Business Tax Briefing

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

17/12/2021

OECD to publish model global minimum tax rules (Pillar Two) on Monday 20 December

The OECD has announced that model rules for the domestic implementation by countries of the global minimum tax will be published on Monday 20 December. The global minimum tax is part of Pillar Two of the G20/OECD Inclusive Framework’s two-pillar approach, and will provide for a system of taxation that imposes a top-up tax on profits arising in a country whenever the effective tax rate, determined on a jurisdictional basis, is below the minimum rate of 15%. Deloitte will be producing an alert on the model rules. 

Validity of corporation tax double tax relief claims following FII GLO, Prudential etc.

The Supreme Court judgment in July 2021 in the FII GLO clarified principles in applying EU law to, and conforming interpretations of, the UK double tax relief rules to certain dividends received by UK companies prior to July 2009. The First-tier Tribunal (FTT) has now given a new decision which deals inter alia with questions of what procedure must be followed by affected taxpayers, in particular what constituted a valid claim. A wide range of questions was posed to the FTT, reflecting the variety of circumstances of the test claimants. In brief, the taxpayers have won on all the major points in the litigation. The decision may be of particular interest to companies with, or considering, claims in connection with, the various cases (including FII GLO, CFC/Dividend GLO, BAT or Prudential) and s79 TIOPA 2010 or s806(2) ICTA 1988 claims for overseas dividends pre-July 2009. It may also be of interest to UK companies in receipt of overseas dividends between 2001 and July 2009 from group companies in non-EU/EEA third countries. 

Finance (No 2) Bill: update

The Public Bill Committee held its first two sittings to consider those parts of the Finance (No 2) Bill not already considered in a Committee of the Whole House on Tuesday 14 December 2021. The amendments for the Public Bill Committee include government amendments 1 to 6 relating to Schedule 2 (qualifying asset holding companies) which address three technical issues in the original drafting. They also include   government amendments 7 to 10 to Schedule 15 (large businesses: notification of uncertain tax treatment) dealing with drafting issues to confirm the application of the rules in respect of provisions in the accounts of partnerships and clarifying the compliance deadlines where provisions for VAT or PAYE uncertainties are recognised in accounts after the relevant return has been filed. HM Treasury has published explanatory notes on these amendments. The government amendments to Schedule 2 were passed at the first sitting of the Committee. The debate is here.  No amendments were made at the second sitting. The debate is here. The Committee will meet next on the afternoon of Wednesday 5 January 2022 and will conclude its work on Thursday 13 January 2022. 

Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act

The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act received Royal Assent on 15 December 2021.  The Act provides that the Insolvency Service is to be given powers to investigate directors of companies that have been dissolved. The dissolution process will no longer be able to be used as a method of fraudulently avoiding repayment of government backed loans given to businesses to support them during the COVID-19 pandemic. Extension of the power to investigate also includes the relevant sanctions, such as disqualification from acting as a company director for up to 15 years. Directors of dissolved companies will also be prevented from setting up a near-identical business after the dissolution, potentially leaving customers and other creditors unpaid. The Act also rules out business rates appeals on grounds of a material change of circumstances where these are related to COVID-19. See also the BEIS press release here

Scottish and Welsh income tax rates

Although Scotland and Wales have their own devolved tax authorities (Revenue Scotland and the Welsh Revenue Authority), the operation and collection of the devolved elements of income tax on the non-savings non-dividend income of Scottish and Welsh individual taxpayers, and accounting for the correct amounts transferrable to devolved governments out of the UK Consolidated Fund, is the responsibility of HMRC. HMRC have published their latest reports on how this is working.  A key responsibility is identifying whether an individual is a Scottish or Welsh taxpayer and, in particular, whether they therefore get an ‘S’ or ‘C’ in their PAYE code.  Third party data exercises indicate that HMRC’s identification of Scottish and Welsh taxpayers is correct in at least 98% of cases. 

BEPS MLI: Seychelles deposits instrument of ratification; Iceland update

The Seychelles deposited its instrument of ratification for the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the BEPS multilateral convention or BEPS MLI) with the OECD on 14 December 2021. Its list of reservations and notifications is here.

Iceland has deposited a new notification, also on 14 December 2021. Iceland’s new notification is here.

There is a full list of signatories and their positions as at 14 December 2021 here.

Imports from Ireland, from 1 January 2022

The first phase of new customs controls for imports from the EU will be implemented on 1 January 2022. Implementation for goods moving from Ireland to Great Britain is complicated by the need to ensure unfettered access for goods from Northern Ireland, and because negotiations on the Northern Ireland Protocol will not be definitively completed by 1 January. Given this uncertainty and complexity, Lord Frost (Minister of State in the Cabinet Office) has announced in a Written Ministerial Statement (HLWS473) that ‘goods moving from the island of Ireland directly to Great Britain will continue to do so on the basis of the arrangements that apply currently, until further notice; and will not, for now, be affected by the changes being introduced on 1 January for all other inbound goods.’  This change will be legislated for before 1 January 2022, and the Border Operating Model has been updated accordingly. It means that importers of non-controlled goods from Ireland to Great Britain, or from Northern Ireland to Great Britain via Ireland, can continue to delay making their customs declarations for up to 175 days if they make an entry in declarant's records at the time of import.  

New statutory instruments relating to Plastic Packaging Tax

From 1 April 2022, Plastic Packaging Tax (PPT) will encourage the use of recycled plastic instead of new plastic material within plastic packaging. To ensure the tax is properly targeted, SI 2021/1417 specifies that ‘packaging components’ will not include plastic cases used by customers for keeping tools, first aid kits, glasses, etc.; nor packaging that is integral to a product (e.g. printer cartridges, inhalers, and tea bags); nor re-usable sales display shelves and poster display stands. PPT will, however, be levied on products that are single-use and become packaging only when the customer uses them (for example, rolls of bin bags, carrier bags, or disposable plates). The SI therefore highlights some of the decisions that businesses will need to consider in relation to PPT, and gives legislative effect to guidance published by HMRC in November. SI 2021/1409 is an Appointed Day Order for PPT. It confirms that the tax will come into effect on 1 April 2022 and allows further regulations developing the rules set out in Finance Act 2021 to be made by statutory instrument.