Business Tax Briefing

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

27/11/2020

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Spending Review 2020

The Chancellor delivered his spending review for 2021-22 to Parliament on 25 November 2020. There were no significant tax policy announcements. The main documents published were Spending Review 2020; Funding the Scottish Government, Welsh Government and Northern Ireland Executive; Policy decisions since Budget 2020 and Policy costings: November 2020.  The Office for Budget Responsibility published its Economic and fiscal outlook – November 2020 together with an Overview and Executive Summary.

National Living Wage (NLW) and National Minimum Wage (NMW) rates from April 2021 were confirmed. The NLW will increase by 2.2% to £8.91, and will be extended in scope to apply to 23- and 24-year-olds for the first time.

The Secretary of State for Work and Pensions announced the outcome of her statutory annual review of benefit and state pension rates. The new rates will apply in the tax year 2021/22, and come into effect on 12 April 2021. State pensions will be increased by 2.5%, in line with the government’s manifesto commitment. All other benefits will be increased in line with CPI.

Supreme Court gives judgment on limitation issues in FII GLO

The Supreme Court has given judgment in Test Claimants in the Franked Investment Income Group Litigation v HMRC (1) and (2). This is the latest judgment in the Franked Investment Income Group Litigation Order (FII GLO), which concerns long-running litigation on claims brought by UK multinational companies who argued that the (now repealed) advance corporation tax and FII rules imposed higher tax burdens on UK groups with foreign subsidiaries compared to UK groups without foreign subsidiaries, and hence infringed EU law. This particular judgment  concerns limitation issues, namely whether Section 32(1)(c) of the Limitation Act 1980, which enables claims to be brought outside the normal six year limitation period, applies to a mistake of law, as well as to a mistake of fact, and when the time limit starts to run. The Court of Appeal had agreed with the claimants that in their case the limitation period started to run in 2006, when the CJEU gave its judgment in Hoechst. The Supreme Court allowed HMRC’s appeal, though for differing reasons. Four of the seven Justices who heard the appeal held that Section 32(1)(c) applies to mistakes of law, as well as to mistakes of fact, but that the time limit could run from an earlier stage, ie from when the claimants knew, or by undertaking reasonable diligence could have known, that they had a valid claim, rather than from the date of the Hoechst decision. In so doing so, they held that the House of Lords erred in its 2006 judgment in Deutsche Morgan Grenfell. Three of the Justices would have held that Section 32(1)(c) could not apply to mistakes of law. The judgment could affect both existing and historic remedies sought in relation to a mistake of law. The case will now be remitted to the High Court to determine the ‘reasonable belief’ date on the facts of the case.

Self-Employment Income Support Scheme: Treasury Direction; guidance

The Treasury has made a Direction in relation to the extension of the Self-Employment Income Support Scheme (SEISS) for the three months to the end of January. The main difference from the first two grants is that there is a narrower rule for determining eligibility.  For the first two grants, it was sufficient to show that the business had been ‘adversely affected’ by COVID-19. The third grant is only available if the business has suffered ‘reduced activity, capacity or demand from that which could reasonably have been expected but for the adverse effect on the business of coronavirus’. The following guidance has been updated:

Claim a grant through the SEISS

Check if you can claim a grant through the SEISS 

How your trading conditions affect your eligibility for the SEISS 

How HMRC works out trading profits and non-trading income for the SEISS 

How your circumstances affect eligibility for the SEISS 

New advisory fuel rates from 1 December 2020

HMRC have announced new advisory fuel rates from 1 December 2020. The previous rates from 1 September 2020 can be used for up to one month from the date the new rates apply. Compared to the previous rates, one of the rates has decreased by 1p.

Commons Treasury Committee: tax policy statement 12 November; policy making process

Chair of the Commons Treasury Committee Mel Stride MP has written to Financial Secretary to the Treasury Jesse Norman MP about the tax policy statement made without prior notice on 12 November 2020, which included a new consultation on making tax digital for corporation tax, and other significant announcements. This followed an earlier package of announcements on 21 July, as well as the tax announcements made on 8 July in the Plan For Jobs. Mr Stride has asked the government to confirm it will in future announce tax policy at fiscal events wherever possible, that Parliament will be given prior notice of such announcements, and that there will not be another package of announcements before Budget 2021.

Forthcoming Dbriefs webcasts

The next Dbriefs webcast is on Tuesday 1 December 2020 at 12:00 GMT/13:00 CET. The title is IR35 – The Journey To April 2021, hosted by James Warwick. Our panel of experts will discuss IR35 and the latest market activity and trends, including operating compliant resourcing models post April 2021.

There is another webcast on Wednesday 2 December at 12:00 GMT/13:00 CET: Brexit: Indirect Taxes In The Homestretch, hosted by Gareth Pritchard. The panel will discuss indirect tax considerations as the end of the Brexit transition period approaches, including considerations for the Northern Ireland Protocol.

End of Transition Period: HMRC VAT guidance

HMRC have published various guidance on how VAT should be accounted for at the end of the Transition period. In relation to Northern Ireland, existing guidance on accounting for VAT on goods moving between GB and NI has been updated with new sections on sales between the UK and the EU which move through NI, the retail export scheme, personal exports of vehicles from NI to GB, and fiscal warehousing. New guidance has also been published on imports into NI, trading under the NI protocol, and claiming EU VAT refunds. HMRC have also published research into preparations made by customs intermediaries for the end of the Transition Period. It is estimated that the sector will need to process an additional 90-135 million customs declarations annually, on top of the current annual requirement of 29-39 million. For information about how Deloitte can help, see our Global Trade Bureau. (Contact: Andrew Clarke).

Repaying deferred VAT by instalments in 2021-2

Updated guidance from HMRC provides details about repaying VAT that was deferred between March and June this year. The online opt-in process that will be launched next year will allow businesses to pay the deferred VAT in 2 to 11 equal monthly instalments from April 2021, without incurring interest. Applicants must be up to date with their VAT returns, and able to pay the deferred VAT by direct debit. (Contact: Alistair Lord).

COVID-19: help and information

To help inform our clients and to enable them to understand how businesses can respond, recover and thrive in these times we are running a series of webinars focused on the economy, on particular sectors and on key roles within an organisation. You can register for future webcasts and view archived webcasts here. You can access more information here and also at our Deloitte global COVID-19 webpage. You can also sign up to our Deloitte Tax Atlas COVID-19 Tax and Fiscal Measures microsite, which provides a high-level summary of tax and fiscal coronavirus measures that have been announced by governments, and our COVID-19 Signal Topic email alerts, here.