11 October 2024
The Upper Tribunal has dismissed the appeals of the taxpayers in the joined cases Trustees of the Panico Panayi Accumulation and Maintenance Settlements & Redevco Properties UK1 Ltd. The cases concerned how to resolve historical incompatibilities between UK capital gains tax and corporation tax law with EU law, in relation to exit charges arising on the deemed disposal of assets when trustees (in Panayi) or a company (in Redevco) migrated their tax residence from the UK to an EEA state. The migrations in both cases occurred prior to the UK’s departure from the EU, and prior to amendments to the Taxes Management Act 1970 that allow taxpayers to pay such UK-EEA exit charges in instalments over five years.
In separate decisions, the First-tier Tribunal agreed with HMRC in both cases that, instead of disapplying the exit charge provisions entirely, a ‘conforming interpretation’ of the UK law with EU freedoms could be adopted. This allowed the legislation as it stood at the time, to be read as if it already included an option to defer affected exit charge payments over five equal annual instalments. The Upper Tribunal has now largely endorsed both First-tier Tribunal decisions, agreeing with the conforming interpretation to defer the payment of tax. The Upper Tribunal however disagreed with the First-tier Tribunal’s conclusions that the conforming interpretation also applied to the dates from which interest arose.
The Chartered Institute of Taxation (CIOT) has published recent correspondence with HMRC in relation to a statutory definition of ordinary share capital (contained in the Income Tax Act 2007, but mirrored in similar definitions) that excludes certain shares with rights to dividends only at a fixed rate. In particular, the CIOT requested clarification as to whether, in HMRC’s view, dividends being cumulative or non-cumulative could affect the position. HMRC’s response acknowledges that an example within their manual page CTM00514 is out of date and will be updated shortly to reflect the outcome of the Upper Tribunal’s January 2021 decision HMRC v Warshaw. The update will also reflect HMRC’s position, stated in their response, that “whether a dividend is cumulative or not has no bearing on whether a share carries a right to a dividend at a fixed rate”.
At Spring Budget 2024, then-Chancellor Jeremy Hunt announced an extension of the audio-visual expenditure credit (AVEC) rules – the Independent Film Tax Credit (IFTC) – targeted at low-budget UK independent films. The new IFTC can provide qualifying low-budget productions certified by the British Film Institute (BFI), whose principal photography began on or after 1 April 2024, with an enhanced AVEC at a higher rate of credit of 53% (compared to the normal rate of 34% for other films). On 9 October 2024, the Department for Culture, Media and Sport announced the making of two sets of regulations – the Corporation Tax (Certification as Low-Budget Film) Regulations 2024 (SI 2024/1009) and the Finance (No. 2) Act 2024 (Applications for Certification as Low-Budget Film: Appointed Day) Regulations 2024 (SI 2024/1010) setting out applicable budgetary and creative conditions, and setting 30 October 2024 as the date from which the BFI’s certification unit will begin accepting applications for certification.
As of 1 January 2025, education services and vocational training supplied by a private school or a ‘connected person’ for consideration will be subject to VAT at the standard rate of 20%. On 29 July 2024, a technical note and draft legislation were published covering this change. HMRC have now issued guidance for education providers: Check if you must register for VAT if you receive private school fees and Charging and reclaiming VAT on goods and services related to private school fees. The guidance states that it is based on the draft legislation, and will be updated if there are any changes announced in the Budget on 30 October 2024. Education providers will be able to register for VAT from 30 October 2024. The registration date will be determined by reference to whether the VAT registration threshold (£90,000 per annum) has been exceeded in the previous 12 months, or the expectation is that it will be in the next 30 days, which will depend on the value of fees received for terms starting on or after 1 January 2025 and the date payments are received. The guidance sets out HMRC’s policy on the VAT treatment of payments received before 1 January 2025, with a number of examples provided for reference. The guidance also provides high-level commentary on the supply of education services with other goods/services (such as school meals, transport, and welfare services), grant/bursary payments, supplies provided in the classroom, and board and lodging, among other issues, as well as advice on reclaiming VAT, including on capital expenditure.
The next EMEA Dbriefs tax webcast will be on Tuesday 22 October 2024 at 12:00 BST/13:00 CEST. Unleashing the value of employee benefits, hosted by Michael Nicolaides, is the fourth in our Global Employer Services A world of talent series, exploring the world of managing, attracting and retaining global talent. Our presenters will discuss the increased pressure on employers to provide employee benefits that support and align with wider corporate strategy and philosophy, and how better defining a benefits strategy, improving communications, and maximising the employee value proposition, whilst balancing budget constraints, can assist with employee retention and well-being.