26/01/2024
Finance Bill update
The government has announced that the remaining Commons stages (Report Stage and Third Reading) of the Finance Bill have been provisionally scheduled for Monday 5 February 2024. Any Report Stage amendments proposed by MPs will be added to the amendment papers published here in due course. As at the time of writing, no amendments in the name of the government have been tabled.
Government publishes further details of building safety levy
The Building Safety Act 2022 included powers for a new levy to be introduced through secondary legislation in order to raise government revenues for meeting building safety expenditure (for example, cladding remediation works). The levy will be payable by property developers and charged on certain new residential developments in England requiring building control approval.
On 23 January 2024, the Department for Levelling Up, Housing & Communities (DLUHC) published its response to the November 2022 consultation on certain implementation and design elements of the levy. Inter alia, the response confirms that the scope of the levy will exclude affordable housing, and other community facilities such as NHS hospitals and other NHS care facilities, armed forces accommodation, criminal justice accommodation, and domestic abuse shelters. DLUHC also intends to exclude developments of fewer than 10 units. Levy amounts will be collected by local authorities in England. DLUHC intends for the levy to be charged on a per square metre basis and levy rates (as yet unspecified) will vary per local authority area to reflect local land values and house prices, with 50% reduced rates for brownfield site developments.
DLUHC has launched a further technical consultation, open until 20 February 2024, asking for views on the methodology for calculating the levy, the collection process, disputes and appeals, and further exclusions. Following analysis and publication of the government’s response to this further consultation, the government will lay the required secondary legislation before parliament.
HMRC publish transfer pricing and diverted profit tax statistics for 2022-23
HMRC have published the latest annual update in their series transfer pricing and diverted profits tax statistics, covering the twelve months to 31 March 2023. The transfer pricing yield – which includes additional tax revenue from transfer pricing enquiries, Advance Pricing Agreements (APAs) and transfer pricing Mutual Agreement Procedure (MAP) cases – was £1.64 billion in 2022-23. 153 transfer pricing enquiry cases, including real-time interventions, were settled in 2022-23 and the average age of a settled enquiry was 38.9 months.
The net amount received in respect of diverted profits tax (DPT) notices was £40 million in 2022-23, with an estimated £253 million of additional tax (primarily corporation tax) arising from transfer pricing-settled investigations into diverted profits. HMRC state that they are currently carrying out around 90 reviews into multinationals in relation to potentially diverted profits, including those who have registered under HMRC’s Profit Diversion Compliance Facility (PDCF), and that, as at the end of March 2023, the total amount of tax under consideration in these cases was £2.6 billion. 24 cases were resolved under the PDCF in 2022-23.
Validity of corporation tax dividend double tax relief claims following FII GLO, Prudential etc.
A number of judgments in recent years, such as the Supreme Court’s judgment in July 2021 in FII Group Litigation, clarified the principles in applying EU law to, and conforming interpretations of, the UK’s double tax relief rules to certain dividends received by UK companies prior to July 2009. In December 2021, the First-tier Tribunal (FTT) gave a decision (the Post Prudential Closure Notice Applications/Appeals group litigation case) dealing, inter alia, with follow-up questions of what procedures must have been followed by affected taxpayers, in particular what constituted a valid claim for relief. A wide range of questions was posed to the FTT, reflecting the variety of circumstances of the test claimants, with the taxpayers winning on most points. Both parties appealed to the Upper Tribunal (UT), and it has now handed down a decision that is largely in favour of HMRC, overturning many of the points the FTT had decided in favour of the taxpayers. The UT, however, has agreed with the FTT in respect of an issue (‘Issue 3’), concerning returns containing claims made by taxpayers for double tax relief for withholding tax only, which HMRC subsequently opened an enquiry into. The UT agreed with the FTT that, in those circumstances, once HMRC’s enquiry into a return is complete, HMRC must also reflect in the closure notices any additional entitlement to double tax relief for underlying tax by way of credit at the ‘foreign nominal rate’ (‘FNR’ – the rate established by the courts for the appropriate level of double tax relief under EU law). The decision will be of particular interest to companies with outstanding claims in connection with the various cases (including FII GLO, CFC/Dividend GLO, BAT or Prudential) and section 79 TIOPA 2010, section 806(2) ICTA 1988, or Paragraph 51 Schedule 18 FA 1998 claims in respect of overseas dividends pre-July 2009. (Contact: Bryan Flint)
Aesthetic-Doctor.com Ltd: VAT and cosmetic surgery treatments – First-tier Tribunal
From when it started trading in 2010, Aesthetic-Doctor.com Ltd (ADCL) never charged VAT to its customers, considering that its treatments were exempt supplies of healthcare. HMRC disagreed, and assessed ADCL for VAT of £1.6 million for the period from 2010 to 2020. The First-tier Tribunal (FTT) has dismissed ADCL’s subsequent appeal. As in other recent cases in the same area, there were arguments about whether only “purely cosmetic” surgery was excluded from exemption, and about how significant a therapeutic purpose had to be for treatments to qualify as healthcare. ADCL’s appeal principally failed, however, because of deficiencies in its documentary evidence, which could not be resolved through witness evidence from ADCL’s director. As the FTT noted, a taxpayer has to keep relevant and appropriate records to claim an exemption from VAT, and this obligation is brought into focus in tribunal, where the burden of proof is on the taxpayer. In this case, ADCL failed to prove the nature and extent of any psychological issues for individual patients, even at a basic level. The FTT concluded that the purpose of the services provided by ADCL was not, in the round, to diagnose, treat or cure health disorders, nor to protect, maintain or restore human health. Consequently, its services did not qualify for exemption and its appeal was dismissed. (Contact: Chris Cherrill)
EMEA Dbriefs webcasts
The next EMEA Dbriefs tax webcast is on Tuesday 30 January 2024 at 14.30 GMT/15.30 CET. In Taking Action On Tax Evasion: Corporate Criminal Offence And Beyond, hosted by Mark Kennedy, our panel of specialists, including external speakers from HMRC, will discuss the corporate criminal offence (CCO) for failing to prevent criminal facilitation of tax evasion. They will run through key aspects of the legislation, factors to consider when undertaking risk assessments, latest trends, and the interaction of the rules with broader anti-economic crime measures such as the Economic Crime and Corporate Transparency Act 2023.