08/12/2023
Finance Bill and National Insurance Contributions (Reduction in Rates) Bill updates
The government has announced that the Finance Bill, published last week to enact several of the Autumn Statement’s tax announcements, is scheduled to have its Second Reading in the House of Commons on Wednesday 13 December 2023.
The National Insurance Contributions (Reduction in Rates) Bill, which will separately enact the Autumn Statement’s key national insurance announcements, completed its House of Commons stages last week and has now had its First Reading in the House of Lords. The Bill’s remaining Lords stages are also scheduled for Tuesday 12 December 2023.
HMRC publish new Guidelines for Compliance with IR35 off-payroll working rules
HMRC have published a new set of guidance pages Help to comply with the reformed off-payroll working rules (IR35) — GfC4. The guidance is the fourth set of guidelines published under HMRC’s new Guidelines for Compliance (GfC) programme which sets out HMRC’s views on a number of complex or widely misunderstood UK tax risks. HMRC state that the GfC4 guidelines, which are broken down into 14 separate parts, are aimed primarily for businesses responsible for operating the off-payroll working rules (IR35) and that engage workers who provide their services through their own intermediaries. They are designed to help such organisations understand what HMRC consider good practice and contain examples of what HMRC considers to be good systems and processes for compliance with the IR35 rules. HMRC stress that the new guidelines should be read alongside existing HMRC off-payroll working guidance and that they are not designed to be used in isolation, or to create an end-to-end process for organisations to comply with the rules.
New UK double tax treaties with Luxembourg and San Marino enter into force
An announcement published in the Official Journal of Luxembourg this morning confirms that the new UK-Luxembourg double taxation treaty and protocol, signed on 7 June 2022, entered into force on 22 November 2023 following ratification by both countries. At the time of writing, an equivalent update has not yet been added to the relevant HMRC guidance page. In accordance with Article 29, the main articles of the treaty and protocol are expected to take effect: from 1 January 2024 for Luxembourg taxes and for UK withholding taxes; from 1 April 2024 for UK corporation tax purposes; and from 6 April 2024 for UK income tax and capital gains tax purposes.
The UK government has confirmed that the UK-San Marino double taxation treaty, signed on 17 May 2023, entered into force on 30 November 2023. This is the first comprehensive double tax treaty between the United Kingdom and San Marino. According to HMRC, the treaty takes effect: from 1 January 2024 for San Marino taxes and for UK withholding taxes; from 1 April 2024 for UK corporation tax purposes; and from 6 April 2024 for UK income tax and capital gains tax purposes.
OECD release tax revenue statistics
The OECD has released the latest in its annual series of statistical reports Revenue Statistics 2023. The report provides internationally comparative data on tax levels and tax structures in OECD member jurisdictions. The provisional tax-to-GDP ratio for the UK increased from 34.4% to 35.3% between 2021 and 2022, while the OECD-average ratio fell slightly from 34.2% to 34.0% over the same period. The OECD notes that this is only the third such annual decline in the average ratio since the financial crisis of 2008-09, which the OECD considers to be largely driven by reductions in excise tax revenues due to responses to the global energy crisis. Overall tax revenues declined as a share of GDP in 21 of the 36 OECD countries surveyed in 2022, increased in 14 countries, and remained at the same level in one.
The OECD highlights that revenues from excise taxes fell as a share of GDP in 2022 in 34 of the 36 countries, and revenues from value-added tax (VAT) also declined as a share of GDP in 19 countries. This was partly offset by increases in revenues from corporate taxes, which rose in more than three-quarters of OECD countries on the back of higher corporate profits, especially in the energy and agricultural sectors.
British Telecommunications plc: historical VAT bad debt relief – Court of Appeal
Deficiencies in the rules for VAT bad debt relief (BDR) prevented BT plc from claiming VAT relief of £65 million between 1978 and 1989 under the BDR scheme in effect at that time (the ‘Old BDR Scheme’). Since 2009, BT has been pursuing a historical BDR claim by two routes, both of which the Court of Appeal has now rejected. In September 2023, the Court of Appeal refused permission for BT to pursue an appeal which had originally been made to the First-tier Tribunal (seeking to justify a claim through section 80 Value Added Tax Act 1994 and a ‘conforming interpretation’ which corrected the Old BDR Scheme). The Court of Appeal has now also struck out BT’s High Court claim for restitution. In the Court of Appeal’s judgment, Parliament must have intended the Old BDR Scheme to exclude common law remedies such as restitution. Otherwise, BT would have been able to avoid detailed regulations about the form and timing of BDR claims by pursuing a High Court claim, rather than applying the Old BDR Scheme. Even if restitution had been available alongside the Old BDR Scheme, the Court of Appeal concluded that HMRC had not been unjustly enriched. The purpose of the law of unjust enrichment is to correct ‘normatively defective’ transfers of value. But BT had always accounted for VAT at the correct time, and was only out of pocket because it had failed to make a BDR claim within the requisite period. On that basis, any unjust enrichment action could not succeed, and the Court of Appeal confirmed the High Court’s decision to strike out BT’s claim. (Contact: Adam Richardson)
EMEA Dbriefs webcasts
The next EMEA Dbriefs Tax webcast is on Tuesday 12 December 2023 at 12.00 GMT/13.00 CET. UK Tax Monthly Update December is from our UK Tax Focus series and will be hosted by Andrew Clarke. During this webcast our panel will discuss the latest UK tax developments, with updates on news in corporate tax, employment taxes, and indirect taxes.
On Wednesday 13 December 2023 at 12.00 GMT/13.00 CET there will be a Dbriefs webcast from our Global Employer Services Seizing the future series. In Digital Transformation, our panel of specialists will discuss how the use of technology is changing how we interact with each other and how we work. Our panel will use real-life case studies to explore emerging digital trends and the effects they are having and will continue to have on Global Mobility and workforce professionals.
And finally, Deloitte’s Alison Lobb and Ralf Heussner recently met with Manuel de los Santos, Head of the Transfer Pricing Unit at the OECD’s Centre for Tax Policy and Administration, to discuss latest and upcoming OECD transfer pricing projects. Topics discussed included: Pillar One Amount A and Amount B rules; transfer pricing aspects of the Pillar Two global minimum tax rules; upcoming projects, including on cross-border remote working, permanent establishments, and intra-group services; and dispute prevention and resolution mechanisms. A recording of the interview is available to watch here.