Business Tax Briefing

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

19/11/2021

Tax Administration and Maintenance Day 30 November

The Budget Red Book confirmed that there would be another Tax Policy Day ‘later in the autumn.’ It has been announced that the government will bring forward a further set of plans for tax administration to be set out in a Tax Administration and Maintenance Command Paper on Tuesday 30 November. The accompanying  news story states that none of the announcements will require legislation in the Finance Bill. 

Finance (No 2) Bill: second reading

The Finance (No 2) Bill had its second reading in the Commons on 16 November 2021. The debate is here. Budget Resolution 24 (diverted profits tax - closure notices etc) was amended. A note which gives a brief description of the amended Resolution is here. A programming motion for the Bill was agreed to. 

The following Clauses will be considered by a  Committee of the Whole House on Wednesday 1 December: Clause 4 (increase in rates of tax on dividend income); Clause 6 (rate of banking surcharge and surcharge allowance); Clauses 7 and 8 and Schedule 1 (attribution of trade and property business profits etc for a tax year); Clause 12 (capital allowances: extension of temporary increase in annual investment allowance); Clauses 27 and 28 (diverted profits tax: mutual agreement procedure and closure notices etc); Clauses 53 to 66 (economic crime (anti-money laundering) levy); Clauses 68 to 71 (value added tax); Clauses 84 to 92 and Schedules 12 and 13 (avoidance); Clause 93 and Schedule 14 (free zones); and any new Clauses or new Schedules relating to the subject matter of the Clauses and Schedules mentioned above.

The remainder will go to a Public Bill Committee for scrutiny. Proceedings in the Public Bill Committee must (so far as not previously concluded) be brought to a conclusion on Thursday 13 January 2021.

The current amendment paper for the Committee of the Whole House stage is here. It includes two government amendments (amendments 2 and 3) to Clause 28 on diverted profits tax: closure notices (see above). 

Social Security (Up-rating of Benefits) Bill:  Royal Assent

As previously reported, the Social Security (Up-rating of Benefits) Bill, the purpose of which is to implement the government's decision to set aside the state pension triple lock earnings link for the purposes of calculating the next increase, was amended in the Lords. The amendments would have seen the earnings link in the triple lock retained. The amendments did not prescribe the figure to be used for calculating the next increase but provided that the Secretary of State should use existing powers to set another earnings figure for the up-rating next April.  The Commons disagreed with the Lords amendments, and the Lords did not insist on them, so they have been effectively reversed. 

The Act received Royal Assent on 17 November 2021 - Social Security (Up-rating of Benefits) Act 2021 (Chapter 32).

BEPS MLI: HMRC publish MLI-synthesised text of UK/Mauritius treaty

HMRC have published the synthesized text of the OECD multilateral instrument (MLI) and the 1981 UK/Mauritius Double Taxation Convention, as amended by the 2018 Protocol. The provisions of the MLI have effect with respect to the Convention:

  • in the UK, for taxes withheld at source, from 1 January 2021
  • in the UK, from 1 April 2021 for corporation tax and from 6 April 2021 for income tax and capital gains tax
  • in Mauritius, for taxes withheld at source, for taxable periods beginning on or after 1 July 2020.
  • in Mauritius, for other taxes, for taxable periods beginning on or after 1 August 2020. 

Managing tax debt through the pandemic: National Audit Office report

The National Audit Office (NAO) has published its report 'Managing tax debt through the pandemic.'  This considers how well HMRC have managed tax debt through the pandemic, including whether they have adapted sufficiently to the changing nature and scale of that debt and the wider circumstances that affect taxpayers’ ability to repay tax. The report concludes that, at the onset of the first lockdown, HMRC acted quickly, pausing debt collection to reduce pressure on debtors, and working to improve their understanding of how the pandemic was affecting taxpayers. Early indications were encouraging, with taxpayers repaying debt faster than expected and taxpayers welcoming HMRC’s understanding tone. However, HMRC forecast that higher levels of tax debt will persist. The NAO observes that HMRC face several years of managing the impact of the pandemic on tax debt, and that current staffing is unlikely to be enough to manage the increased workload. HMRC made efficiencies before the pandemic but they did not improve overall levels of debt collection and they were writing off more debt. The NAO suggests that adding staff and private sector capacity would have most success in increasing debt collection. While some debtors have been able to repay tax debt quickly, there remains an unknown number of taxpayers who have been badly affected and will struggle to repay tax debt. The NAO urges HMRC to build on their initial work and to better understand the resources they need to manage the scale of the challenge they face. 

Forthcoming Dbriefs webcast

The next Dbriefs webcast is on Thursday 25 November 2021, 12.00 GMT/13.00 CET and is from our Transfer Pricing series. The title is Transfer Pricing, Diverted Profits Tax And HMRC’s Profit Diversion Compliance Facility (PDCF) and it will be hosted by Jamie Bedford. During the webcast our panel will discuss HMRC’s PDCF, the themes and lessons learnt. To register, please click here

CHAPS payments to non-established traders

To date, HMRC have repaid VAT due to overseas traders that are registered for UK VAT by payable order. However, HMRC have been informed that there has been an increase in banks and countries which no longer accept payable orders. HMRC have therefore announced that they are creating a form, accessible through the government gateway, that will allow traders to provide details of their overseas bank accounts. These details will allow HMRC to make repayments by CHAPS instead of sending a payable order. 

VAT: disclosure issues in joined penalty appeals: Upper Tribunal

HMRC assessed Universal Payroll Services Ltd and Universal Project Services Ltd for input tax, as the companies could not demonstrate that they had paid for, or indeed ever received, certain supplies. The companies went into liquidation, and so HMRC issued personal liability notices for £6m against Paul Bell and Mark Mitchell on the basis that they were shadow directors. The First-tier Tribunal (FTT) directed that Mr Bell’s and Mr Mitchell’s appeals against the penalties should be heard together. Early in proceedings, however, it emerged that Mr Bell alleged that Mr Mitchell controlled the companies, whereas Mr Mitchell argued that Mr Bell was responsible for them. The fact that Mr Mitchell and Mr Bell were blaming each other created difficulties for HMRC in deciding what evidence to disclose, as they had obtained documents in the course of an investigation into Mr Mitchell’s direct tax affairs, but Mr Mitchell challenged their relevance to the VAT appeals. The Upper Tribunal has endorsed the FTT’s decision about disclosure. It had been right to rule that documents referring to interactions between Mr Mitchell and Mr Bell could be disclosed by HMRC,  whereas documents showing interactions between Universal and other companies, or Mr Mitchell’s interactions with other companies, could only be disclosed if HMRC had identified those companies in its statement of case.