Business Tax Briefing

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


Finance (No. 2) Bill: progress; reprinted Bill; written evidence

The Public Bill Committee held its third and fourth sittings to consider the Finance (No. 2) Bill on 27 April 2021. The government amendment to Clause 116 and Schedule 28 in relation to VAT late payment interest and repayment interest was passed in the fourth sitting. The debate on the third sitting is here. The debate on the fourth sitting is here. The Committee has  completed its scrutiny of the Bill which will now move on to its Report stage in the House of Commons. No date has yet been set for the Report stage. The Bill, as amended by the Committee of the Whole House and the Public Bill Committee, is available here. Written evidence submitted to the Public Bill Committee has been published.

New Investment Council formed

The Department for International Trade (DIT) has announced the creation of an Investment Council to act as an advisory body to the UK government on foreign investment with the aim of improving and enhancing the UK's business environment for foreign investors. The Council will be led by Minister for Investment Gerry Grimstone and include private sector senior leaders from around the world in a variety of industries. It will provide strategic advice to the DIT and wider government, advising inter alia on policy and regulatory changes that could improve the UK’s attractiveness. 

Public Accounts Committee: report on Environmental Tax Measures

The Public Accounts Committee (PAC) has published a report on Environmental Tax Measures. The PAC observes in its summary that, despite the importance of tax as an instrument for pursuing government’s environmental goals, particularly getting to net zero greenhouse gas emissions by 2050, it is concerned that HM Treasury and HMRC have taken a very limited view of the role of tax so far. It says the departments only recognise four environmental taxes, as these are the only ones with specific environmental objectives, and have limited understanding of the environmental impact of these taxes because their management has focussed on the revenue raised. In the PAC's view, they have not kept track of the impact of other tax measures with environmental objectives, such as tax reliefs to support energy saving and clean technologies, or the impact of tax measures affecting the consumption of fossil fuels. The PAC is encouraged to hear that they have started to assess the impact of fuel duty freezes on the environment but argues that that environmental assessments should be made for all taxes.

IBAs: 'temporarily out of use': Upper Tribunal

The Upper Tribunal has allowed the taxpayer's appeal in Mark Shaw (as nominated member of TAL CPT Land Development Partnership LLP) v HMRC which concerns the meaning of the term ‘temporarily out of use’ in the context of claims for Industrial Building Allowances (IBAs) made by the taxpayer (TAL) (prior to the phasing out of IBAs and eventual repeal in 2011). TAL claimed the IBAs on the basis that, although the buildings concerned were not being used at the time of their acquisition, TAL intended to bring them back into use by finding suitable tenants to occupy them. Accordingly, TAL argued that the statutory provision within s 285 CAA 2001, requiring a building not to be regarded as ceasing to have been used because it falls 'temporarily out of use', applied up until the point that TAL decided to cease its efforts to use the buildings and to sell them. HMRC argued that the buildings were not 'temporarily out of use' within s 285 CAA 2001 at any time during TAL’s period of ownership because a period of actual use is required at both ends of a period of temporary disuse. If, as was the case here, the building never came back into actual use, then HMRC argued that the period during which it was not being used cannot be considered to be 'temporary.' The First-tier Tribunal concluded that the buildings ceased permanently to be used as industrial buildings when they stopped being used by the previous owner. However, the Upper Tribunal held that the correct approach means establishing why the building is empty and what the owner intends to do with it, and that the findings of fact made by the First-tier Tribunal clearly demonstrated that the period of temporary disuse continued up to the point at which TAL decided to cease its marketing efforts in November 2005 in relation to some of the buildings, and in or around October 2006 when it resolved to cease its attempts to use the remaining buildings.

OECD report: Taxing Wages 2021

The OECD has published its report Taxing Wages 2021. This annual publication provides details of taxes paid on wages in OECD countries. It covers personal income taxes and social security contributions paid by employees, social security contributions and payroll taxes paid by employers, and cash benefits received by workers. It illustrates how these taxes and benefits are calculated in each member country and examines how they affect household incomes. The individual summary for the UK is here. Taxing Wages 2021 includes a special feature entitled ‘Impact of COVID-19 on the Tax Wedge in OECD Countries’. It shows that declining household incomes coupled with tax reforms linked to the COVID-19 pandemic are driving widespread declines in effective taxes on wages across the OECD.

Forthcoming Dbriefs webcasts

The next Dbriefs webcast is on Tuesday 11 May 2021, 12.00 BST/13.00 CEST. The title is UK Tax Monthly Update. During this webcast our panel will be providing an update on corporate tax, employment tax, and indirect tax. To register for this webcast, click here. Also coming up on Wednesday 12 May 2021, 12.00 BST/13.00 CEST, is our SAP Tax Service and Indirect Determination webcast. Our panel will discuss how the move to real-time digital reporting is now more important than ever. They will explore how your organisation can achieve fully automated calculation processes using SAP S/4HANA®. To register for the webcast, click here.

Common law claim for historical VAT bad debt relief rejected: High Court

Deficiencies in the VAT bad debt relief (BDR) scheme prevented BT from claiming VAT between 1978 and 1989 under the ‘Old BDR Scheme’. In 2014 the Court of Appeal ruled that BT did not have a legitimate expectation arising from the eventual repeal of the Old BDR Scheme in 1997, and that a claim submitted in 2009 under the scheme was time-barred. The High Court has now ruled that BT was not entitled, as an alternative, to relief for mistake of law either. Unlike claims for overpaid VAT, VATA 1994 does not expressly exclude common law remedies for bad debt relief. However, in the High Court’s judgment, the Old BDR Scheme was intended by Parliament to be an exhaustive and exclusive scheme for VAT relief on bad debts. Otherwise, taxpayers could circumvent the rules made by Parliament relating to the format, the calculation, and the time limits for BDR claims by seeking an equivalent relief at common law. The High Court concluded that Parliament intended the Old BDR Scheme to oust any common law remedy, and dismissed most of BT’s claim (even though it accepted that there was an arguable case about whether HMRC had been unjustly enriched by limitations of the Old BDR Scheme). 

VAT: partnerships in German VAT groups:  CJEU

One of the potential challenges of compulsory VAT grouping, as operated in Germany and recently considered for the UK, is the need to be precise about what must be included in or kept out of a VAT group. Otherwise, it can create the sort of issue considered recently in M-GmbH by the CJEU. M-GmbH controlled the majority of the voting rights in PD & Co KG, a limited partnership. Three of the other limited partners were individuals, and although M-GmbH might control the partnership in practice (most decisions were taken by a majority vote) the other partners could conceivably block its control. The German tax authorities concluded that the involvement of these individuals meant that the partnership could not be included in M-GmbH’s VAT group, and assessed the partnership rather than the VAT group for under-declared VAT. The CJEU has ruled that the limited partnership had close financial, economic and organisational links to M-GmbH notwithstanding the involvement of the other limited partners. The limited partnership should have been treated as part of M-GmbH’s VAT group and should not have been assessed.  

COVID-19: help and information

A reminder that you can access a wide range of information, help and advice on responding to and recovering from COVID-19 here and also at our Deloitte global COVID-19 webpage.