20 September 2024
CJEU allows appeal in UK CFC State aid case
Yesterday, the Court of Justice of the European Union (CJEU) issued its judgment, in favour of the United Kingdom and taxpayer appellants, in the Controlled Foreign Company (CFC) State aid litigation (Cases C-555/22 P, C-556/22 P and C-564/22 P). In a hearing in January 2024, the UK government, ITV plc, and two members of the London Stock Exchange group argued that the Court of Justice should set aside the EU General Court’s judgment of 2022, and annul the European Commission’s original decision of 2019, that held that the exemption for certain financing income within Chapter 9 of the UK’s CFC rules, as it stood between 2013 and 2018, resulted in selective tax advantages contrary to EU State aid rules. The CJEU considers that the General Court and the Commission both erred in law when concluding that the UK’s CFC rules were the correct reference framework for examining whether Chapter 9 granted a selective advantage. The CJEU instead considers that the UK’s CFC rules formed an integral part of the general corporation tax system of the UK. As a result of this error, the CJEU agreed with the April 2024 recommendations of CJEU Advocate General (AG) Laila Medina, and has set aside the General Court’s judgment and annulled the Commission’s State aid decision.
HMRC publish new regulations for R&D additional information form requirements
On 11 September 2024, HMRC published the Research and Development Relief (Information Requirements etc.) Regulations 2024 (SI 2024/950). The Regulations amend earlier Regulations from 2023 (SI 2023/813) with an updated list of the information that must be included in the ‘Additional Information Form’ (AIF) required to support all R&D claims made from 8 August 2023. The updated list includes changes to reflect the new merged R&D Expenditure Credit (RDEC) and enhanced relief for loss-making R&D intensive SMEs (ERIS) regimes enacted in Finance Act 2024, including information on contracted out expenditure, overseas expenditure, the ERIS intensity threshold and Northern Ireland companies. The Regulations also confirm that an AIF is only required for original claims and not for any amendments. They also put the rules requiring projects to be described in detail in an AIF on a statutory basis (including confirmation that where the AIF requires details of 10 projects to be included, these must be the 10 largest). HMRC published the new version of the AIF and related guidance on 12 September 2024, and its use is mandatory for claims made on or after 2 October 2024.
R&D claim notifications: 30 September deadline for March year ends
Schedule 1 of Finance (No. 2) Act 2023 introduced a new R&D claim notification requirement, applicable to corporation tax accounting periods beginning on or after 1 April 2023. If required, a notification should be filed with HMRC within six months of an accounting period end, and so affected companies with a 31 March 2024 year end will need to file a claim notification by 30 September 2024. Claim notifications are generally required where a company is claiming an R&D relief for the first time, or has not made an R&D claim in the last three years. There are specific rules in the legislation for determining whether or not a company is considered to have a made a claim in the last three years for these purposes that can, for example, depend on whether a past claim was made in an original return or through an amendment to a filed return. In particular, R&D claims for accounting periods beginning before 1 April 2023 will be ignored for these purposes if made through an amended return filed on or after 1 April 2023. If a notification is required but is not made in time, any R&D claims made for that period will be invalid and HMRC will remove them from the company tax return.
Supreme Court remits referee employment status case back to First-tier Tribunal
On 16 September 2024, the Supreme Court released its judgment in HMRC v Professional Game Match Officials Limited concerning the question of whether certain football referees were employees of the professional body that arranges referees for significant national football games. This would determine how fees paid to them should be treated for income tax and national insurance purposes. The Supreme Court held that the contracts in question contained a sufficient degree of ‘mutuality’ and ‘control’ and were thus not incompatible with being employment contracts. However, the Court did not come to a final conclusion on the status of the referees, and instead held that the third stage of the employment status test (‘overall evaluation of employment status’) was best considered by the First-tier Tribunal, with that evaluation to include a qualitative assessment of both ‘mutuality’ and ‘control’, as well as all other relevant matters.
First countries sign multilateral convention to facilitate implementation of subject to tax rule
The OECD held a signing ceremony yesterday to mark the first countries signing the Multilateral Convention to Facilitate the Implementation of the Pillar Two Subject to Tax Rule (STTR MLI). The subject to tax rule (STTR) is a model treaty provision, agreed by the OECD/G20 Inclusive Framework in 2023 as part of its work on Pillar Two. It is designed to allow developing countries to amend their treaties, either through agreed bilateral amendment or a coordinated multilateral instrument (the STTR MLI), such that they can impose taxation at source on certain cross-border payments between connected companies where the recipient is subject to a nominal corporate tax rate below 9%. For more details on the STTR please see here.
Nine countries signed the STTR MLI yesterday and submitted their initial notifications of double tax treaties that they wish to be covered. Those nine countries were: Barbados, Belize, Benin, Cabo Verde, the Democratic Republic of the Congo, Indonesia, Romania, San Marino and Türkiye. Another 10 countries have expressed their intention to sign: Belgium, Bulgaria, Costa Rica, Mongolia, Portugal, Senegal, Seychelles, Thailand, Ukraine and Uzbekistan. As expected given tax rates in the UK, no treaties with the UK are included in any of the notifications made.
HMRC publish Guidelines for Compliance on VAT compliance controls
HMRC have published Help with VAT compliance controls – Guidelines for Compliance (GfC8). The guidelines set out HMRC’s recommended approach to VAT compliance, and their expectations for businesses planning, carrying out, and reviewing their VAT accounting and compliance processes. There are 10 parts to the guidelines, which commence with HMRC noting that businesses will approach VAT compliance matters differently depending on the complexity and scale of their business, and that the guidelines should be used to aid taxpayers in developing their individual compliance strategy and approach to tax risk and governance matters. The guidelines proceed to cover a series of best practice points, including risk management, process documentation, and use of master data, as well as addressing compliance controls relating to employee expenses, outsourcing, the making of manual adjustments, and error corrections. The collection of Guidelines for Compliance issued by HMRC to date is available here. (Contact: Andrew Dalah)
EMEA Dbriefs webcasts
There are three EMEA Dbriefs tax and legal webcasts coming up next week: