12 April 2024
Tax Administration and Maintenance Day – next week
At Spring Budget 2024, the government announced that it would bring forward a further set of tax announcements at a ‘Tax Administration and Maintenance Day’ (TAMD) on Thursday 18 April 2024. In previous years, the government has described TAMD announcements as outlining actions that “the government is taking to simplify the tax system, tackle the tax gap and modernise the tax system”. These have included new consultations and the government’s responses to earlier closed consultations. Per the government’s announcement, none of the TAMD announcements will require legislation in Spring Finance Bill 2024, due to have its Second Reading debate in the House of Commons on Wednesday 17 April 2024.
UK CFC State aid case – CJEU Advocate General considers Commission erred in law
On 11 April 2024, CJEU Advocate General (AG) Laila Medina issued her Opinion, in favour of the UK 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 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. AG Medina 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 AG considers instead that the correct reference system for the analysis ought to have been the general UK corporate tax system, and as a result recommends that the State aid decision should be annulled. The judges will now consider AG Medina’s proposals and will give the Court’s judgment at a later date.
Welsh government consulting on land transaction tax relief changes
On 8 April 2024, the Welsh government opened a consultation on potential changes to land transaction tax (LTT) reliefs. The Welsh government is seeking views on two proposals it intends to put to the Senedd on the abolition of LTT multiple dwellings relief (MDR) and on LTT relief for Welsh local authorities purchasing properties for social housing purposes. The proposal to abolish MDR follows the UK government’s Spring Budget announcement that similar rules for stamp duty land tax (SDLT) in England and Northern Ireland will be abolished with effect from 1 June 2024. The Welsh government is also using the consultation to gather views on whether it should review the relief on the purchase of six or more dwellings in a single transaction and LTT reliefs more generally. The consultation is open until 19 May 2024.
Innovative Bites Limited: Mega Marshmallows are not confectionery – Upper Tribunal
The tribunal has once again been asked to rule on the VAT liability of a food product, in particular whether a product is ‘confectionery’ and therefore excluded from zero-rating. Innovative Bites Limited contended that its product Mega Marshmallows were intended to be roasted over a campfire or barbeque or used as an ingredient in a s’more, and that they were not usually consumed as a snack without roasting. Innovative Bites therefore disputed HMRC’s contention that Mega Marshmallows were confectionery and standard rated for VAT purposes. The First-tier Tribunal (FTT) agreed with Innovative Bites, concluding that, considering the viewpoint of a typical customer and giving the term ‘confectionery’ its ordinary meaning, Mega Marshmallows were not confectionery and were therefore zero rated. The Upper Tribunal (UT) has dismissed HMRC’s appeal against the FTT decision.
As a preliminary issue, the UT considered the relationship between Excepted Item 2 (confectionery) and Note 5 of Group 1, Schedule 8, Value Added Tax Act 1994. One of HMRC’s arguments was that Note 5 (which provides that ‘confectionery’ includes certain products) is a deeming provision, which would mean that if a product fell within Note 5, there can be no further findings of fact and hence no multi-factorial assessment. However, the UT considered that there were inconsistencies in HMRC’s arguments on this issue, as HMRC also indicated that in some circumstances a multi-factorial assessment may be required. The UT concluded that Note 5 is not a deeming provision, but is rather an inclusive definition, to clarify potential doubt. A multi-factorial assessment may therefore still be necessary to determine whether a product is confectionery. The UT then concluded that there was no material error of law in the FTT’s analysis and weighing of the relevant factors and evidence. Accordingly, the UT upheld the FTT decision. (Contact: Andrew Roberts)
Labour announces plans for reducing the tax gap
On 9 April 2024, the Labour party announced a package of policies ahead of the next general election intended to reduce the tax gap – the difference between the amount of tax that is owed and the amount that is collected by HMRC – and increase tax compliance yields during the next Parliament. Proposals include an increase in HMRC resourcing of £555 million per year, enabling 5,000 additional compliance staff to be recruited, and increasing HMRC’s capital budget by £300 million a year to fund investment in technology to accelerate systems modernisation and digitalisation. The document states that Labour would also examine options for legislative and regulatory changes to assist HMRC’s efforts to tackle tax non-compliance. Separately, Labour has announced the establishment of a panel of independent experts to advise on policies for improving tax compliance and modernising HMRC. The outputs of this panel will feed into Labour’s manifesto.
EMEA Dbriefs webcasts
The next EMEA Dbriefs Tax webcast is on Tuesday 16 April 2024 at 12.00 BST/13.00 CEST. UK Tax Monthly Update – April is from our UK Tax Focus series and will be hosted by Andrew Clarke. During this webcast our panel will discuss what your organisation needs to know to keep up to date with the latest UK tax developments, with updates on news in corporate tax, employment tax, and indirect taxes.