Business Tax Briefing

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


BEIS consultation on subsidy controls

The Department of Business Energy and Industrial Strategy (BEIS) is consulting on its proposed approach for establishing a UK-wide subsidy control regime. This will be the long-term replacement for the EU’s State aid regime. Under the new system, local authorities, public bodies and the devolved administrations in Edinburgh, Cardiff and Belfast will be empowered to design taxpayer subsidies by following a set of UK-wide principles. The accompanying press release states that the new system will ensure the UK honours its international obligations under World Trade Organisation (WTO) rules, the UK-EU Trade and Cooperation Agreement and other free trade agreements. Views are sought on a number of matters, including whether the UK should apply additional principles on subsidy control as well as those set out in the UK-EU Trade and Co-operation Agreement; how to best ensure transparency; the possible roles of the independent body that will oversee the new system and possible exemptions. The consultation closes on 31 March 2021.

HMRC updated guidance on Coronavirus Job Retention Scheme

HMRC have updated their guidance on the Coronavirus Job Retention Scheme (CJRS), including by adding information that there is no right of appeal for those ineligible for the CJRS:

Claim for wages through the CJRS

Check if you can claim for your employees' wages through the CJRS 

Check if your employer can use the CJRS 

Steps to take before calculating your claim using the CJRS

Calculate how much you can claim using the CJRS 

Find examples to help you calculate your employees' wages

Apple State aid case: appeal to CJEU

The European Commission confirmed in September 2020 that it will be appealing to the CJEU against the General Court's judgment of July 2020 in the Apple/Ireland State aid case. The General Court annulled the Commission's decision of August 2016 that Ireland granted illegal State aid to Apple via tax rulings issued by the Irish Revenue on the method to determine chargeable profits in Ireland. The Commission's grounds of appeal were published in the EU’s Official Journal on 1 February 2021.

Report on implementing HMRC powers, obligations and safeguards

HMRC have published a report which evaluates how the powers, obligations and safeguards given by Parliament to enable HMRC to administer the tax system, introduced since 2012, have been implemented. The report is the culmination of work which HMRC undertook with taxpayer representative bodies and follows a commitment made by the Financial Secretary to the Treasury Jesse Norman in a Written Ministerial Statement on 22 July 2019.  HMRC are making a number of commitments as a result of the evaluation. These include improving communications with taxpayers about powers, obligations and compliance enquiries; updating and clarifying guidance on taxpayers’ rights and obligations; increasing awareness of HMRC’s internal decision-making and governance processes; and further improving taxpayers’ experience. 

Capital allowances: hydroelectric scheme: HMRC’s appeal largely dismissed by Court of Appeal

The Court of Appeal has largely dismissed HMRC’s appeal in SSE Generation Limited (SSEG) which concerned the tax treatment of a number of assets constructed by SSEG. The assets concerned were a group of long-life infrastructure assets within a hydroelectric power scheme. SSEG contended that the relevant assets were ‘plant’ and that the relevant expenditure was capital expenditure ‘on the provision of plant’ for the purposes of Part 2 of the Capital Allowances Act 2001. The dispute concerned civil engineering works which enabled water to be taken into and from a dammed area and channelled under high pressure to the turbine to generate electricity and for the used water to be discharged into Loch Ness. The First-tier Tribunal (FTT) decided that in principle the expenditure incurred on a considerable number of the items concerned was allowable. The Upper Tribunal (UT) agreed, and also found that the costs of the construction of the ‘cut and cover’ water conduits, which had been determined to be non-qualifying by the FTT, qualified in full. The Court of Appeal has now upheld the UT’s decision, apart from its decision to allow the expenditure on the ‘cut and cover’ conduits. That part of the UT’s decision was reversed on the basis that SSEG had not sought permission to appeal from the FTT on the point. The Court of Appeal agreed with the UT and the FTT that s22(1)(a) CAA 2001 and s22(1)(b) CAA 2001 are mutually exclusive, and that there is no overlap between the two provisions. The Court also discussed the application of the principle noscitur a sociis, i.e. that the meaning of words used in legislation should be considered in the context of the words around them.

Insurance for North Sea pipeline installation not subject to IPT: First-tier Tribunal

Subsea 7 Group (S7) lays undersea pipelines in the North Sea for oil companies. Laying pipelines up to 50km long at depths of up to 3,000m is a complex and expensive business for which appropriate insurance is required. S7’s client, an oil company, arranged Construction All Risks (CAR) insurance to cover itself and S7 against damage to the pipeline and associated equipment in the course of a project. However, any deductible (i.e. excess) under the CAR policy was S7’s responsibility, which it insured with its captive insurance company, Tartaruga Insurance Ltd. The First-tier Tribunal has now ruled that the risks insured by Tartaruga mainly related to the risk of something going wrong with the pipeline or the ship that was laying it, rather than a purely financial risk of S7 having to pay the deductible. To that extent, the risk related to ‘buildings’ (which include pipelines) and was not subject to insurance premium tax if the project was taking place outside the UK’s 12-mile limit. Some risks did not relate to buildings (e.g. damage to materials while being transported) and were subject to IPT depending on where S7 was established. In those cases, the FTT accepted that S7’s ships were capable of being establishments for materials once they were on board, but not while they were in transit. An apportionment of the premium paid by S7 to Tartaruga will therefore have to be agreed, but HMRC’s argument that the entire premium should be subject to IPT has been rejected.

VAT: medical courses delivered overseas: First-tier Tribunal  

St George’s University (SGU) in Grenada offers a four-year medical degree which it delivers in partnership with universities in 12 different countries, and through a network of affiliated teaching hospitals. For example, the first year of the degree could be studied at the University of Northumbria in Newcastle (UNN), and years three or four could involve clinical training at a UK teaching hospital. Although the student experience might be similar to that of UK students, and although much of the teaching was carried out by staff at UNN or the teaching hospitals, it was clear to the First-tier Tribunal (FTT) from the contracts that it was SGU and not the UK institution that was providing education to the students. This was potentially an issue, as the FTT rejected SGU’s claim that it was (or should be treated as) an eligible body, and it could not therefore exempt its fees from UK VAT. However, the FTT also concluded that SGU delivered its services in Grenada and not in the UK. As in the CJEU judgment in Geelen, SGU’s degree should be seen as a single complex supply, and although elements of it took place in the UK the overall delivery of the course was in Grenada. University courses are subject to VAT where they take place; as this was outside the UK, the fees received by SGU from students were not subject to UK VAT. 

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.