Business Tax Briefing

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


National Insurance Contributions Bill

The Public Bill Committee stage of the National Insurance Contributions Bill took place on Tuesday 22 June 2021. No amendments were made. The debate is here. The Bill will introduce:

  • Zero-rate of secondary Class 1 National Insurance contributions (NICs) for Freeport employees;
  • Zero-rate of secondary Class 1 NICs for armed forces veterans;
  • Exemption for COVID-19 Test and Trace Support Payments for Class 4 and Class 2 NICs, which are paid by the self-employed;
  • Provisions allowing changes to the Disclosure of Tax Avoidance Schemes (DOTAS) regime as it applies to NICs avoidance schemes.

The Bill now moves to its report stage in the Commons. No date has yet been set for the report stage. The Chartered Institute of Taxation (CIOT) has submitted written evidence on the Bill. The CIOT comments, inter alia, that it is problematic that the zero-rate of secondary NICs for Freeport employees applies only to new employees commencing employment from 6 April 2022, when it is expected that UK Freeports will start operating in 2021. The CIOT suggests that Freeport businesses will wish to take on new employees at that point rather than waiting until April 2022 but will have a perverse fiscal incentive not to do so. The CIOT adds that clarification on whether ‘deemed employments’ under the Off-Payroll Working rules are included within the scope of this relief and the veterans’ relief would be welcome. 

Coronavirus Job Retention Scheme: updated guidance

HMRC have updated their guidance on the Coronavirus Job Retention Scheme (CJRS) as follows:

 OECD model digital platform reporting rules:  sale of goods and transportation rental

The OECD has published Model Reporting Rules for Digital Platforms: International Exchange Framework and Optional Module for Sale of Goods. This follows on from the Model Rules, approved by the OECD/G20 Inclusive Framework of BEPS (the Inclusive Framework) in June 2020. The original model rules provide for a new global tax reporting framework, under which digital platforms would be required to collect information on the income realised by sellers offering accommodation, transport, and other personal services through their platforms and report the information to tax authorities. The new document consists of a new module containing amendments to the model rules and interpretive guidance, and a new multilateral agreement to support the international exchange of information collected.  The amendments in the module reflect the interest of a number of countries to permit an extension of the scope to cover income realised by sellers from the sale of goods and from the renting out of vehicles. The multilateral agreement will support the annual automatic exchange of information collected under the rules between the tax authorities. For further details, see the article here

UK/Switzerland competent authority agreement on treaty arbitration

The Swiss Federal Tax Administration has published a document  Mutual agreement on the implementation of paragraph 5 of Article 24 of the Convention between the UK and the Swiss Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income. The document, which was signed on 16 June 2021, establishes the mode of application of the arbitration process provided for in paragraph 5 of Article 24 of the 1977 UK/Switzerland Treaty as amended

Stamp presses decommissioned by HMRC

HMRC have issued a press release confirming that, from 19 July 2021, their Stamp Duty press machines will be retired from service. From mid-July, an electronic process will be adopted for the remaining transactions which still required physical stamps, such as duty paid on shares purchased on a stock transfer form. The introduction of the new process took place during the COVID-19 pandemic as traditional physical stamping could not function under COVID-19 restrictions. 

Business premises renovation allowances:  Upper Tribunal  

The Upper Tribunal has given its decision in London Luton Hotel BPRA Property Fund LLP v HMRC. The issue is how much of the expenditure of £12.5 million (the Development Sum) incurred by London Luton Hotel BPRA Property Fund LLP  (the LLP)  in 2010/11 under a contract in connection with the redevelopment of a property near Luton Airport into a hotel qualified for business premises renovation allowances (BPRA). BPRA were a form of capital allowances introduced in 2007 and withdrawn in 2017. HMRC opened an enquiry into the LLP's tax return, following which they disallowed £5.3 million of the claim. The First-tier Tribunal (FTT) agreed with HMRC that the whole £12.5 million did not automatically qualify but held that much of the expenditure incurred was ‘qualifying expenditure’. The Upper Tribunal found that the FTT’s approach contained errors of law. However, having reformulated the question the FTT had to address, it reached a similar conclusion, namely that it was necessary, in determining to what extent the sum claimed by the LLP qualified for BPRA, to consider each of the specific obligations covered by the development agreement, rather than the Development Sum as a whole.  It went on to apply the ‘qualifying expenditure’ test in section 360B CAA 2001 et seq to each element in turn. 

Contracted out services:  VAT subject to normal assessment procedures: Court of Appeal

NHS Trusts are allowed to reclaim VAT on costs relating to their non-business activities under the contracted out services (COS) scheme. Although this is a purely domestic provision that is not derived from the EU Principal VAT Directive, the UK has chosen to administer it through the normal VAT return process: NHS Trusts have to be VAT-registered to use the scheme, and include COS VAT as input tax in their VAT returns. In Milton Keynes Hospitals NHS Foundation Trust, the Court of Appeal has ruled that HMRC’s powers of assessment also apply to COS VAT. The Trust had reclaimed VAT on IT services under COS, but HMRC considered that the services did not qualify and assessed the Trust. In the court’s judgment, repayments made under the COS scheme did not lose their character as amounts of VAT, and the Trust accounted for COS VAT by reference to ‘prescribed accounting periods’. HMRC were therefore entitled to issue an assessment in the normal way, and the Trust will need to pursue alternative arguments that the assessment was out of time, or that the VAT was correctly claimed, at a substantive Tribunal hearing.  

VAT: insuring taxi cabs is exempt:  First-tier Tribunal 

Various taxi companies submitted claims for overpaid output tax following the Upper Tribunal’s decision in Wheels Private Hire Ltd in 2017, which held that optional insurance provided to self-employed drivers alongside taxi finance and maintenance services should be treated as a separate exempt supply for VAT purposes. In Wheels, some drivers had taken out their own insurance. By contrast, the terms of the block insurance policy arranged by Black Cabs Services Ltd (BCSL) were such that BCSL’s owner could not remember a single instance of a driver getting their own insurance separately. Nevertheless, the First-tier Tribunal has ruled that the average driver would have distinguished the insurance (which was itemised separately on invoices) from other costs, and that the insurance was optional. Applying BGZ Leasing, BCSL’s charges for insurance were separate and exempt from VAT, and its appeal was allowed.