Business Tax Briefing

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


EU Council approves public CbCR directive

Following the political compromise reached in June 2021 between the EU Council and European Parliament, the EU Council has now formally approved the text of a draft public country-by-country reporting (CbCR) directive. The directive would require multinationals with worldwide revenues of more than €750 million to disclose publicly, on a country-by-country basis, corporate income tax information relating to their operations in each of the 27 member states, as well as information for certain third countries on the EU list of non-cooperative jurisdictions. Both EU-parented groups and non-EU parented groups with EU subsidiaries or branches would have to comply with these new reporting obligations. The reporting would take place within 12 months of the date of the balance sheet for the financial year in question. The directive sets out the conditions under which a company may defer the disclosure of certain information for a maximum of five years. 21 member states (representing 94% of the EU population), sufficient for a qualified majority, voted for the measure; Cyprus and Sweden voted against it, while the Czech Republic, Ireland, Luxembourg and Malta abstained. The next step is the formal approval of the provisional agreement by the European Parliament, which is expected to take place in November. The directive will enter into force on the 20th day following its publication in the Official Journal of the European Union. Member states will have 18 months from the entry into force of the directive to transpose it into national law. For further detail see the Deloitte tax@hand article here

Coronavirus Job Retention Scheme: HMRC guidance

HMRC have updated their guidance on the Coronavirus Job Retention Scheme (CJRS). The CJRS ended on 30 September 2021. Claims for September must be submitted on or before 14 October 2021. Any amendments must be made on or before 28 October 2021:

Check if your employer can use the CJRS

Check if you can claim for your employees' wages through the CJRS

Claim for wages through the CJRS

Self-Employment Income Support Scheme: guidance

HMRC have withdrawn their guidance on the Self-Employment Income Support Scheme (SEISS). Claims for the fifth grant have now closed. The last date for making a claim was 30 September 2021:

Claim a grant through the SEISS

Check if you can claim a grant through the SEISS

Tax Chambers of the Upper and First-tier Tribunals: Annual Report for 2021

The Senior President of Tribunals has published his annual report for 2021. The report includes coverage of the Tax Chambers of the Upper Tribunal and of the First-tier Tribunal. President of the Upper Tribunal Sir Antony Zacaroli comments that the experience of remote hearings has been generally positive. He hopes that a return to face-to-face hearings for substantive appeals and other larger hearings will again become the norm, but that fully remote hearings will continue to be an option for shorter applications and that technology will assist participation in hearings by those who cannot physically attend (hybrid hearings).

First-tier Tribunal President Judge Greg Sinfield also anticipates a return to face-to-face hearings in many cases, and expects hybrid hearings to become more common in future. The First-tier Tribunal has already agreed with HMRC that all ex parte applications for approval to issue information notices will be made electronically and considered at a video hearing by reference to electronic documents. Judge Sinfield suggests that taxpayers could see similar benefits from moving short penalty cases to video hearings. A video to show litigants in person what happens in a simple tax appeal is available here.  

BEPS MLI: UK/South Korea; UK/Iceland treaties: MLI-synthesised texts

HMRC have published the synthesised text of the OECD BEPS Multilateral Convention (BEPS MLI) and the 1996 UK/South Korea Double Taxation Convention. The MLI modifications took effect in respect of the 1996 Convention:

  • For both countries, for taxes withheld at source, from 1 January 2021.
  • In the UK, in respect of corporation tax, from 1 April 2021; in respect of income tax and capital gains tax, from 6 April 2021.
  • In South Korea, in respect of other taxes, for taxable periods beginning on or after 1 March 2021. 

HMRC have also published the synthesised text of the BEPS MLI and the 2013 UK/Iceland Double Taxation Convention. The MLI modifications took effect in respect of the 2013 Convention:

  • For both countries, in relation to taxes withheld at source, from 1 January 2020.
  • In the UK, in respect of corporation tax, from 1 April 2021; in respect of income tax and capital gains tax, from 6 April 2021.
  • In Iceland, in respect of other taxes, for taxable periods beginning on or after 1 January 2021.

UK/Switzerland treaty: memorandum of understanding

The UK and Switzerland signed a memorandum of understanding on arbitration under Article 24 of the 1977 UK/Switzerland double Taxation Convention on 16 June 2021. The memorandum has been added to HMRC's Switzerland tax treaties page.

BEIS: government plans to legislate on tipping practices

The Department of Business, Energy & Industrial Strategy (BEIS) has published an update following a 2016 consultation on tipping, gratuities, cover and service charges, and an announcement in 2018 that legislation would be brought in to ensure tips left for workers go to them in full. The planned measures will be contained in a future Employment Bill. They will include requirements for employers not to make any deductions from tips received by their staff, including administration charges, other than those required by tax law, and to distribute them in a way that is fair and transparent.

Input tax restriction on non-business broadcasting

In 2016 the CJEU ruled that the Czech public broadcasting body was not in business for VAT purposes in relation to its core broadcasting activities, which were funded by a public licence fee. In Balgarska natsionalna televizia (BNT) it has applied the same approach to the Bulgarian national broadcaster. Although BNT was funded from the state budget by a flat rate subsidy per hour of programming rather than by a licence fee, it was not making supplies to viewers for consideration. However, the fact that much of BNT’s revenue was therefore classified as non-business rather than exempt did not mean that it should be ignored for the purposes of determining input tax recovery. The CJEU confirmed that there is no right of deduction in relation to non-business activities, and this must be reflected in the calculation of recoverable input tax. It ruled that EU Member States have a broad discretion to determine an appropriate recovery method. Therefore, practical difficulties in attributing input tax to BNT’s taxable activity (such as advertising, product placement, and teleshopping) may mean that the national courts uphold the assessment. 

Reduced rate of VAT on hospitality from 1 October

On 1 October, the 5% reduced rate of VAT which applied since 15 July 2020 to certain supplies in the hospitality and tourism sectors increased to 12.5%. The reduced rate applies to certain supplies of food and non-alcoholic drinks in the course of catering from restaurants, pubs and cafés etc.; supplies of holiday accommodation; and the right of admissions to shows and certain attractions. Businesses involved in those sectors will need to ensure that their systems are correctly configured to apply the correct rate – a number of complications (for example, around how deposits should be handled) became evident when the reduced rate was initially introduced. Businesses outside the sector will need to ensure that they recover the correct amount of VAT on services that they purchase (for example, when employees expense a meal). The 12.5% rate is also temporary – it will run for six months until 31 March 2022, after which the standard rate is due to apply once again.