Business Tax Briefing

Finance Bill update

The Finance Bill completed its remaining Commons Stages (Report Stage and Third Reading) on 5 February 2024. The only amendments and new clauses approved by MPs were those in the name of the Chancellor of the Exchequer tabled last week, in relation to the electricity generator levy, research and development reliefs, and creative sector reliefs. A reprinted version of the Bill, reflecting these changes, has been published.

The Bill has now moved to the House of Lords, which does not make changes to Finance Bills. Remaining Lords stages are all scheduled for 21 February 2024, after which the Bill will be sent for Royal Assent.

HMRC update Corporate Criminal Offences statistics

Corporate Criminal Offences (CCO) for the failure to prevent the facilitation of tax evasion were introduced by the Criminal Finances Act 2017. HMRC have updated their statistics on compliance activities in relation to CCO investigations. As at 1 January 2024, HMRC had 11 live CCO investigations, with no charging decisions yet made, and a further 24 identified cases were under review as to whether they should proceed to an investigation. The cases identified span 10 business sectors, including software providers, labour provision and transport. To date, HMRC have reviewed and rejected an additional 94 cases, however HMRC note that some of their previous investigations have led to satisfactory explanations that have caused CCO investigations to be dropped but have instead led to other tax and regulatory offences being pursued.

If you missed it, you can watch a replay of last week’s EMEA Dbriefs webcast Taking Action On Tax Evasion: Corporate Criminal Offence And Beyond in which our panel of specialists, including external speakers from HMRC, discussed key aspects of the CCO legislation, latest trends, and the interaction of the rules with broader anti-economic crime measures such as measures within the Economic Crime and Corporate Transparency Act 2023.

OECD update on monitoring harmful tax practices and no or only nominal tax jurisdictions

On 6 February 2024, the OECD/G20 Inclusive Framework published its latest update in respect of peer reviews of countries’ preferential tax regimes under the BEPS Action 5 minimum standard on harmful tax practices. The Inclusive Framework approved new conclusions of the Forum on Harmful Tax Practices (FHTP) on the status of four regimes: regimes in Hong Kong (Profits tax concessions for family offices) and the United Arab Emirates (Free zones) were found to be not harmful, whilst two regimes in Albania and Armenia have now been abolished. A total of 322 potentially preferential tax regimes have now been reviewed. The FHTP has also completed the third annual monitoring process of ‘no or only nominal tax jurisdictions’ to evaluate whether substantial activities requirements in each country are effective in practice. No issues were identified in respect of Bahrain, Bermuda, British Virgin Islands, Cayman Islands, Guernsey, Isle of Man, Jersey or the United Arab Emirates. Recommendations for substantial improvement were made to Anguilla, and areas for focused monitoring were identified for Anguilla, The Bahamas, Barbados, and Turks and Caicos Islands. The update also notes that the UAE will no longer be considered a no or only nominal tax jurisdiction as a result of its recent introduction of a 9% corporate income tax rate.

DuelFuel Nutrition Limited: VAT treatment of sports nutrition bars – First-tier Tribunal

DuelFuel Nutrition Limited makes twin packs of sports nutrition bars, marketed as a flapjack (to be eaten prior to exercise) and a brownie or cake slice (for recovery following exercise). In a new decision of the First-tier Tribunal (FTT), neither of the products qualified for zero-rating as cakes. For historical reasons, HMRC have always accepted that flapjacks can be treated as cakes in certain circumstances, but this approach does not extend to products such as cereal bars or flapjacks with more than minor additions (which typically includes energy or sports nutrition bars). HMRC therefore ruled that DuelFuel should charge VAT at the standard rate on its products. On appeal, the FTT conducted a multifactorial review of the products’ ingredients, taste and texture, packaging and marketing, and circumstances of consumption, etc. and concluded that they were not cakes, and could not be zero-rated as cakes. The FTT then had to consider whether the products were ‘confectionery’, and concluded that, in the normal sense of the word, they were not. However, it accepted HMRC’s argument that Note 5 (to Group 1, Schedule 8, VATA 1994) deems “sweetened prepared food which is normally eaten with the fingers” to be confectionery so long as it does not produce an absurd result. The FTT rejected DuelFuel’s claim for a more restrictive interpretation, and concluded that the products were confectionery, and therefore subject to VAT at 20%. (Contact: Donna Baker)

EMEA Dbriefs webcasts

You can catch up on demand with any recent EMEA Dbriefs tax webcasts you may have missed, including UK Tax Update – February, ‘Next-Gen’ Digital Invoicing And Reporting In The Modern Tax Environment, Update On Latest OECD Developments – Pillar Two, Accessing Global Talent: The Future Of Global Mobility and Transfer Pricing – Effective Use Of Mutual Agreement Procedures. If you want to be informed about upcoming webcasts, please subscribe to receive our bi-weekly mailing.