Business Tax Briefing

A weekly round-up of corporate, employment and indirect tax news


'L' day will be Tuesday 20 July

Financial Secretary to the Treasury Jesse Norman has confirmed that the government will publish draft clauses for the next Finance Bill on Tuesday 20 July 2021. These will largely cover pre-announced policy changes and will be accompanied by responses to consultations and other supporting documents. 

Self-Employment Income Support Scheme fifth grant: Treasury Direction; HMRC guidance

The Treasury Direction for the fifth grant available under the Self-Employment Income Support Scheme (SEISS) has been published. This sets out the legal framework for the grant. HMRC guidance has been published/updated as follows:

Work out your turnover so you can claim the fifth SEISS grant

Claim a grant through the SEISS

How your circumstances affect eligibility for the SEISS

How your trading conditions affect your eligibility for the SEISS

Check if you can claim a grant through the SEISS

How HMRC works out trading profits and non-trading income for the SEISS 

The fifth grant mostly works the same way as the fourth grant, with one key difference. There are now two alternative levels of grant, 80% of three months' average profits with a cap of £7,500 (as before) or 30% of three months' average profits, with a cap of £2,850. The average profits calculation and qualification criteria are identical to the fourth grant. Traders only qualify for the higher grant if one of the following conditions is met: (1) They traded in 2019/20 but not in the preceding three tax years; (2) The only trading profits in 2018/19 and 2019/20 are from Lloyd's underwriting; or (3) The person meets the financial impact declaration test, which determines whether there has been a 30% drop in turnover. 

G20 Finance Ministers meeting: OECD Secretary-General Report

Ahead of the meeting of G20 Finance Ministers and Central Bank Governors in Venice, Italy on 9-10 July, the OECD has published the OECD Secretary-General Tax Report to G20 Finance Ministers and Central Bank Governors. Annex A includes the Statement regarding agreement on the key components of changes to the international tax framework issued last week following the G20/OECD Inclusive Framework meeting. The number of Inclusive Framework countries in agreement with the Statement has increased from 130 to 131, as a result of the agreement of Peru. 

Jersey’s economic substance regime extended to partnerships

The draft Taxation (Partnerships – Economic Substance) (Jersey) Law 2021, which extends Jersey’s economic substance rules to partnerships in line with commitments given to the EU Code of Conduct Group, was lodged with the Jersey States Assembly on 18 May 2021.  It was passed without amendment on 29 June 2021 and came into force for financial periods commencing on or after 1 July 2021 for new partnerships formed on or after this date. For existing partnerships (i.e. those in existence prior to 1 July 2021) it will take effect for financial periods commencing on or after 1 January 2022. The legislation broadly mirrors Jersey’s existing economic substance legislation for companies. Where a ‘resident partnership’ has gross income in relation to relevant activity carried on by or through that partnership, it will be required to meet the economic substance test.  ‘Relevant activity’ definitions largely follow those set out in the existing company economic substance rules. As with companies, persistent failure could lead to the partnership being wound up or dissolved. For further details see here. 

Office of Tax Simplification: making better use of third party data; evidence

The Office of Tax Simplification (OTS) has published a paper which sets out proposals for how government could make tax easier for people through making better use of data held by third parties, such as bank interest, and the steps that would need to be taken to achieve this. This follows the review launched in December 2020. The report makes recommendations which, inter alia, encourage the government to:

  • Ensure that data reported to HMRC by third parties is visible to taxpayers through the Single Customer Account and used to update tax codes and help the completion of tax returns.
  • Set out a clear roadmap of the stages through which changes would be consulted on and made.
  • Explore how best to enable taxpayers to see and validate data matched to their account.

The OTS has also published its evidence for HM Treasury’s five-yearly review of the OTS.  It suggests that it is important for the OTS to take a broad view of tax simplification, as there is no other body which occupies a comparable position in this area. It also identifies some possible reforms, including giving the OTS the opportunity to contract external research surveys to support its work. 

Forthcoming Dbriefs webcasts

The next Dbriefs webcast is on Monday 19 July 2021, 14.00 BST/15.00 CEST. The title is G20/OECD The Digitalised Economy - Political Agreement On Taxation Of Digital Economy (Pillar One) And Global Minimum Rate (Pillar Two), hosted by Alison Lobb. During this webcast our panel will discuss the recently agreed statement from the G20/OECD Inclusive Framework on the allocation of taxing rights between countries (‘Pillar One’) and the introduction of a global minimum tax (‘Pillar Two’) and how this may impact your organisation.

There is another webcast on Tuesday 20 July 2021, 14.00 BST/15.00 CEST Demystifying The New UK Patent Box Regime, hosted by Sarah Lord. During the webcast the panel will discuss the ‘new’ UK patent box regime - what the rules are, and what they could mean for your organisation. 

VAT: claims for input tax on Mailmedia services were invalid: Advocate General

For Zipvit Ltd to recover VAT on Mailmedia services provided by Royal Mail in 2006-10, VAT must have been ‘due or paid’ and should have been evidenced by a VAT invoice. At the time, however, the services were (incorrectly) considered exempt. Although HMRC chose not to pursue Royal Mail for output tax that it should have paid, Zipvit still sought to recover input tax. In the Opinion of AG Julianne Kokott, VAT had been ‘due or paid’ by Royal Mail, regardless of whether HMRC could or should have assessed it. The fact that Royal Mail provided a service that should have been taxable established a right for Zipvit to recover input tax in principle. However, Zipvit’s claim failed because of the absence of a VAT invoice. The AG listed five essential characteristics of a VAT invoice, one of which is the VAT amount. If an invoice is defective in other respects, then it can be fixed; but the documents issued by Royal Mail simply did not mention an amount of VAT, which meant that they could not be recognised as VAT invoices at all. Failure to specify a VAT amount made it impossible for supplier, customer, or HMRC to verify how much VAT Royal Mail had included in its charges. As no VAT invoice had ever been issued, the AG’s view was that Zipvit was not entitled to recover any input tax. 

VAT: insurance commission must be recognised in standard method

Rádio Popular, a Portuguese retailer which sells computers, phones, and domestic appliances, earned commission from selling extended warranties for its products on behalf of an insurer. The commission was exempt from VAT, but Radio Popular excluded it from its partial exemption calculations on the basis that it was generated by incidental financial transactions. The CJEU did not even need to consider whether the commission was ‘incidental’. In its judgment, the court noted that the EU Principal VAT Directive specifically omits insurance transactions from the definition of incidental financial services (that can be left out of standard partial exemption method calculations). The court ruled that insurance could not be defined as a type of financial service (which Radio Popular thought might be an alternative way of excluding the exempt turnover). Regardless of whether or not the insurance commissions were incidental, Radio Popular should have included them in its partial exemption calculations.