EU Council: non-cooperative jurisdictions list updated
The EU Council has approved the removal of Anguilla, Dominica and Seychelles from the EU list of non-cooperative jurisdictions for tax purposes. Nine jurisdictions remain on the EU list of non-cooperative jurisdictions (Annex I): American Samoa, Fiji, Guam, Palau, Panama, Samoa, Trinidad and Tobago, US Virgin Islands and Vanuatu. Anguilla, Dominica and Seychelles are now included in the state of play document (Annex II), which covers jurisdictions that do not yet comply with all international tax standards but that have committed to implementing tax good governance principles. Costa Rica, Hong Kong, Malaysia, North Macedonia, Qatar and Uruguay have also been added to Annex II, while Australia, Eswatini and Maldives have implemented all the necessary tax reforms and have therefore been removed from it.
Telebetting business moved to Gibraltar: TA s739: HMRC partly win in Court of Appeal
The Court of Appeal, by a majority, has partly allowed HMRC's appeal against the decision of the Upper Tribunal (UT) in favour of the taxpayers in Peter Fisher, Stephen Fisher and Anne Fisher v HMRC. This is a complex case concerning the sale and transfer in March 2000 of a telebetting business by a UK resident company called Stan James (Abingdon) Ltd (SJA) to a Gibraltar company named Stan James Gibraltar Ltd (SJG). Points considered include the application of the income tax anti-avoidance rules on transfer of assets abroad (the TOAA rules) and the relevance and compatibility of the TOAA rules with EU freedom of establishment and free movement of capital rights. The UT found that the TOAA rules were not engaged, since the transfer from SJA to SJG was a transfer made by SJA, and not by the shareholders or directors as quasi-transferors, as was found by the First-tier Tribunal (FTT).
In brief, the Court of Appeal allowed HMRC’s appeal as regards two of the appellants, Stephen and Peter Fisher, concluding that they were quasi-transferors, as the FTT had found. However, it agreed with the UT that the FTT had been mistaken in regarding Anne Fisher as a quasi-transferor to whom the TOAA rules applied. This was in essence because Anne was a director and shareholder but played no active role in the business and entrusted all of her responsibilities to Peter and Stephen. The Court cited the UT's statement that “‘procure’ means “doing something positive to bring something about.’” The Court of Appeal also held that there is no requirement for income tax to be avoided; that the motive defence was not available to Stephen or Peter; that the TOAA rules were not incompatible with EU law in any relevant way (Gibraltar being part of the UK for EU law purposes); that none of the income of SJG which was the subject of the assessments is to be regarded as too remote from the transfer of the business and that the 2005-2006 and 2006-2007 assessments on Stephen were not defective. Philips LJ did not consider Anne, Stephen or Peter to be quasi-transferors and would have dismissed HMRC’s appeal in its entirety.
Political gifts: inheritance tax: taxpayer loses in Court of Appeal
The Court of Appeal has dismissed the appeal of Mr Arron Banks against the Upper Tribunal's decision that nearly £1 million of donations to UKIP made by Mr Banks and companies controlled by him in the run up to the 2015 general election did not pass the statutory tests in the inheritance tax act (IHTA section 24) to be exempt political gifts, as no UKIP MPs were elected in the previous general election. Instead, the gifts gave rise to an immediate 20% tax charge.
Lord Justice Henderson, with whom the other two judges agreed, held that the only relevant respect in which IHTA section 24 discriminated against Mr Banks was on the ground of his status as a donor supporting a party without an MP at Westminster elected at the last general election before the donations were made. He had 'no hesitation in concluding that HMRC [had] discharged the burden of establishing justification in relation to the difference in treatment on the ground of Mr Banks' status as a donor to a political party with no MP elected to Westminster following the 2010 General Election.' Lord Justice Henderson’s judgment contains some interesting commentary on the history of the inheritance tax exemption for political party donations and on how to determine discrimination.
BEPS MLI: Namibia signs; Andorra, Spain ratify
Namibia has signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS MLI), becoming the 96th jurisdiction to do so. Namibia’s provisional list of reservations and notifications is here. There is a complete list of signatories and their positions as at 30 September 2021 here. Spain deposited its instrument of ratification of the BEPS MLI with the OECD on 28 September 2021. Spain’s final list of reservations and notifications is here. Andorra deposited its instrument of ratification with the OECD on 29 September 2021. Andorra’s final list of reservations and notifications is here.
Forthcoming Dbriefs webcasts
The next Dbriefs webcast is on Tuesday 12 October 2021, 12.00 BST/13.00 CEST. The title is UK Tax Monthly Update, hosted by Andrew Clarke. During this webcast, our panel will provide an update on corporate tax, employment tax, and indirect tax. To register for this webcast, click here.
On Wednesday 13 October 2021, 12.00 BST/13.00 CEST, we have a webcast SAP S/4HANA®: Automating Data For Tax Provisioning And Transfer Pricing With Longview Tax, hosted by Thomas Picton-Turbervill. Our panel, with guest speakers from Longview Tax sharing their experiences, will discuss how your organisation can automate tax and transfer pricing data collection in SAP S/4HANA®. To register for this webcast, click here.
VAT: RCB 13(2021): self-supply charge on sale and leasebacks following Balhousie
Businesses which buy certain zero-rated properties such as care homes can face a self-supply charge if they dispose of their entire interest in the property within 10 years. In Balhousie, the Supreme Court ruled that a taxpayer had not disposed of its entire interest when it financed the development of a care home through a sale and leaseback. In RCB 13(2021), HMRC have published their revised policy in light of this judgment. Provided that the property continues to be used for a qualifying purpose, there is no gap between the sale and the leaseback, and the lease runs at least for the remainder of the 10-year period from when the property was purchased, then HMRC will accept that the self-supply charge does not arise. Any business that has accounted for VAT under the self-supply charge as a result of financing a relevant property by way of sale and leaseback should consider whether it can reclaim the VAT.
VAT: output tax adjustment for pharmaceutical rebates: CJEU
Prescription drugs in Hungary are partly paid for by patients, and partly subsidised by the NEAK (the state health insurance body). Pharmaceutical distributors are not allowed to run commercial promotions for their drugs, but can help fund the state subsidy. Boehringer Ingelheim agreed to make payments to the NEAK, in order to guarantee that its products would continue to be subsidised. The CJEU has ruled that it should be allowed to adjust its output tax accordingly. In effect, Boehringer was reimbursing the NEAK part of the consideration it had received from its wholesale customer, and it should not be subject to VAT on a greater amount than it received. Applying the CJEU’s 2017 judgment in Boehringer I, the NEAK should be treated as a final consumer. Therefore, if Boehringer paid amounts to the NEAK then it should be entitled to adjust its output tax regardless of whether the payments were required by statute or agreed under contract. The CJEU recognised that the Hungarian tax authorities might legitimately expect Boehringer to produce invoices to evidence the VAT adjustment (and the NEAK had not issued any) but concluded that Boehringer should be allowed to evidence the payments by other means.