20 September 2024
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”. Earlier this month, 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.
HMRC publish transfer pricing guidelines for compliance
As the seventh in their series of ‘Guidelines for Compliance’, on 10 September 2024 HMRC published Help with common risks in transfer pricing approaches (GfC7). The new guidance sets out a number of points and potential pitfalls for businesses to consider when analysing their transfer pricing outcomes, and offers best practice recommendations to help businesses with their UK transfer pricing compliance. The guidance does not relate to any change to UK transfer pricing law or HMRC policy on transfer pricing. For more details, please see Deloitte’s alert.
An EMEA Dbriefs transfer pricing webcast to discuss the guidelines will be held on 3 October 2024 at 12.00 BST/13.00 CEST. For more information and to register visit here.
HMRC consulting on further draft UK Pillar Two guidance
On 12 September 2024, HMRC published further draft manual guidance on multinational top-up tax and domestic top-up tax, the UK’s implementation of an income inclusion rule and a qualified domestic minimum top-up tax under the OECD Inclusive Framework’s Pillar Two global minimum tax rules. The draft guidance follows earlier releases of draft guidance issued in June 2023 and December 2023. HMRC are inviting feedback on the draft guidance by 23 October 2024.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.
Upper Tribunal dismisses taxpayers’ appeal on partnership and intangible fixed assets
The Upper Tribunal has dismissed the taxpayers’ appeal in Muller UK & Ireland Group LLP and others v HMRC. In 2013, three UK resident companies incorporated a limited liability partnership (LLP) and transferred their trades and certain assets to it. HMRC disputed whether intangible assets and goodwill transferred to the LLP should, as the taxpayers contended, be treated as falling within the intangible fixed assets regime of Part 8 Corporation Tax Act 2009 for the purposes of calculating the taxable profits attributable to each member of the LLP. This required consideration of the general rules for calculating the taxable profits arising to corporate partners from a trade carried on by a partnership – which requires computation of the profits as if a notional company were carrying on the same trade – and how the notional company concept interacted with Part 8 and in particular its rules on assets acquired from related parties.
The Upper Tribunal agreed with the 2023 decision of the First-tier Tribunal (FTT), holding that the absence of specific words treating the notional company as having the ownership attributes of the relevant partnership did not mean that the key related party provisions in the intangible fixed asset rules were incapable of applying. The Upper Tribunal agreed that, in order to calculate taxable profits, it was necessary to attribute the partnership’s ownership characteristics to the ownership of the notional company. Applied to the facts in this case, this meant each corporate member was to be considered a “related party” of the notional companies, and accordingly, the assets transferred remained outside of the scope of Part 8.
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 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.
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.
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 ten 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.
EMEA Dbriefs webcasts
We have a number of Dbriefs webcasts over the next month, including: New Government Reforms: what next for UK employment law and taxes? (24 September); Global pay transparency (25 September); Interview with Nicole Newbury, Director of Large Business, HM Revenue & Customs (26 September); and IR35/employment status – Autumn case law update (2 October). For more information, and to view recent webcasts on demand, please visit our Dbriefs website.