jones Medal for Paper III).
Front row, left to right: Anja Krech (Victor Durkacz Medal for Paper
IID, November 2003), Helen Wainwright (Institute Medal and
LexisNexis Prize), the President, Sarah Allatt (Gilbert Burr Medal for
Paper IIA) and Rodney Adams (Institute Gold Medal for the highest
mark in the LLB Taxation & Law 2004, Bournemouth University).
The reception in the Guildhall Art Gallery.
Photo No: 4361
The President (left) with new Fellows, Liz Lathwood (centre) and
Sivahar Mahalingham (right).
New Members and their guests, in the Old Library at Guildhall,
awaiting the presentation of their CTA certificates.
New Chartered Tax Advisers and their families relaxed in the Crypt
after the official ceremony.
From left to right: The Advanced Diploma in International Taxation -
Martin Harty (ADIT certificate holder), Ruth Bruce (Winner of the
Heather Self Medal for the highest marks in ADIT Paper I - Principles of
International Taxation) and Sam Golcher (ADIT certificate holder).
Guided tours of the historic Guildhall were provided at the end of the
evening for new Members and their guests.
iii
The Chartered Institute of Taxation is the professional body for Chartered Tax Advisers

CTA Members - In Memoriam
This section is dedicated to those Members who passed away this year.
Our condolences to their family and friends.
Mr Peter Adcroft Mr Jack Farraday Mr Gordon Naylor
Mr Leslie Assender Mr Bryan Gair Mr Jack Ozerovitch
Mr Alfred Atkinson Mr John Griffiths Mr Michael Phillips
Mr Edward Batty Mr John Hall Mr Paul Powell
Mr Peter Bigg Mr Fraser Heggie Mr Donald Pritchard
Mr Wilfred Boyles Mr Dennis Hirst Mrs Christine Rogers
Mr Henry Brown Mr Julian Hodge Mr Derek Strath
Mr David Casswell Mr Ian Jay Mr Peter Swaine
Mr Kenneth Castle Mr Bernard Keane Mr David Thomas
Mr Darayas Chinoy Mr Alan Lodge Mr George Tricker
Mr Charles Coulson Mr Raymond Lowen Mr Donald Ward
Mr William Crabb Mr John Martin Mr Frederick Williams
Mr Wallace Davis Mr Ronald Maton Mr David Williams
Mr William Dickinson Mr James Morris Mr Phillip Younghusband
Mr Richard Downs
Mr Thomas Munn
Latest Members’ Offer:
£50 off ADIT Paper II Tutor
Tax Journal Christmas Party
is offering CIOT Members an
outstanding deal on the
CIOT Tolley ADIT Paper II Tutor.
The recently published course notes and interactive
tutorial CD are being offered at a discounted price of
£799 until January 2005; a saving of £50 off the normal
price of £849.
The course materials include written notes covering all
the topics, and an interactive tutor CD with examples to
guide the student through the course. Both will be fully
updated to incorporate the Finance Act 2004.
Visit: http://www.tax.org.uk/memberoffers/
to find out more!
The Tax Journal Christmas Party took place at Halsbury House, UK
headquarters of LexisNexis, on Thursday 9 December 2004 and was
hosted by the Editor of Tax Journal, Alison Lovejoy. Many Members
and officials from the CIOT attended the event including the CIOT
Past Presidents (pictured above). From left to right: Tim Ambrose,
Penny Hamilton and John Whiting.
iv
CTANews January 2005