Business Tax Briefing

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

12/02/2021

Jersey: economic substance rules for partnerships from 1 July

The government of Jersey has published a consultation on extending the scope of Jersey’s economic substance regime to apply to partnerships in addition to Jersey tax resident companies. This is necessary in order to fully deliver on commitments made to the EU Code of Conduct Group in 2018. In-scope partnerships are expected to be those that are managed and controlled in Jersey, which could include certain foreign partnerships, and the rules could also apply to Jersey limited liability partnerships (LLCs). Jersey officials are in discussions with the EU Commission on various possible exemptions, e.g. for fund vehicles. Legislation is anticipated by 30 June and the extended scope is likely to take effect from 1 July 2021, with a maximum six-month extension for existing partnerships. The consultation period will run until 1 March 2021. There is an alert with more details here. Guernsey and the Isle of Man have made similar political commitments to the EU, and we understand that Guernsey has announced its intention to legislate for similar rules by 30 June but that consultation is with interested industry groups only.

NICs: veterans’ transition to civilian life via employment: policy paper

At Spring 2020 Budget, the Chancellor announced the introduction of a National Insurance contributions (NICs) ‘holiday’ for employers of veterans in order to support former service personnel into employment. Following earlier consultation, on 11 January 2021, HMRC published draft legislation for further technical consultation, on clauses which will enable employers to apply a zero-rate of secondary Class 1 Employer National NICs on the earnings of veterans (up to a threshold) during the first year of their civilian employment. HMRC have now published a policy paper on the relief, which includes examples of how it will work in practice. The relief will be available from April 2021. From April 2021 to March 2022, employers will need to pay the associated secondary Class 1 NICs to HMRC as normal and then claim them back from April 2022 onwards. From April 2022 onwards, employers will be able to apply the relief in real time through PAYE.

Public Accounts Committee: new inquiry on environmental taxation; NAO report

The Commons Public Accounts Committee has opened an inquiry into environmental taxation. The call for evidence observes that HM Treasury’s 2020-21 review into funding the transition to a net zero greenhouse gas economy explicitly plans to ‘consider the full range of government levers, including tax’ when considering where costs will fall. The deadline for the call for evidence is Monday 1 March 2021.

The National Audit Office (NAO) has also published a report on environmental tax measures. The press release notes that HM Treasury and HMRC administer four  environmental taxes: Climate Change Levy; Carbon Price Support; Landfill Tax; and Aggregates Levy. The government plans to introduce a fifth – the Plastic Packaging Tax – from April 2022. The NAO finds that, when designing environmental taxes, HM Treasury and HMRC rarely specify how they will measure the environmental impact so as to allow Parliament to assess whether taxes are meeting their objectives. More widely, HMRC have not identified the tax reliefs which could impact on the government's environmental goals. The NAO recommends that HMRC and HM Treasury should work closely with other departments to ensure that existing and future tax measures are compatible with the environmental strategies being developed across government. It suggests that the Treasury's net zero review is an important first step in this process.

Belarus and Samoa join Inclusive Framework on BEPS

Belarus and Samoa have joined the OECD/G20 Inclusive Framework on BEPS, becoming its 138th and 139th members. members of the BEPS Inclusive Framework are, amongst other things, committed to implementing and maintaining BEPS minimum standards in the areas of country-by-country reporting to tax authorities, dispute resolution, treaty abuse and harmful tax practices. The implementation of the minimum standards is subject to peer review. There is a full list of members as at February 2021 here.

Van benefit and fuel benefit upratings

Exchequer Secretary to the Treasury Kemi Badenoch has made a Written Ministerial Statement confirming that the van benefit charge and fuel benefit charges for cars and vans will be uprated by the Consumer Price Index from 6 April 2021. The measure was announced outside of the normal fiscal process to ensure employers and HMRC are given enough time to prepare for the uprate, ahead of the 2021-22 tax year. The government will lay the statutory instrument to uprate these charges on 9 March 2021. A tax information and impact note will be published at Budget 2021.

Forthcoming Dbrief webcast

The next Dbriefs webcast is on Wednesday 17 February 2021, 12.00 GMT/13.00 CET. The title is SAP S/4HANA®: Tax Data Management And Analytics, hosted by Joost Dumeez, from our SAP S/4HANA® series. During this webcast our panel of experts will discuss how SAP S/4HANA can be used to improve your organisation’s tax data management and analytics. To register for this webcast, click here.

COVID-19 VAT deferral: further details of instalment repayment scheme

HMRC have amended their guidance on how businesses will have to pay any VAT that became due between March and June 2020, but which was deferred in line with HMRC’s response to COVID-19. The deadline for joining the instalment repayment scheme has been extended to 21 June 2021, although businesses which delay joining will have to pay the deferred VAT in fewer instalments (eleven instalments for a business which joins by 19 March, or eight instalments for one joining on 21 June). All businesses will therefore have to finish repaying the deferred VAT by the end of January 2022 (slightly earlier than some had anticipated). Large businesses which make payments on account will be invited to join the scheme in March, and helpline details have been provided for businesses who will not be able to join the scheme online (e.g. those who do not have a UK bank account).

Conditions for inward processing duty relief: CJEU

Rottendorf Pharma imported 12.5kg of ertugliflozin from the US for the production of diabetes medicine. When it had to pay the associated customs duty, it realised that it could have claimed inward processing relief (IPR), as the finished product was going to be re-exported. The German customs authorities granted IPR retroactively, provided that the medicine was presented to the Beckum customs office prior to export. Rottendorf Pharma, which was not very familiar with customs processes, failed to modify the data in its systems and did not therefore present the drugs when they were re-exported. Customs duty rules include a general equity provision which allows duty to be remitted in ‘special situations’ if a taxpayer has not been manifestly negligent. There was some question as to whether Rottendorf had been negligent by failing to observe the IPR conditions, but ultimately that was a question for the national court to decide. It may find it unnecessary to do so, however, as the CJEU has ruled that Rottendorf was not in a ‘special situation’. It had not shown that IPR was particularly complex, nor that IPR caused particular issues for it compared to other pharmaceutical companies. The error may have arisen because, on retroactively being granted IPR, Rottendorf failed to update the status of the drugs in its systems, but that fell short of being a special situation which would justify duty remission. Even though the ertugliflozin was imported, processed, and re-exported, Rottendorf Pharma will have to pay customs duty of €179k.

COVID-19: help and information

To help inform our clients and to enable them to understand how businesses can respond, recover and thrive in these times we are running a series of webinars focused on the economy, on particular sectors and on key roles within an organisation. You can register for future webcasts and view archived webcasts here. You can access more information here and also at our Deloitte global COVID-19 webpage. You can also sign up to our Deloitte Tax Atlas COVID-19 Tax and Fiscal Measures microsite, which provides a high-level summary of tax and fiscal coronavirus measures that have been announced by governments, and our COVID-19 Signal Topic email alerts, here.