3 May 2024
The Finance Bill introduced following March’s Spring Budget – Finance (No. 2) Bill 2023-24 – will begin its House of Commons Committee stages next week. The bill’s clauses on income tax rates, corporation tax rates, and the energy profits levy’s new energy security investment mechanism will be debated in the Commons chamber by MPs in a Committee of the Whole House on 8 May 2024. The remainder of the bill will be considered by a separate public bill committee, with its proceedings due to conclude by 23 May 2024 at the latest.
HM Treasury has made the Special Tax Sites (Applicable Sunset Date) Regulations 2024 (SI 2024/574). Further to announcements made at Autumn Statement 2023 and Spring Budget 2024, these regulations extend the window to claim the tax and NICs reliefs available for operations in special tax sites within Freeports and Investment Zones from 5 years to 10 years. The revised sunset dates are:
On a related topic, on 26 April 2024, the Business and Trade Committee of the House of Commons (Chair: Liam Byrne MP) published a report looking at the performance of Investment Zones and Freeports in England. The Committee recommends improvements in transparency and governance arrangements, including publishing evaluation data on the impacts of zones, and linking accountability to regional leaders, such as Metro Mayors. The Committee also sets out potential further improvements to allow Freeports and Investment Zones to achieve their full potential including: prioritised access to energy; extended planning freedoms; access to enhanced skills; improved Freeport customs arrangements; and connection to wider government economic policies, including possible relocation incentives for smaller firms.
Y KG operated a biogas production facility in Germany, and used the biogas to generate electricity which it sold to the grid. Biogas production generates significant heat, and Y agreed to provide any that it did not use to a neighbouring asparagus farmer. Y evidently saw the excess heat as a simple by-product of its electricity production, as the contract only required the farmer to pay for the heat depending on their own economic situation, and in the event, Y was never paid anything. In a tax audit, the German tax authorities identified the absence of payment, and assessed Y for VAT on a deemed supply of goods because it had given away the heat free of charge. The CJEU has endorsed this approach.
Y had recovered VAT in full on the facility which produced the heat, and was making that heat available free of charge. The only exceptions to the rules on deemed supplies of goods are for samples and small value gifts (and neither applied here). The EU Principal VAT Directive does not extend the exceptions to cases where the recipient is a fully taxable business, and does not take into account the incidental nature of the heat production. Y should have accounted for VAT on a deemed supply. The CJEU provides some further guidance on how to value the heat that Y gave away (observing that a cost-based calculation would need to include financing costs). (Contact: Vito D’Agostino)
The 2024 edition of the Deloitte European VAT Refund Guide is now available. Businesses operating in countries in which they are not VAT-registered can incur significant amounts of VAT on expenses paid in those countries. The VAT Refund Guide covers the rules and procedures on how to claim a VAT refund in 32 European countries.
The next EMEA Dbriefs Tax webcast is on Thursday 9 May 2024 at 12.00 BST/13.00 CEST. Research and Development (R&D) Tax Relief – Update on Tax Controversy, hosted by Tammy Arendse, will discuss HMRC’s increased scrutiny of R&D claims, with approximately 20% of claims currently being enquired into. Our panel will consider the approach taken by HMRC on R&D tax enquiries and the trends facing claimants.