Business Tax Briefing

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


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Freeports - Prospectus published; bidding process open in England

On 16 November 2020, HM Treasury published its Freeports bidding prospectus. The prospectus is a guide for bidders competing for Freeport status in England. It provides additional detail on the UK’s Freeports model, including how Freeport levers relating to customs, tax, planning, regeneration and innovation will work. In addition to the customs-related benefits, the tax-related measures include:

  • Stamp Duty Land Tax relief
  • Enhanced Structures and Buildings Allowances
  • Enhanced Capital Allowances
  • Employer National Insurance Contributions Rate Relief
  • Business Rates Relief

The prospectus outlines what bidders are expected to set out in their proposals and how they can take full advantage of each measure. The prospectus also explains how Freeports should be delivered, and provides details of the selection process, with successful Freeport locations to be announced in the spring. Bidders wanting to apply for Freeport status should complete this form by noon on 5 February 2021.

OECD - 2020 Review/Public Consultation on BEPS Action 14 (Dispute Resolution)

On 18 November 2020, the OECD published a public consultation document covering a review of BEPS Action 14, Making Dispute Resolution Mechanisms More Effective.  Interested parties are invited to send their comments no later than Friday 18 December 2020. The public consultation meeting on the 2020 review of BEPS Action 14 will be held virtually in early 2021, with information to be available on the OECD website in due course.

SDLT - HMRC change in guidance; 3% surcharge, mixed use transactions

HMRC have updated their guidance on multiple dwellings relief (MDR), which allows stamp duty land tax (SDLT) rates to be fixed by the average value of dwellings rather than total deal price, by amending their manual page SDLTM09740 (SDLT - higher rates for additional dwellings - higher rates transactions - Para 3 Sch4ZA FA2003). The guidance suggests that HMRC now accept that the 3% surcharge on residential property does not apply to mixed use transactions. This means that beneficial rates previously applying only to student accommodation should now apply across the board as long as there is a commercial element (which is not ‘negligible’ or ‘artificially contrived’). The value of the reclaims can therefore be up to 3% of the purchase price. Much of this benefit will be lost when the SDLT holiday ends, which is due to happen on 31 March 2021. That date is also important for non-resident buyers, as it will see the introduction of a new 2% surcharge for such persons.

New manual pages - Taxation of Coronavirus Support Payments

Four new pages have been added to HMRC’s Business Income Manual (BIM) concerning the taxation of coronavirus support payments. The relevant legislation is section 106 Finance Act 2020 and Schedule 16 Finance Act 2020. The new pages are:
BIM40456 - Specific receipts: Coronavirus Support Payments - General rules
BIM40457 - Specific receipts: Coronavirus Support Payments - Specific rules & exceptions
BIM40458 - Specific receipts: Coronavirus Support Payments - Self Employment Income Support Scheme
BIM40459 - Specific receipts: Coronavirus Support Payments - Employment-Related Schemes

Income Tax/NIC exemption for COVID-19 tests

The Income Tax (Exemption of Minor Benefits) (Coronavirus) Regulations 2020 (SI 2020/1293) are coming into force on 8 December 2020. These regulations  provide for a new temporary income tax exemption for the 2020-21 tax year, to ensure that employees who are provided with a coronavirus antigen test by their employer, will not be liable to an income tax benefit in kind charge. A tax information and impact note (TIIN) was also published. Whilst the regulations only apply to tests provided on or after 8 December 2020 (and before 6 April 2021), the explanatory memorandum states: “For any relevant tests which have been provided earlier in the tax year before this instrument comes into force, HMRC will exercise its collection and management discretion, and will refrain from collecting any income tax and National Insurance contributions (NICs) due.”

Dbriefs webcasts

The next Dbriefs webcast is on Tuesday 24 November 2020 at 12:00 GMT/13:00 CET. The title is Tax Transparency And Sustainability - Achieving Tax Clarity and it is from our UK Tax Focus series, hosted by Mark Kennedy. During the webcast our panel of experts will discuss how to communicate your organisation’s position on tax sustainability measures with clarity. For more information and to register for the webcast, click here.

There is also be a Dbriefs webcast from our International Tax series on Thursday 25 November, at 15:00 GMT/16:00 CET, hosted by Shaun Lucey and including guest speakers from HMRC. Entitled Offshore Receipts In Respect Of Intangible Property (ORIP), our panel of experts will discuss the administrative requirements, practical considerations and general implications of the ORIP rules.. For more information and to register for the webcast, click here.

Kaplan: overseas student recruitment costs subject to VAT

Kaplan International Colleges UK (KIC UK) incurred costs in 70 countries (principally China, Hong Kong, India, and Nigeria) recruiting overseas students for its UK colleges. Until 2014, it incurred these costs directly. It therefore had to account for UK VAT under the reverse charge, which it could not recover as it had formed a VAT group with the colleges whose activity was exempt. For sound commercial reasons, Kaplan then established a company in Hong Kong (KPS HK) which consolidated the recruitment costs before apportioning them between the colleges. The CJEU has ruled that this did not convert the recruitment costs into an exempt supply under the cost-sharing exemption (CSE). KPS HK was providing its services to the UK VAT group, one of whose members (KIC UK itself) was not a member of the cost-sharing group as it did not provide exempt education. If the CSE applied to charges from KPS HK to the UK VAT group (meaning that no reverse charge arose) then there was a risk that KIC UK would benefit from the exemption. This risk could not be tolerated, and therefore the CSE could not apply to any of KPS HK’s charges. (Contact: Laurie Pay).

VAT recovery on supplies of financial and insurance services to the EU

Earlier this month, the Chancellor of the Exchequer confirmed that, with effect from 1 January 2021, businesses will be entitled to recover VAT incurred in relation to specified supplies of financial services and insurance made to counterparties outside the UK (compared to outside the EU at present), a move which is expected to allow UK businesses to recover an additional £800m of input tax each year. This approach was originally set out in the VAT (Input Tax) (Specified Supplies) (EU Exit) (No. 2) Regulations 2019, which is expected to be the mechanism for achieving this objective. We understand that HMRC will be issuing guidance on how the change will apply, which may address how to calculate recovery rates for VAT quarters and partial exemption years which straddle 1 January, and whether taxpayers can re-attribute input tax already incurred to future specified supplies. Any business currently making exempt supplies of financial or insurance services to EU clients should review the potential impact of this change on their partial exemption special methods. (Contact: Daniel Johnson).