6 June 2025
HM Treasury has published an outcome document titled The Tax Treatment of Carried Interest - Government Response and Policy Update, following its October 2024 call for evidence on potential new qualifying conditions for the revised carried interest tax regime. The main announcements include that the government has decided not to proceed with implementing the following conditions that it had been exploring: (i) a minimum level of team co-investment, and (ii) a minimum holding period for carried interest. In addition, the Income Based Carried Interest (IBCI) rules will be modified to make targeted amendments which are intended to provide more equitable outcomes. Measures will also be introduced which are expected to make the new rules more workable for many short-term visitors to the UK. The government plans to release draft legislation for technical consultation before the Summer Recess in late July, with legislation for the revised regime to be brought forward in the next Finance Bill. Please see our Alert for further details.
The Upper Tribunal (UT) has dismissed the taxpayer’s appeal and HMRC’s cross-appeal in the corporation tax and stamp duty land tax (SDLT) case Nellsar Limited v HMRC. The case centred on the appropriate method for determining the value of goodwill arising from Nellsar’s acquisition of five care homes businesses. In particular, the value of the ‘identifiable assets’ – the freeholds in the care homes – under UK GAAP.
The taxpayer considered that the acquisition of the properties should be accounted for on a 'depreciated replacement cost' basis. However, the UT has upheld the First-tier Tribunal’s (FTT’s) conclusion that GAAP required the acquisition to be accounted for on a market value basis, modified by special assumptions contemplated by RICS guidance. It also upheld the FTT’s conclusion that, where a company prepares accounts which are non-GAAP compliant, the tax treatment should be decided as if GAAP-compliant accounts had been prepared. The UT dismissed HMRC’s cross-appeal on the FTT decision relating to the valuation of the properties.
HMRC has updated its International Manual (INTM333520) to reflect that from 1 July 2025, EU and EEA resident companies will no longer be entitled to ‘repayment interest’ in relation to a repayment of income tax where a company makes a claim for relief under a Double Tax Agreement with the UK. Companies that are within the charge to UK corporation tax in respect of the underlying income will continue to be entitled to receive repayment interest.
The OECD has released three documents in relation to the automatic exchange of information for tax purposes under the Common Reporting Standard (CRS) and the Crypto-Asset Reporting Framework (CARF). The Consolidated text of the Common Reporting Standard (2025) contains an unofficial consolidated text of the CRS, which incorporates amendments adopted by the OECD in 2022. The OECD has also released version 3.0 of the CRS Status Message XML Schema (applicable from 1 January 2027), and the CARF Status Message XML Schema, for use by Competent Authorities to communicate errors in information provided through the XML schemata in a structured manner.
As a reminder, registration with HMRC is required for groups within the scope of Pillar Two in the UK within six months of the end of the group’s first in-scope accounting period – i.e. by 30 June 2025 for December year-end groups. See Tax@Hand for further details. Deloitte’s Global Pillar Two Legislative Tracker can help you to stay informed about local measures implementing Pillar Two. The Tracker provides a high-level summary of Pillar Two proposals and enacted laws by jurisdiction, together with country-by-country comparisons.
Solent Pathway Campus Limited (SPCL), a joint venture partnership between Solent University and QAHE (Solent) Limited, provided education courses. SPCL claimed that its supplies were VAT exempt on the basis that it was providing education as an eligible body (as a college of a UK university) or, alternatively, was making supplies of teaching English as a foreign language (TEFL). HMRC refused SPCL’s claim. The FTT has held that SPCL’s supplies were VAT-exempt education services. In determining whether SPCL was a college of a university, the FTT considered the five factors set out by the Supreme Court in SAE Education Ltd and a number of other factors put forward by SPCL, and concluded that SPCL was a college of the University “due to the evident relationship between the … students and the University and the degree to which the activities of SPCL are recognised by and integrated with the University”. SPCL was therefore an eligible body. The FTT went on to consider SPCL’s alternative argument, and concluded that SPCL was making single composite supplies of TEFL, based on the course content, the characteristics of the students (who come from outside the UK, without English as a first language, and were seeking to progress to degree courses at the University), and the qualifications of the tutors. The FTT allowed SPCL’s appeal against HMRC’s refusal of its claim. (Contact: Laurie Pay)
The next EMEA Dbriefs tax webcast is on Thursday 12 June 2025 at 12.00 BST/13.00 CEST. In Understanding the evolving unallowable purpose landscape and its practical implications for organisations, hosted by Gemma Marshall, we will discuss the UK unallowable purpose legislation (UAP) that can apply to financing costs. We will examine the evolving UAP landscape and its practical implications for businesses, covering the key learnings from recent court judgments and HMRC's updated guidance. We will also provide insights into prevailing HMRC practices.