CCIA Compliance Reports - Spice

Click here to load reader

  • date post

    22-Jul-2016
  • Category

    Documents

  • view

    226
  • download

    7

Embed Size (px)

description

CCIA Compliance Reports - Spice

Transcript of CCIA Compliance Reports - Spice

  • 1

    Legal and compliance analysis of Spice Time Credits

    Organisation: Spice Introduction This guidance document describes the impact of relevant laws and regulations on the Spice Time Credits community currency. Legal and compliance issues with regard to the relevant in-country laws and regulations are analyzed so that future currency projects can benefit from this knowledge and avoid risks at implementation. This document is part of a wider package of legal and compliance documents that can be found on the Community Currency Knowledge Gateway at http://community-currency.info/en/find/cc-toolkits/legal-and-compliance/

  • 2

    Disclaimer

    This document only offers an overview of the legal landscape that this complementary currency operates within and nothing contained in this document should be considered legal advice.

    This report has been compiled and verified by Qoin as part of the Community Currencies in Action (CCIA) collaboration project. CCIA is a transnational partnership project designing, developing and implementing community currencies across northwest Europe. The partnership provides a rigorously tested package of support structures to facilitate the development of currency initiatives across NWE, promoting them as credible policy vehicles. Running from May 2012 to June 2015, CCIA is part-funded through the INTERREG IVB North West Europe Programme, a financial instrument of the European Unions Cohesion Policy Investing in Opportunities.

    Find out more about CCIA on our website: www.communitycurrenciesinaction.eu

  • 3

    Introduction This guidance document describes the impact of relevant laws and regulations on the Spice Time Credits community currency. Legal and compliance issues with regard to the relevant in-country laws and regulations are analyzed so that future currency projects can benefit from this knowledge and avoid risks at implementation. Each chapter is divided in main and sub legal topics. An explanation is given for each main and sub topic. For each legal topic a description is given about how its relevant to the Spice Time Credits. Legal Topics 1. Taxation Tax authorities and regulators can consider community currencies to be a means by which individuals and companies can more easily escape the tax implications of the transactions that they engage in. It is therefore vital that any community currency seeks to mitigate these legitimate concerns by addressing the impact on VAT, Corporation tax and Income tax of individuals and companies using the scheme. For example, in the Netherlands a ruling has been obtained from the tax authorities that currency earned through social currency schemes are not taxed up to the equivalent of a maximum annual remuneration of volunteers up to 1500. However the situation varies in the different NWE countries and for some similar policies are yet to be. A further challenge is designing a calculation model which allows for computing equivalent legal tenders for currencies that are circulated on a completely different basis such as hours. To maintain the integrity of the community currency programs CCIA will do an in-depth risk analysis to understand how to mitigate the possibility of users avoiding paying all the tax due to the authorities. An initial assessment is, that social currencies (e.g. Timebanking, loyalty schemes etc.), due to their relatively limited scale in terms of individual balances and individual earnings, and spending opportunities, in general have a low risk of tax avoidance by users. For currencies in the professional/b2b mutual credit and legal backed tender, where the potential risks are higher, measures have already been implemented to verify the identity of participants when they enter the scheme. 1.1 Value Added Tax (VAT) Time credits are not taxable income. The Time Bank only records the time exchanged between its members. Time credits cannot buy goods or retail services. They have no cash/equivalent value. The Department of Work & Pensions Time Exchange guidance states that Participation in a time-exchange scheme is not voluntary work, but as the nature of the scheme is not to make any payment in cash, it is treated in the same way as voluntary work as far as the effect on JSA(IB) is concerned and that carried out under the Time Exchange Scheme is not classed as remunerative work. While answering a question on time exchange schemes, Angela Eagle, the Parliamentary Under- Secretary of State for Social Security, stated to the House of Commons on June 15 2000; Time credits derived from participation in a time exchange scheme ... do not constitute earnings. Links to original law texts and contact details regulatory authorities relevant for this sub topic: See Decision Makers Guide Volume 5, Chapter 26, Notional earnings https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/251801/dmg-vol5-consolidated-version.pdf The Time Exchange Scheme 167. Participation in the Time Exchange Scheme is considered by community organisations and local government, as a way of involving people in their local communities, as part of a regeneration scheme. 168. Although participants in a Time Exchange Scheme may do so in the belief that they are volunteers, it is not regarded as volunteering for either income related or incapacity benefits, as volunteering is done without reward or expectation of reward. 169. However, work carried out under the Time Exchange Scheme is not classed as remunerative work and it is input JSAPS in exactly the same way as volunteering.

  • 4

    170. As there is a distinction between work undertaken on a voluntary or remunerative basis and that undertaken under the Time Exchange Scheme, offices need to be aware of what scheme(s) exist in their areas. 171. In a Time Exchange Scheme, time credits cannot be exchanged for goods or converted into alternative currency used by a Local Exchange Trading Scheme (LETS). For benefits purposes, participation in a LETS is self-employment and any activity undertaken will count towards the remunerative work rule. 1.2 Corporation tax Corporation Tax is a tax on the taxable profits of limited companies and some organisations including clubs, societies, associations, co-operatives, charities and other unincorporated bodies. Taxable profits for Corporation Tax include: profits from taxable income such as trading profits and investment profits (except dividend income which is taxed

    differently) capital gains - known as 'chargeable gains' for Corporation Tax purposes Spice Time Credits have no cash value and Time Credit Systems do not generate profit. Therefore the corporation tax is not applicable. Links to original law texts and contact details regulatory authorities relevant for this sub topic: HM Revenue and Customs http://www.hmrc.gov.uk/ct/getting-started/intro.htm#1 1.3 Income tax Taxable income in the UK includes: earnings from employment earnings from self-employment most pensions income (State, company and personal pensions) interest on most savings income from shares (dividends) rental income income paid to you from a trust Earning time credits is counted as non-remunerative work and does not affect your entitlement to income related state benefits. Paul Boateng, the Minister of State, announced this decision during a debate in the House of Commons on June 15 2000; I am pleased to announce today that, following legal advice, the Department of Social Security will provide new local guidance, advising that no account be taken of Time Credits earned in time exchange schemes when calculating income-related benefits. This is reflected in Department of Work and Pensions Guidance which states work carried out under the Time Exchange Scheme is not classed as remunerative work and it is input JSAPS in exactly the same way as volunteering. Links to original law texts and contact details regulatory authorities relevant for this sub topic: See Decision Makers Guide Volume 5, Chapter 26, Notional earnings https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/251801/dmg-vol5-consolidated-version.pdf The Time Exchange Scheme 167. Participation in the Time Exchange Scheme is considered by community organisations and local government, as a way of involving people in their local communities, as part of a regeneration scheme.

  • 5

    168. Although participants in a Time Exchange Scheme may do so in the belief that they are volunteers, it is not regarded as volunteering for either income related or incapacity benefits, as volunteering is done without reward or expectation of reward. 169. However, work carried out under the Time Exchange Scheme is not classed as remunerative work and it is input JSAPS in exactly the same way as volunteering. 170. As there is a distinction between work undertaken on a voluntary or remunerative basis and that undertaken under the Time Exchange Scheme, offices need to be aware of what scheme(s) exist in their areas. 171. In a Time Exchange Scheme, time credits cannot be exchanged for goods or converted into alternative currency used by a Local Exchange Trading Scheme (LETS). For benefits purposes, participation in a LETS is self-employment and any activity undertaken will count towards the remunerative work rule. HM Revenue and Customs http://www.hmrc.gov.uk/incometax/basics.htm 2. Insurance Under this topic there are 2 sub-topics that will be investigated. Firstly the impact on volunteers engaging in work on behalf of the currency operator and related need for insurance. Secondly how the governance board will be indemnified against major risks. In some cities/municipalities citizens engaging in volunteer work are covered by a municipal (accident/disability) insurance policy. There are,