Business Tax Briefing

Regulations made to extend EIS and VCT income tax relief by ten years to 5 April 2035

On 3 September 2024, HM Treasury made appointed day regulations (SI 2024/897) which bring into force an extension of two sunset clauses that restrict when shares qualify for income tax relief under the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT) rules. The relevant sections of Income Tax Act 2007 previously restricted the availability of EIS and VCT income tax relief to shares issued before 6 April 2025. In line with an announcement made at Autumn Statement 2023, the new regulations bring into force amendments in Finance Act 2024 that update both sunset dates to before 6 April 2035. The government has issued a press release highlighting the 10-year extension and the tax reliefs available under the two schemes to individuals investing in qualifying early-stage companies.

Business tax road map to be published at Autumn Budget 2024

Labour’s manifesto for the 2024 general election included a commitment to publish a ‘roadmap for business taxation’ for the next parliament, intended to “allow businesses to plan investments with confidence”. During Treasury questions in the House of Commons chamber earlier this week, Chancellor of the Exchequer Rachel Reeves MP confirmed the timing of the publication of the road map, stating that it will be outlined as part of the upcoming Budget on 30 October 2024. The Chancellor also confirmed that the road map would reflect Labour’s manifesto promises to cap corporation tax at 25% for the duration of this parliament and to retain capital allowances full expensing.

Budget responsibility bill completes Commons stages

One of the first bills introduced by the new government in July 2024 was the Budget Responsibility Bill, which is intended to ensure that all ‘fiscally significant’ permanent tax or spending change announcements made by governments will be subject to an independent assessment by the Office for Budget Responsibility (OBR). The bill completed its remaining House of Commons stages on 4 September 2024. No amendments were made to the bill during these stages and the text of the bill as approved by the Commons, and introduced in the House of Lords yesterday, is here. The bill’s remaining Lords stages are scheduled for Monday 9 September 2024.

Company cars – HMRC advisory fuel rates from 1 September 2024

On 23 August 2024, HMRC published the new advisory fuel rates for company cars applicable from 1 September 2024. The previous mileage rates, effective from 1 June 2024, can be used for up to one month from the date the new rates apply. Compared to the previous rates, the advisory fuel rates for petrol and diesel engines sized up to 2000cc have each decreased by 1p, and the petrol and diesel rates for larger engines have both decreased by 2p. The advisory rate for fully-electric cars has decreased from 8p to 7p per mile. The rates for cars with liquefied petroleum gas (LPG) engines are unchanged from the previous quarter.

Barclays Service Corporation and another: VAT grouping – First-tier Tribunal

An application to include Barclays Services Corporation (BSC), a US entity with a UK branch, into an existing Barclays VAT group was rejected by HMRC on two grounds: BSC was not eligible to be treated as a member of the VAT group because it was not established, nor did it have a fixed establishment, in the UK; or, alternatively, if BSC did have a fixed establishment in the UK, it was necessary to refuse the application for the ‘protection of the revenue’. The First-tier Tribunal (FTT) has rejected Barclays’ appeal on the first ground. Considering the case law and the contractual position/element of control in relation to the BSC employees, the FTT found that, at the time the application was made, the UK branch of BSC did not have sufficient human and technical resources in the UK to make a meaningful commercial contribution. Therefore, as there was no activity, the UK branch could not, as a matter of fact, have been a fixed establishment of BSC. In respect of the UK’s ‘whole establishment construction’ of the VAT grouping provisions, whereby the entire eligible non-UK body corporate is allowed into a VAT group, the FTT held that any change to the UK’s approach could give rise to important practical repercussions, which the FTT was not in a position to evaluate. Finally, the FTT went on to consider the ‘protection of the revenue’ point. The FTT rejected HMRC’s ground of appeal, and held that VAT savings arising on BSC’s admission to the VAT group (had it been a UK fixed establishment) would be “those that fell within the normal consequences of VAT grouping”. (Contact: Chris Beattie)

Go City Limited: VAT treatment of city passes – First-tier Tribunal

Go City Limited (formerly the Leisure Pass Group Limited) sold the ‘London Pass’ and the ‘London Explorer Pass’ (the Passes), which entitled the purchaser to enter various attractions and use certain transport in London without further payment. The FTT has held that the Passes were multi-purpose vouchers and were therefore outside the scope of VAT and were not tickets. The Passes were also outside the scope of VAT because of the contractual arrangements whereby Go City acted as the supplier of entry to the attractions, meaning that the supplies took place when customers used the Passes and not when the Passes were purchased. The FTT also rejected HMRC’s contention that the entire purchase price should be allocated as consideration for Go City’s supplies: where a customer did not use all the credits, the unallocated part of the payment was not consideration for a supply. The FTT also considered the validity of the first two of four assessments which were raised “to protect HMRC’s position” in respect of the purported under-declaration of VAT. The FTT found that the assessments were invalid because, at the time they were raised, HMRC did not have a view that Go City’s VAT returns were incorrect, as a final decision had yet to be made. The FTT allowed Go City’s appeal. (Contact Katy Sweaton)

EMEA Dbriefs webcasts

The next EMEA Dbriefs tax webcast is on Wednesday 11 September 2024 at 12.00 BST/13.00 CEST. In UK Tax Update – September, hosted by Rachel Austin, our panel will discuss topical tax developments of relevance to UK businesses in relation to corporate taxes, employment taxes and indirect taxes.