Business Tax Briefing

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

24/09/2021

Deferral of Making Tax Digital for income tax and of basis period reform 

Financial Secretary to the Treasury Lucy Frazer has given a written Ministerial Statement on the deferral of Making Tax Digital (MTD)  for income tax and of basis period reform. The government will now be introducing MTD for income tax self-assessment (ITSA) a year later than planned, in the tax year beginning in April 2024. General partnerships will not be required to join MTD for ITSA until the tax year beginning in April 2025. The date at which all other types of partnerships will be required to join will be confirmed later. Two statutory instruments on the MTD measures have been laid before parliament, and a Tax Information and Impact Note has been published. HMRC have issued a press release summarising the main MTD changes. It was also announced that the proposed basis period changes which were the subject of recent consultation will not come into effect before April 2024, with a transition year not coming into effect earlier than 2023. The consultation document envisaged changes coming in with effect from April 2023, with a transition year from April 2022.  The government will respond to the consultation in due course. 

Scottish Budget will be on 9 December

Finance Secretary Kate Forbes MSP has announced that the Scottish government will publish its Budget for 2022/23 on Thursday 9 December 2021. The Budget will include proposals for tax rates and bands for 2022-23 for the devolved elements of income tax and Land and Buildings Transaction Tax (LBTT). The Scottish government has recently confirmed commitments for the duration of the current parliament to maintaining the current rates and bands for LBTT, to freezing income tax rates, and to increasing income tax thresholds by no more than inflation. 

Residential Property Developer Tax: draft legislation

In February 2021,  the government announced that it intended to introduce a tax on the residential property development sector from 1 April 2022 to help fund a five-point plan to ‘bring an end’ to the use of unsafe cladding on  residential buildings. The Residential Property Developer Tax (RPDT) will apply to the profits of companies from in-scope activities above an annual group-wide allowance. The government held a consultation seeking views on the policy design of the RPDT between 29 April and 22 July 2021. Draft legislation for the RPDT has now been published, together with an explanatory note. The rate of the tax has not been announced; this will be confirmed at the Budget on 27 October. There are areas of the policy and legislation that have not yet been finalised. In particular, the draft legislation does not cover the treatment of build-to-rent activity or affordable housing. Comments are invited by 15 October. 

Economic Crime (Anti-Money Laundering) Levy: draft legislation

At Budget 2020, the government announced a new levy to raise £100 million per year from the anti-money laundering (AML) regulated sector - the Economic Crime (Anti-Money Laundering) Levy (ECL). This will help to fund reforms outlined in the government’s 2019 Economic Crime Plan. AML-regulated entities with over £10.2 million in UK revenue will be liable to pay the levy, which will first be collected in 2023/24. The levy will be collected by the three public sector AML statutory supervisors: the Financial Conduct Authority, HMRC and the Gambling Commission. The government launched a consultation on the design principles of the levy in July 2020. The resulting government response document is here. The government is now consulting on draft legislation on the ECL ahead of its inclusion in the next Finance Bill.  The consultation will run until 15 October 2021. Responses should be sent to: eclevyconsultation@hmtreasury.gov.uk.  

Underpayments of state pension: NAO report; Public Accounts Committee enquiry

The National Audit Office (NAO) has published a report on underpayments of the state pension. The NAO states that, in early 2020, the number of women contacting the Department for Work & Pensions (DWP) to confirm the accuracy of their state pension increased, following media coverage of women being underpaid by significant amounts. The DWP confirmed that there was a significant issue in August 2020, and now believes it has underpaid an estimated 134,000 pensioners by over £1 billion, or an average of £8,900 each. In January 2021, it started a process to review all cases at risk of being underpaid. The Commons Public Account Committee (PAC) is to conduct an enquiry into underpayments of the state pension. It will question senior officials at the DWP on who has been underpaid the state pension in this instance and why, on what the DWP is doing to put it right and on what lessons it can apply to similar problems it has experienced over many years in connection with other benefits. Evidence on these issues is invited by Monday 25 October 2021. 

Forthcoming Dbriefs webcast

There is a Dbriefs webcast on Thursday 30 September 2021, 12.00 BST/13.00 CEST Update On The Implementation Of Anti-Hybrid Rules In Response To ATAD II, hosted by Kate Ramm. During this webcast our panel will focus on the impact of European anti-hybrid rules, particularly in Germany and Spain, and what the measures could mean for your organisation.  You can register for this webcast here

Protecting VAT claims: a tale of two farmers:  Upper Tribunal

Towards the end of 2012, HMRC wrote to two farmers informing them that their entitlement to use the agricultural flat rate scheme (AFRS) was being revoked for the protection of the revenue. Mr Hewitt accepted HMRC’s decision. Mr Shields did not, and, following a reference to the CJEU, he eventually overturned HMRC’s decision in 2017. Mr Hewitt then sought to resurrect his claim, but the First-tier Tribunal refused to grant him permission to submit an appeal which by then was five years after HMRC’s original decision. The Upper Tribunal has rejected Mr Hewitt’s appeal against that decision. The principle of effectiveness did not require time limits for submitting an appeal to be measured from the date of the CJEU’s judgment in Shields; nor from the date that Mr Hewitt became aware that he had valid grounds for challenging HMRC. Like Mr Shields, Mr Hewitt could have challenged HMRC's decision immediately. He chose not to do so, and as a consequence he had no entitlement to backdate his AFRS registration to 2012. 

VAT: new guidance on the One Stop Shop Union Scheme

HMRC have updated their guidance explaining how to report and pay VAT due on the distance sales of goods from Northern Ireland to consumers in the EU using the One Stop Shop (OSS) Union scheme. The OSS VAT return service will be available from 1 October 2021 through the Government Gateway. HMRC have provided more information about the OSS record-keeping requirements. New guidance on completing and submitting OSS returns explains that businesses will be excluded from the OSS Union scheme if they miss return submission or payment deadlines for 3 consecutive periods, and do not rectify the position within 10 days of a reminder being sent. HMRC have also updated their guidance on the EU e-commerce package. It explains that the UK Import OSS (IOSS) registration portal is not currently available and further guidance will be provided when the system is available. It also explains that the UK is in discussion with the EU Commission about the issue of fiscal representatives in relation to businesses in Great Britain that register for the EU IOSS scheme.