Business Tax Briefing

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

03/12/2021

Tax Administration and Maintenance Day

Tax Administration and Maintenance Day was on 30 November 2021.  The government’s command paper, summarising the day’s announcements, is here.  Also published were a Written Ministerial Statement, an HMRC press release, the government’s responses to the Office of Tax Simplification Reports and a page listing the individual announcements. The documents published included responses to consultation documents, and accompanying policy announcements, including:

The government has responded to the reports of the Office of Tax Simplification (OTS) on capital gains tax, confirming that it will implement some of the reports’ recommendations.

In response to the OTS’s second report on inheritance tax, in which the OTS considered various key aspects of IHT, including business property relief and lifetime gifts, the government has stated that it will not proceed with any changes at the moment. HM Treasury has also reported following its statutory review of the effectiveness of the OTS, which it is obliged to conduct every five years, and has made eight recommendations for improvement. These include asking the OTS to be more explicit in stating the reasoning behind its recommendations, and, when making recommendations, to highlight more clearly those which it views as most important.

A number of new consultations were published, including on issues arising from the recent business rates review; on mandatory disclosure rules targeted at Common Reporting Standard (CRS) avoidance arrangements and ‘opaque offshore structures’ (based on OECD model rules to replace current rules which are based on retained elements of EU DAC6); and on possible changes to Stamp Duty Land Tax in relation to mixed-property purchases and multiple dwellings relief. There are also new calls for evidence, including on the key design features of Landfill Tax and on the role of umbrella companies in the labour market.

India and United States agree transitional approach on India’s equalisation levy and Pillar One

On 24 November 2021, the governments of India and the United States published press releases, announcing a compromise agreement on a transitional approach to phasing out India’s equalisation levy regime. This follows on from the agreement in early October between 136 (now 137) countries of the OECD/G20 Inclusive Framework on the two-pillar solution to address the tax challenges arising from digitalisation. Pillar One of the two-pillar solution would reallocate taxing rights in favour of market countries, coordinated with the removal of all digital services taxes (DSTs) and other relevant similar measures. The India-US agreement will mirror the recent compromise reached between the US and five European countries with DSTs (including the UK). India will collect the 2% equalisation levy during the interim period prior to the commencement of Pillar One. However, for the largest and most profitable multinationals (i.e. those in the scope of Pillar One’s ‘Amount A’ rules), India is expected to subsequently allow a credit for 'excess' equalisation levy over their Amount A tax in the first year, to be set against the Indian Amount A tax liability. As part of the agreement, the US will terminate the trade tariffs on India imposed (but currently suspended) in response to the levy. Other smaller multinationals will continue to pay the equalisation levy in the interim period, and once Pillar One is implemented, these multinationals will no longer be subject to the levy and neither will they be in scope of Amount A. Turkey has also agreed a similar approach with the US to the phasing out of its DST. 

Finance (No 2) Bill: update

Parts of the Finance (No 2) Bill were debated by a Committee of the Whole House on 1 December 2021. The debate is here. Amendments were made to Clause 28 on diverted profits tax. The remainder of the Bill now goes to a Public Bill Committee for scrutiny. The first sitting of the Public Bill Committee is expected to be on Tuesday 14 December. The latest list of amendments for the Public Bill Committee is here. There are currently no government amendments for the Public Bill Committee.  

HMRC: VAT and CT phonelines

HMRC are running a trial of reducing the hours on some of their telephone services so that they can dedicate the time to work through post that has built up over the past year. To test the approach, they will close their VAT and CT phone lines (with the exception of the bereavement line) on 3,10 and 17‌‌ ‌December.  HMRC say they have recently been able to move more resources back into their core tax activities now that the COVID-19 schemes have ended, and they are adding further capacity through temporary recruits. By April 2022, they expect to be delivering normal (pre-pandemic) performance on their core service lines in terms of the work they have on hand and their turnaround times. 

Forthcoming Dbriefs webcast

The next Dbriefs webcast is on Thursday 9 December 2021, 15.00 GMT/16.00 CET. The title is US Tax Policy Outlook and it will be hosted by Marek Krawczyk. To register, please click here

VAT on international matchmaking consultancy: Upper Tribunal

Gray & Farrar International LLP runs an exclusive matchmaking business. For an entry level fee of £15,000, GFI interviews prospective clients, establishes a dating profile, and connects them (at least eight times a year) with possible matches. Matchmaking at this level is for an international clientele, and if it was consultancy then UK VAT would not be chargeable to overseas clients. The First-tier Tribunal (FTT) decided in 2019 that GFI’s liaison team provided a level of support and advice (acting as confidante) which was more than just expert advice, and which meant that GFI’s service could no longer simply be categorised as consultancy. According to the Upper Tribunal, the FTT had failed to identify the ‘predominant element’ of GFI’s services. The predominant element of GFI’s supply was making the introductions, which involved the provision of expert advice (interviewing clients and establishing who might be their ideal match) and information (putting clients in touch with prospective dates). This service, judged from the point of view of the ‘typical’ consumer by reference to objective factors, should be categorised as consultancy for VAT purposes. GFI had correctly treated its services as outside the scope of UK VAT, and its appeal was allowed.  

HMRC reminder about full customs controls from 1 January 2022

HMRC have published a reminder to traders that, from 1 January 2022, they will have to make customs declarations and pay tariffs at the point of import, and will no longer be able to delay making declarations under the Staged Customs Controls rules. Unless goods have received customs clearance, they will in most cases not be able to leave the port, so traders that are unable to deal with the required declarations themselves should consider appointing a customs agent (if they have not done so already). The reminder also mentions the need for exporters to provide statements on origin and supplier declarations, and confirms that postponed import VAT accounting will remain available, and that UK tariff codes will be changing on 1 January 2022. (Contact: Jeffrie Mann, who leads Deloitte’s Global Trade Bureau).