Business Tax Briefing

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

28/05/2021

Finance Bill: report stage; Lords’ version

The Finance Bill had its report stage and third reading in the Commons on Monday 24 May 2021. All the government amendments and new clauses for the report stage were approved. The debate is here. None of the non-government amendments tabled for report stage were passed.

The Lords' version of the Finance Bill incorporating the changes is now available. This is effectively the text of the Act, as the Lords cannot change it. The Lords are due to consider the Bill on 8 June.

New advisory fuel rates from 1 June 2021

HMRC have announced new advisory fuel rates from 1 June 2021. The previous rates from 1 March 2021 can be used for up to one month from the date the new rates apply. Compared to the previous rates, some of the rates have increased by 1 or 2 pence.

Coronavirus Job Retention Scheme: updated HMRC guidance

HMRC have updated their guidance on the Coronavirus Job Retention Scheme (CJRS): Claim for wages through the CJRS. A section has been added 'If you're putting lots of employees on furlough'. There is a new link to download a template for claiming for 16 to 99 employees.

HMRC: tax relief for employees working from home

HMRC have reminded taxpayers that, where employed workers were told to work at home by their employer because of COVID-19, and, as a result, their household costs have increased, they are eligible to claim the working from home tax relief. From 6 April 2020, the amount employers have been able to pay tax-free without employees having to provide evidence of an increased bill is up to £6 a week. Employees who have not received such payments from their employer can apply to receive tax relief from HMRC. Claims can be made via HMRC’s online portal. Employed workers who complete a tax return should apply for the tax relief via their self-assessment return.

BEPS Action 14: dispute resolution: Stage 2 peer reviews

Under BEPS Action 14, jurisdictions have committed to implement a minimum standard to improve the resolution of tax-related disputes between jurisdictions. On 25 May 2021, the OECD published stage 2 peer review monitoring reports for EstoniaGreeceHungaryIcelandRomania, the Slovak RepublicSlovenia and Turkey. The reports evaluate the progress made by these eight jurisdictions in implementing any recommendations resulting from their stage 1 peer review. They take into account developments in the period 1 May 2018 to 31 October 2019. The OECD observes that the results from the peer review and peer monitoring process demonstrate positive changes across all eight jurisdictions, although not all show the same level of progress.

Costa Rica becomes 38th member of the OECD

On 25 May 2021, Costa Rica formally became a member of the OECD. OECD member countries invited Costa Rica to join in May 2020, following a five-year accession process during which it underwent in-depth technical reviews by 22 OECD Committees and introduced major reforms to align its legislation, policies and practices with OECD standards.

European Commission’s Annual Report on Taxation

The European Commission’s Annual Report on Taxation 2021 was published on 18 May 2021. The conclusions are that Member States have made progress in bringing their tax policies in line with EU priorities, but that there are still areas for improvement. The report finds that research and development (R&D) investment in the EU is on average lower than in large OECD countries, and suggests ways in which R&D tax incentives could be made more effective. The report notes that most Member States have introduced measures to tackle aggressive tax planning, but considers that much remains to be done and that the severe strain on public finances caused by COVID-19 has made the fight against tax abuse even more urgent.

Forthcoming Dbriefs

The next Dbriefs webcast is on Tuesday 8 June 2021, 12.00 BST/13.00 CEST. The title is UK Tax Monthly Update, hosted by Andrew Clarke, from our UK Tax Focus series. Our panel will provide an update on corporate tax, employment tax, and indirect tax. To register for the webcast, click here.

There will be another Dbriefs webcast on Wednesday 9 June 2021, 12.00 BST/13.00 CEST Operational Transfer Pricing: Implementing Your TP Policies from our Transfer Pricing series, hosted by James Phillips. The panel will discuss the use of robust processes and fit-for-purpose systems to implement transfer pricing policies. . For more information, and to register for the webcast, click here.

Revenue and Customs Brief 7(2021): VAT liability of charging of electric vehicles

In Revenue and Customs Brief 7(2021) HMRC have confirmed that businesses providing facilities for charging electric vehicles (EVs) in public places should normally charge standard-rated VAT. The reduced rate applies to supplies of up to 1,000 kWh per month of electricity at any premises (such supplies are considered de minimis, and deemed to be for domestic use). However, HMRC interpret ‘premises’ as meaning a house or building, and therefore consider that charging points in car parks, petrol stations or on-street parking do not qualify for the reduced rate. The guidance also states that a supply of electricity must be ‘ongoing’ in order to fall within the deemed domestic provisions, apparently precluding the reduced rate from applying to EV charging. This approach has come as a surprise to many providers, who may now need to review the VAT rate applied to supplies in the past and consider possible Climate Change Levy implications. The Brief also states that businesses cannot recover any VAT on electricity used by employees to charge their vehicles at home, as the electricity has been supplied to the individual and not the business. To that extent, EVs will be treated less favourably than petrol or diesel cars, where VAT incurred on fuel purchases can be recovered to some extent. VAT recovery on electricity supplied to a business may be possible if employees recharge their EVs at work, subject to a private use adjustment.

Revenue and Customs Brief 8(2021): public funds received by further education institutions

In Colchester Institute Corporation, the Upper Tribunal held that the provision of fully-funded education by a further education college should be treated as an exempt business activity, rather than a non-business activity. The tribunal dismissed the college’s appeal on other grounds, but its decision on the nature of fully-funded education remains significant. It means that some taxable turnover from commercial activities (e.g. certain restaurants, run with help from students) should have been exempt. On the other hand, it potentially means that new buildings constructed by colleges do not qualify for zero-rating, and fuel and power provided to colleges does not qualify for the reduced rate. In Revenue and Customs Brief 8(2021) HMRC have confirmed that they will continue to allow colleges to treat fully-funded education as a non-business activity, pending further consideration of the nature of such education in another case. Colleges can apply the VAT exemption, but if they do so, any claims for output tax overpaid on commercial activity will need to be balanced against the loss of zero-rating and reduced-rating reliefs – any college must adopt a consistent VAT treatment to the education it provides. Energy providers may therefore wish to check whether certificates provided by colleges to justify the reduced rate on fuel and power remain valid.