27 June 2025
HMRC publish guidance on Cost Contribution Arrangement Advance Pricing Agreements
HMRC have added two new pages to their International Manual (INTM422160 and INTM422170), on Cost Contribution Arrangement (CCA) Advance Pricing Agreements (APAs). As announced in the March 2025 consultation Advance tax certainty for major projects, HMRC is offering clearance on the UK transfer pricing treatment of CCAs via unilateral APAs under existing legislation. The new guidance sets out how HMRC operate the CCA APA programme, and describes the circumstances in which HMRC may enter into such an agreement. It includes a sample draft CCA APA, to help businesses “better understand the typical types of clauses which might be found within APAs and/or which may be suitable for APAs, depending upon individual circumstances.”
Supreme Court dismisses taxpayer appeal on the meaning of “more than incidental”
The Supreme Court has unanimously dismissed the taxpayer’s appeal in the corporation tax case Dolphin Drilling Limited. The judgment concerns the ‘hire cap’ rules within Corporation Tax Act 2010, applicable to contractors in the offshore oil industry. The dispute centred on whether it was “reasonable to suppose” that the use of a leased converted oil rig (the Borgsten) for accommodation purposes was “unlikely to be more than incidental to another use, or other uses” to which the Borgsten was likely to be put. In the context of the provisions, Lord Hodge considered that the words “incidental to another use” should be given their ordinary meaning and that for a use to be “incidental to” another use, it must also arise out of that other use. Applying the test to the facts, the Supreme Court found that, whilst the accommodation use may have been a “secondary” use of the Borgsten, it was a separate, independent service and not “incidental to” its other uses, and thus dismissed the appeal.
Supreme Court refuses permission to appeal – validity of pre-2009 dividend double tax relief claims following FII GLO etc.
A number of judgments in recent years, such as the Supreme Court’s judgment in July 2021 in FII Group Litigation, clarified the principles in applying EU law to, and conforming interpretations of, the UK’s historical corporation tax treatment and the double tax relief rules to certain overseas dividends received by UK companies prior to 1 July 2009. In February, the Court of Appeal handed down a judgment (the Post Prudential Closure Notice Applications/Appeals group litigation case) dealing, inter alia, with follow-up questions of what procedures must have been followed by affected taxpayers, in particular what constituted a valid claim for double tax relief for underlying tax (at the rate established by the courts for the appropriate level of relief under EU law). A wide range of questions was posed, reflecting the variety of circumstances of test claimants. The Court of Appeal agreed with HMRC’s arguments and analysis of the issues. The taxpayers had sought permission to appeal.
The Supreme Court’s website has now been updated to indicate that permission to appeal has been refused. The decision to refuse permission will be of particular interest to companies with outstanding claims in connection with the various cases (including FII GLO, CFC/Dividend GLO, BAT or Prudential) and section 79 TIOPA 2010, section 806(2) ICTA 1988, or Paragraph 51 Schedule 18 FA 1998 claims in respect of historical overseas dividends. (Contact: Bryan Flint)
HMRC publish statistics on illustrative tax changes
On 24 June 2025, HMRC updated their twice-annual statistical publication Direct effects of illustrative tax changes. The publication sets out HMRC’s latest ‘ready reckoner’ numerical estimates, subject to high level modelling and methodological assumptions, of what the effects would be on annual UK exchequer tax receipts of a range of hypothetical changes to a wide variety of UK tax rates and thresholds.
JPMorgan Chase Bank NA: single/ multiple supplies
JPMorgan Chase NA (CBNA) supplied services to JPMorgan Securities plc (SPLC) under an intercompany contract, namely business delivery services (BDS), relating to the trading infrastructure, and support services, such as HR and legal. HMRC considered that the services formed a single taxable supply, whereas CBNA argued that there was a separate supply of support services (taxable) and multiple supplies of BDS to different SPLC business areas (VAT exempt). The First-tier Tribunal (FTT) found that all the elements under the contract formed a single taxable supply, focusing on the fact that they worked together to provide “everything that it (SPLC) needs to enable it to achieve its aim of regulatory compliant trading”. Given that conclusion, it was not necessary for the FTT to consider whether exemption applied to the separate supplies, but it considered the issue briefly, concluding that none of the BDS qualified for exemption.
The Upper Tribunal (UT) has upheld the FTT’s decision, confirming that there was a single taxable supply. The UT supported the FTT’s conclusion that the contracts could be relied upon as providing a complete picture of the economic reality between the parties. The UT also confirmed that the narrow approach to interpreting the scope of exemptions set out by the Supreme Court in Target Group Ltd, concerning the exemption for payment services, also applied to the exemption for securities, meaning the securities exemption should only apply to services that themselves alter the legal and financial relationship between parties to a securities transaction. The UT concluded that this test was not met with respect to CBNA’s services; CBNA merely provided infrastructure and fulfilled administrative functions surrounding transactions in securities. The UT dismissed CBNA’s appeal. (Contact: Nicole Faith)
EMEA Dbriefs webcasts
As a reminder, the next EMEA Dbriefs tax webcast is on Tuesday 1 July 2025 at 12.00 BST/13.00 CEST. In Update on consultations on transfer pricing, permanent establishments and diverted profits tax, hosted by Alison Lobb, we will discuss HMRC’s technical consultation on changes to transfer pricing, permanent establishments, and diverted profits tax rules. We will also discuss the consultation on further potential transfer pricing changes, including the introduction of additional documentation.