Business Tax Briefing

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

04/06/2021

EU reaches political agreement on public country-by-country reporting

Provisional political agreement has been reached between negotiators for the EU Members States and negotiators for the European Parliament on a proposed Directive for public country-by-country reporting in the EU. The provisional text would require multinationals with worldwide revenues of more than €750 million to disclose publicly, on a country-by-country basis, corporate income tax information relating to its operations in each of the 27 member states, as well as information for certain third countries in the EU list of non-cooperative jurisdictions. Both EU-parented groups and non-EU parented groups with EU subsidiaries or branches would have reporting obligations. The reporting would take place within 12 months from the date of the balance sheet of the financial year in question. The draft Directive (which has not yet been published) sets out the conditions under which a company may obtain a deferral of the disclosure of certain elements for a maximum of five years. EU Member States would have eighteen months to transpose the Directive into national law. The agreed text now goes back to the Parliament and Council for the formal approval and adoption of the Directive. This process is expected to be completed after the European Parliament’s summer recess. 

Self-Employment Income Support Scheme: policy paper

HMRC have published a policy paper on the Self-Employment Income Support Scheme (SEISS) fifth grant covering May 2021 to September 2021, which will be open for claims from late July 2021. HMRC have said that more detailed guidance for claiming the grant will be available by the end of June 2021. The fifth grant will work in broadly the same way as the fourth grant, but there is one major difference. Businesses that have experienced a reduction in turnover of 30% or more will receive up to 80% of three months’ worth of average trading profits (capped at £7,500), whereas those with a turnover reduction of less than 30% will receive a grant based on 30% of average profits (capped at £2,850).  When this was announced in the Budget, there was no information about what periods would be used in determining the fall in turnover. The policy paper refers to the reduction for ‘the year April 2020 to April 2021.’ Presumably this will be clarified in the detailed guidance and/or when the appropriate Treasury Direction is published (also likely to be at the end of June). 

Office of Tax Simplification: potential for moving the end of the tax year

The Office of Tax Simplification (OTS) has published a document setting out the scope of a new high-level exploration of the benefits, costs and wider implications of changing the date of the end of the tax year for individuals. The OTS has initiated this work in the context of HMRC’s current call for evidence on reforming the tax administration framework. The review will focus on the implications of moving the tax year end date from 5 April to 31 March. The review will also consider potential alternative approaches to addressing practical issues connected with the UK’s tax year running to 5 April. In addition, the OTS will outline the main additional broader issues, costs and benefits that would need to be considered if the end of the tax year were moved to 31 December. 

Government response to Treasury Committee’s Tax after Coronavirus Report

The Commons Treasury Committee published its report Tax after coronavirus on 1 March 2021.  The report contained a large number of recommendations, including that the government should set out a tax strategy for what it wants to achieve from the tax system. The government has now responded to the Committee. In its response, it said inter alia that It is not always appropriate for the government to pre-announce tax reforms; as a result, the use of roadmaps needs to be judged against wider objectives, risks of unintended market consequences and economic conditions. The Committee has expressed disappointment that some of its recommendations, particularly around strategy, have been dismissed without a full explanation. Treasury Committee chair Mel Stride said: ‘Our inquiry was a thorough look at the tax system and an appraisal of how it could be reformed.... it is disappointing that [the government] has rejected our recommendations to improve the approach to tax strategy, when the evidence was overwhelmingly in favour.’ 

National Insurance Contributions Bill: research briefing

The National Insurance Contributions Bill, which was introduced on 12 May 2021, will have its second reading on 14 June 2021. The Bill will introduce:

  • Zero-rate of secondary Class 1 National Insurance contributions (NICs) for Freeport employees.
  • Zero-rate of secondary Class 1 NICs for armed forces veterans.
  • Exemption for COVID-19 Test and Trace Support Payments for Class 4 and Class 2 NICs, which are paid by the self-employed.
  • Provisions allowing changes to the Disclosure of Tax Avoidance Schemes regime as it applies to NICs avoidance schemes.

The House of Commons Library has published a research briefing on the Bill. 

Forthcoming Dbriefs

A reminder that the next Dbriefs webcast is on Tuesday 8 June 2021, 12.00 BST/13.00 CEST. The title is UK Tax Monthly Update, from our UK Tax Focus series, hosted by Andrew Clarke. 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. 

Landlord not established for VAT by merely owning property: CJEU

Titanium Ltd, based in Jersey, owned two commercial properties in Austria which it leased to Austrian businesses. The lease was subject to VAT (as a land-related supply), but a disagreement arose over whether VAT should be accounted for by Titanium or by the lessees. The reverse charge potentially applies to supplies by non-established businesses, so if Titanium had a fixed establishment in Austria by virtue of owning the property then it should have charged VAT. However, Titanium did not employ any staff in Austria, and engaged a local property management company to deal with day-to-day operations. It retained control over any important decisions (agreeing leases, authorising repairs or improvements, and appointing the management company), but none of these required it to have a presence in Austria. The CJEU has ruled that the property on its own could not be a fixed establishment, as an establishment requires both human and technical resources. The only questions referred to the CJEU related to identifying an establishment, and it did not therefore provide any further guidance on the operation of the reverse charge in this case.  

Car park fines subject to VAT: Advocate General’s Opinion

Apcoa Parking Danmark A/S operated car parks on private land under agreements with site owners. It set the conditions for using the car parks, and imposed a €69 ‘control fee’ if drivers did not comply with them. In the Opinion of Advocate General (AG) Jean Richard de la Tour, such fees were subject to VAT. Case law treating retained deposits as outside the scope of VAT depends on the non-performance of any service, and was not applicable in this case because the drivers who incurred the fines used the car parks. A more appropriate comparison was between car parking fines and charges for the early termination of telecoms contracts, which are subject to VAT. Apcoa argued that the control fee was out of all proportion with the normal charges for parking. However, the AG observed that the drivers had a free choice whether or not to incur the control fees (they could return to their vehicle on time, park in the marked bays, etc.), and it made sense for the fees to be high because of the cost of enforcing them. There was therefore, in his opinion, a direct link between the control fees and the provision of parking. Apcoa’s claim for VAT of €3.37m on the control fees should therefore be rejected.