COVID-19: updated Companies House guidance
Companies House have updated their guidance which makes clear inter alia that any automatic accounts filing extensions granted by the Corporate Insolvency and Governance Act have come to an end. Companies can apply for a three month filing extension, if something has happened that is outside their control as a result of which they cannot file their company accounts on time. Companies that are eligible and cite issues around COVID-19 in their application will be granted an extension. Any such application must be sent before the normal accounts filing deadline and include a full explanation of why the extension is needed. If there is no application for an extension and the accounts are filed late, an automatic penalty will be imposed.
Inclusive Framework: BEPS Action 5: harmful tax practices: update
The OECD reports that progress continues in combatting harmful tax practices as new outcomes on the review of preferential tax regimes have been approved by the G20/OECD Inclusive Framework on BEPS. At its April 2021 meeting, the Forum on Harmful Tax Practices (FHTP) reached new conclusions on 25 regimes as part of the implementation of the BEPS Action 5 minimum standard (harmful tax practices). The FHTP has reviewed 309 regimes since the start of the BEPS project. The results are here.
Barbados joins Inclusive Framework two-pillar agreement
The OECD has announced that Barbados has agreed to the Statement regarding agreement on the key components of changes to the international tax framework released on 1 July 2021. The number of jurisdictions participating in the agreement is now 133.
HMRC guidance: self-employed reporting COVID-19 grants and support payments
HMRC have published new guidance that sets out which COVID-19 grant or support payments self-employed individuals or partners in a business need to include in their tax returns.
Maldives, Papua New Guinea, Rwanda sign the Mutual Assistance Convention
Maldives, Papua New Guinea and Rwanda have signed the multilateral Convention on Mutual Administrative Assistance in Tax Matters (the Mutual Assistance Convention), bringing the total number of jurisdictions that participate in the Convention to 144. Jordan deposited its instrument of ratification of the Convention on 11 August 2021, ensuring that the Convention is in effect with respect to Jordan as from 2022.
UK/US treaty: Brexit: equivalent beneficiary
Competent Authority Arrangements have been agreed between the US and the UK, including one which states that the UK and US competent authorities agree that, for the purposes of applying paragraph 7(d) of Article 23 of the UK/US treaty, a ‘resident of a Member State of the European Community’ continues to include a resident of the UK. The Arrangements state that this interpretation reflects the shared understanding of the competent authorities that residents of either Contracting State should be eligible to qualify as equivalent beneficiaries for purposes of applying the derivative benefits test in paragraph 3 of Article 23 of the treaty. The Arrangements have been added to HMRC’s US: tax treaties page here and here.
Correspondence on the pensions triple lock
Correspondence on the pensions triple lock between Mel Stride, Chair of the Treasury Select Committee and the Chancellor has been published. The triple lock ensures that the state pension is guaranteed to be uprated each year by wage growth, inflation or 2.5%, whichever is higher. Mr Stride points out that, in its September 2020 report on the economic impact of COVID-19, the Treasury Select Committee suggested that lifting the triple lock on pensions in 2022 should be carefully considered. The Chancellor has said in response that the government will continue to examine the data as it becomes clearer, and will be guided by the principle that decisions on pensions must be fair to both pensioners and taxpayers.
Self-employment income support scheme: conducting business by telephone
HMRC have issued revised Directions relating to the conduct of income tax business by telephone. The new Directions allow amendments to returns for 2020/21 or 2021/22 in relation to certain self-employment income support scheme (SEISS) payments to be made by taxpayers or their agents over the telephone.
A reminder that our programme of Dbriefs webcasts is taking a break over the summer. The programme will recommence in September. You can catch up on any titles you may have missed, including: Demystifying The New UK Patent Box Regime; G20/OECD The Digitalised Economy - Political Agreement On Taxation Of Digital Economy (Pillar One) And Global Minimum Rate (Pillar Two); Taking Action On Tax Evasion: Corporate Criminal Offence And Beyond; HMRC Review Of Transfer Pricing Documentation and many more. For further details of our webcasts available to view on demand see here.
Legitimate expectation arguments in the First-tier Tribunal
If a taxpayer legitimately expects that HMRC should act in a particular way, and they do not, then can the First-tier Tribunal (FTT) adjudicate? The FTT is a creature of statute – it has the power to rule on matters listed in s.83(1) VATA 1994, but it does not have any general supervisory jurisdiction over HMRC. However, appeals against VAT assessments stem from s.73 VATA, under which HMRC may (but do not have to) assess a taxpayer. In KSM Henryk Zeman, the Upper Tribunal (UT) therefore concluded that any appeal against a VAT assessment involved consideration of HMRC’s discretion. In such cases, VATA does not exclude public law defences like legitimate expectation – indeed, the UT thought that such defences fell squarely within the subject matter which the FTT should consider. In the circumstances of this case (which related to a VAT assessment on a Polish company that installed a boiler in the UK for another Polish company) no legitimate expectation arose. However, in some other cases, the UT’s conclusion could allow public law defences such as legitimate expectation to be considered by the FTT, rather than having to be dealt with exclusively by separate judicial review proceedings.
Burden of proof in inward diversion fraud VAT appeal: Court of Appeal
In 2011-12, £32m was deposited into Award Drinks Ltd’s bank account in cash, at 42 bank branches around the UK. To HMRC, the cash looked like the proceeds of inward diversion fraud (where multiple consignments of alcoholic drinks were illegally imported under a single administrative reference code, and then sold for cash). HMRC concluded that ADL had made taxable supplies in the UK and assessed it for VAT. On appeal, ADL failed to convince the Fist-tier Tribunal or Upper Tribunal that the cash was from selling alcohol to French retailers while it was still in bond (for resale to customers on ‘booze cruises’ to France). The Court of Appeal has now confirmed that HMRC never conceded in their pleadings that ADL had sold the drinks while they were in France. The judgment confirms that the burden of proof on the taxpayer to prove its case does not change just because fraud is suspected. HMRC had made an assessment, to the best of their judgment, that the cash was consideration for sales that were subject to UK VAT. Thereafter, it was ADL’s task to show why the assessment was incorrect, and it had failed to provide any coherent explanation for why the money was not consideration for UK supplies. The Court of Appeal dismissed its appeal.