Finance Bill progress and Royal Assent
The Finance Bill completed its stages in the Lords on Tuesday 8 June 2021. The Bill cannot be changed after it leaves the Commons, so there were no amendments. Issues covered in the Lords debate, which also considered the Lords Finance Bill Sub-Committee report New powers for HMRC: fair and proportionate? published on 19 December 2020, include:
Tax challenges arising from digitalisation: G7 reach agreement on Pillar One and Pillar Two
On 5 June 2021 the G7 finance ministers published a communiqué which confirms that high-level political agreement has been reached on global tax reform. Since 2017, the member countries of the G20/OECD Inclusive Framework on BEPS have been developing a ‘two pillar’ approach to address the tax challenges arising from the digitalisation of the economy. This led to the publication of two detailed ‘blueprints’ in October 2020 on potential rules for addressing nexus and profit allocation challenges (Pillar One) and for global minimum tax rules (Pillar Two). The proposals were updated and simplified by the US Biden Administration in April 2021 and this formed the basis for the G7 agreement. The communiqué sets out that the Pillar One rules should apply to the largest and most profitable multinationals, that it will reallocate at least 20% of residual profits over and above a 10% profit margin level to market countries, and that it will be coordinated with the removal of digital services taxes and similar measures. On Pillar Two, the G7 members agree that the global minimum effective tax rate should be at least 15%, applying on a country-by-country basis. For further details see our alert here.
Coronavirus Job Retention Scheme: updated HMRC guidance
HMRC updated guidance: claim relief from Corporation Tax trading losses
HMRC have updated their guidance Work out and claim relief from Corporation Tax trading losses. A new section has been added about the temporary extension to carry back of trade losses.
HMRC update on Corporate Criminal Offences
Corporate Criminal Offences (CCO) for the failure to prevent the facilitation of tax evasion were introduced by the Criminal Finances Act 2017. The offences came into effect on 30 September 2017 and apply to organisations that failed to prevent the facilitation of tax evasion from that date onwards. HMRC have updated their statistics on their compliance activities in relation to CCO investigations. HMRC currently have 14 live CCO investigations, as opposed to ten when the figures were last updated in August 2020. No charging decisions have yet been made. A further 14 live opportunities are currently under review. To date, HMRC have reviewed and rejected an additional 40 opportunities. As before, HMRC’s investigations and opportunities cover ten different business sectors, including financial services, oil, construction, labour provision and software development.
CIOT/IFS debate: How should platforms/gig economy workers be taxed?
From 09:30 to 11:00 BST on Wednesday 23 June 2021, the Chartered Institute of Taxation (CIOT) and the Institute for Fiscal Studies (IFS) will hold an online debate with an expert panel on platforms and the gig economy. The CIOT observes: ‘The ‘gig economy’ has grown and risen up the policy agenda in recent years. The associated growth in people working through their own businesses and in work happening through platforms highlights difficult questions about when to have boundaries in the tax system and where to put them.’ The debate will be chaired by CIOT President Peter Rayney, and the panel will include: Stuart Adam - Senior Research Economist, IFS; Bill Dodwell – Tax Director, Office of Tax Simplification; Meredith McCammond – Technical Officer, Low Incomes Tax Reform Group and Neil Ross – Head of Policy, techUK
They will address such issues as whether platforms should face an equivalent to employer NICs when they contract with a gig economy worker, whether they should be required to operate PAYE and withhold income taxes and when they should have to charge VAT on the services provided through them. The event is free and open to anyone interested in the topic. There are more details here. The registration link is here.
Forthcoming Dbriefs webcast
The next Dbriefs webcast is on Tuesday 15 June 2021, 12.00 BST/13.00 CEST. The title is Embarking On A Xaas Journey: Equipping The Tax And Legal Team from our Indirect Tax series, hosted by Charlotte Degadt. During this webcast our panel will advise on how your organisation can adopt a subscription model, looking at the potential tax impacts and giving some practical examples. For more information, and to register for the webcast, click here.
Innocent agents assessed for excise duty: CJEU
In October 2013, WR drove a lorry loaded with 25,000 litres of beer into the UK at Dover, using an Administrative Reference Code (‘ARC’) number copied from a previous consignment. The re-use of the ARC number indicated an attempt to evade excise duty, so HMRC seized the beer, confiscated the lorry, and assessed WR for duty and penalties. WR was not responsible for the paperwork (which he had no way of checking), and was hauling the beer on behalf of someone he knew only as ‘Des’, whom he met rarely, who paid him in cash, and who did not appear to help with any further enquiries. The CJEU has ruled that WR was ‘holding’ the goods within the meaning of the Excise Duty Directive because he was in physical possession of them, and he could therefore be assessed despite being an ‘innocent agent’. Where the Directive considers intention or culpability relevant, it says so expressly. The Directive was deliberately broad, because it would be practically very difficult for tax authorities to collect duty if they had to prove that a driver was complicit in an attempted fraud. Based on the CJEU’s response, the Court of Appeal is likely to allow HMRC’s appeal and uphold the assessment on WR.
No closing stock adjustment in VAT retail scheme: First-tier Tribunal
In 2002, Poundland agreed a bespoke VAT retail scheme with HMRC which did not (like the scheme it replaced) require adjustments for opening and closing stocks of zero-rated goods when calculating output tax due. In 2017, Poundland moved to another scheme based on its electronic point of sale system. HMRC considered that Poundland should have made a closing adjustment for stocks of zero-rated goods on hand, and assessed it for £2.1m. The First-tier Tribunal has allowed Poundland’s appeal. Some zero-rated goods might have been included in calculations under the 2002 scheme (which operated by reference to stock purchases) as well as the 2017 scheme (which included their sale). However, the 2002 scheme was a mechanism for estimating output tax due, and did not mean that the stock was actually being zero-rated when it was recognised in the scheme calculations. If HMRC had considered a closing stock adjustment appropriate, then they should have required it to be set out in the 2002 scheme. It was not possible to infer the need for such an adjustment in 2017, when it became apparent that a considerable potential adjustment had arisen over the 15 years that the scheme had been operating for. On that basis, and on the basis of other errors in HMRC’s approach to issuing the assessment, Poundland’s appeal was allowed.