Business Tax Briefing

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

30/10/2020

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Spending Review will be delivered on 25 November 2020

The Chancellor has announced that he will deliver the 2020 Spending Review on 25 November 2020. As previously confirmed, this was originally meant to be a comprehensive spending review, setting departmental budgets for the next three financial years, but COVID-19 has caused the government to limit it to 2021-22 only. The Office for Budget Responsibility has confirmed that it will publish its latest outlook for the economy and public finances in the economic and fiscal outlook alongside the Spending Review.

Supplementary charge: apportionment of profits: taxpayer wins in Court of Appeal

The Court of Appeal has allowed the taxpayer's appeal in Total E&P North Sea UK Limited and Another v HMRC. The case concerns an increase to corporation tax on oil-related activities announced with immediate effect in March 2011, and Finance Act 2011 Part 1 s7(5), which allowed an affected company to elect for a just and reasonable alternative basis of assessment to time apportionment in assessing the amount of tax payable on its ring fence profits for an accounting period straddling the rate change. The Court of Appeal agreed with the First-tier Tribunal that any company which earned profits at a significantly faster rate in the earlier part of the period than the later part, and stood to be materially prejudiced by time apportionment, could avail itself of s7(5). It disagreed with the Upper Tribunal’s view that, for s7(5) to be engaged, profits in the later period had to have arisen from something which was exceptional. Lord Justice Newey said ‘The FTT thought that s7(5) applies to all companies "whose profits are not smoothly spread throughout the year, but whose profits differ greatly from one part of the year to the other, and who could be disadvantaged by … a change of tax rate part way through an accounting period". I agree.’

Senior Accounting Officer: new approach to penalties

Following recent discussions with HMRC on the Senior Accounting Officer (SAO) rules, we understand that, in 2018/19, 152 SAO penalties were raised; this number fell slightly to 148 in 2019/20. Five of the penalties across the two periods related to main duty failures or inaccurate certificates. We also understand that HMRC intend to modify their approach following critical comments on their exercise of discretion in relation to SAO penalties made by the First-tier Tribunal in Castlelaw v Douglas; updated guidance is expected by the end of the year. It is expected that greater emphasis will be placed on the taxpayer’s compliance record and the overall status of the relationship with HMRC. HMRC therefore expect to spend more time focusing on the substance of SAO, including engaging directly with SAOs as part of the Business Risk Review (‘BRR+’) process. HMRC are continuing to accept SAO certificates signed electronically, and to accept unsigned certificates where the certificate is issued from the SAO’s email address. If you would like more information on the SAO regime, please speak to Mark Kennedy, Tim Hayle or your usual Deloitte contact.

Draft non-resident stamp duty land tax regulations: consultation

HMRC have published draft regulations which set out proposed changes to the 2003 stamp duty land tax (SDLT) return regulations for public consultation. The proposed changes reflect the planned introduction of a 2% SDLT surcharge on non-residents purchasing residential property in England and Northern Ireland with effect from 1 April 2021. The consultation closes on 23 November 2020.

COVID-19: HMRC updated guidance on claiming Statutory Sick Pay

HMRC have updated their guidance Check if you can claim back Statutory Sick Pay paid to employees due to coronavirus (COVID-19). The section 'who can use the scheme' has been updated to reflect that employers can ask employees for a ‘shielding note’ or a letter from a doctor or health authority advising them to shield because they are at high risk of severe illness from COVID-19.

HMRC office closures and regional centres: update

Financial Secretary to the Treasury Jesse Norman has released an update on the status of HMRC’s programme of office closures. HMRC offices across the country continue to be closed in line with previous plans, with 13 larger regional centres opening in their place. The latest regional centre to open was Queen Elizabeth House in Edinburgh in September. Regional centres in Leeds, Cardiff and Stratford (London) are due to open in the spring.

Forthcoming Dbriefs webcasts

The next Dbriefs webcast is on Tuesday 3 November 2020, 14.00 GMT/15.00 CET. The title is G20/OECD The Digitalised Economy – Blueprint On A Global Minimum Tax (Pillar Two), hosted by Alison Lobb. Our panel will discuss the Blueprint of proposals from the G20/OECD Inclusive Framework on the ability to tax profits where income is locally subject to low effective tax rates and the potential implications for all businesses. To register for the webcast, click here.

On Wednesday 4 November 2020, 12.00 GMT/13.00 CET there is a webcast EU Mandatory Disclosure Regime (DAC6) – Pre-flight Checks, hosted by Owen Gibbs. The panel will discuss the mandatory disclosure rules under the EU Directive on administrative cooperation (DAC6) rules, and the steps to ensuring compliance. To register, click here.

On Thursday 5 November, 12.00 GMT/13.00 CEST there is a webcast Remote Workers – How Organisations Have Managed Remote Workers And Looking Ahead, hosted by Rumi Das. Our panel will discuss the future of remote working with guest speakers looking at how their organisations have dealt with managing their mobile populations, and including a look at the necessary compliance. To register for the webcast, click here.

COVID-19: Commission adopts tax reliefs for PPE and testing kits

The European Commission has announced that it is extending import VAT and duty relief on imports of PPE until April 2021. The latest extension of this relief is accompanied by more detailed tariff codes and access to customs laboratories to enhance the monitoring and quality controls of imported masks. The extension does not apply to domestic supplies – in the UK. Jesse Norman confirmed in response to a Parliamentary Question on 21 October that the temporary zero rate for PPE would expire on 31 October as scheduled. The Commission has also proposed a new zero rate for the supply of vaccines and testing kits to hospitals and medical practitioners, which would remain in force until the end of the pandemic. (Contact: Alistair Lord).

Guidance on movements of goods between Northern Ireland and Great Britain

HMRC have published guidance on the VAT arrangements for movements of goods between Great Britain (GB) and Northern Ireland (NI) under the Northern Ireland Protocol. Although the guidance does not always align with the Commission’s approach to NI, it provides further detail on some practical considerations. In the main, goods supplied between GB and NI will be chargeable to UK VAT in the normal manner. However, for goods sold between GB and NI that are subject to certain customs regimes or the domestic reverse charge, the customer (rather than the supplier) will account for UK VAT. VAT will be due on movements of own goods from GB to NI, but not from NI to GB. HMRC consider that there will be no requirement for a new VAT registration for sales of goods in NI (albeit the Commission expects NI businesses that trade with the EU to use an ‘XI’ prefixed VAT registration). Intra-EU rules and simplifications (such as triangulation) will not be available for movements of goods involving GB, but will be available for movements of goods involving EU Member States and NI. (Contact: Brian Birt).

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.