24 May 2024
The Prime Minister, Rishi Sunak MP, has announced that the UK General Election will be held on Thursday 4 July 2024. Today is the last sitting day for the current Parliament: Parliament will be prorogued at the close of business today ahead of its formal dissolution on Thursday next week.
MPs will be summoned to meet on 9 July 2024 and the first State Opening and King’s Speech of the new Parliament, in which the elected Government will set out its planned legislative programme for the first parliamentary session, will be held on 17 July 2024.
On 21 May 2024, the Committee stages of Finance (No. 2) Bill 2023-24 (i.e. the ‘Spring Finance Bill’, introduced following March’s Spring Budget) concluded following consideration of the Bill’s clauses by a Public Bill Committee. No amendments were made to the Bill during the Bill’s Committee stages.
Due to the subsequent election announcement, the Government and Opposition agreed to accelerate the remaining stages of the Bill. The Commons Report Stage and Third Reading completed yesterday afternoon, and the House of Lords completed their consideration this morning. The Bill will receive Royal Assent (and thus become Finance (No. 2) Act 2024) later today shortly prior to prorogation.
The final text of the Act will be published here in the coming days. However, as the Bill was not amended during any of its parliamentary stages, the content of the Act will be unchanged from the original version of the Bill introduced in March.
Registration is required for groups within the scope of Pillar Two in the UK within six months of the end of the group’s first accounting period starting on or after 31 December 2023. For example, for in-scope December year-end businesses, registration with HMRC will be required by 30 June 2025.
On 20 May 2024, HMRC published a statutory notice and a supporting guidance page setting out how businesses within the scope of the UK’s Pillar Two top-up taxes (Multinational Top-Up Tax and Domestic Top-Up Tax) can register for these taxes with HMRC. The guidance also sets out the information that will need to be provided to HMRC upon registration.
A number of announcements relating to the UK’s double tax treaties were made in the last week:
HMRC have updated their guidance page Changes and issues affecting the Corporation Tax online service, with details of an issue affecting UK corporation tax returns (CT600s) filed by certain ‘small’ non-UK resident companies. The issue relates to the reintroduction, with effect from 1 April 2023, of the 19% small profits rate and marginal relief. HMRC note that non-resident companies without a UK permanent establishment are not entitled to the small profits rate or marginal relief, but that a small percentage of filings have incorrectly reflected the rate or relief. HMRC’s online service will be updated in April 2025 to prevent this issue. In the meantime, HMRC provide guidance on how to ensure that the correct (25%) main rate of corporation tax is applied to such companies, and state that correction notices will be issued if HMRC identify errors in returns already filed.
To fund the development of a new hotel in Milton Keynes, Hotel La Tour Ltd decided to sell its existing hotel in Birmingham by way of the sale of shares in a subsidiary which owned the hotel. HLT sought to recover the VAT incurred on the marketing and legal costs associated with the sale on the basis that the relevant services were directly and immediately linked to its downstream taxable activities, namely developing and operating the new hotel in Milton Keynes. HMRC denied VAT recovery on the basis that the costs related to the exempt share sale. Both the First-tier Tribunal and Upper Tribunal found in favour of the taxpayer. However, on appeal, the Court of Appeal has unanimously found in favour of HMRC. On revisiting the CJEU’s decision in AB SKF, Lady Justice Whipple held that this judgment preserved the existing rules on direct attribution, but acknowledged that input tax connected with a share sale may have a direct and immediate link either with the share sale or with the taxpayer’s business as a whole, that being a matter for the domestic court to determine. Distinguishing Frank A Smart (which related to a non-business activity), and rejecting the contentions that it was necessary to look at the purpose of the share sale (i.e. fundraising) and that the existence of a VAT group meant that HLT was not engaged in an economic activity, HMRC’s appeal was allowed. The VAT on the costs were used in, were cost components of, and were directly and immediately linked with the share sale which was conducted as part of HLT’s economic activity and exempt for VAT purposes. (Contact: Tim Churchill)
On Wednesday 29 May 2024, there will be an EMEA Dbriefs Legal webcast at 14.00 BST/15.00 CEST titled Pillar Two – A Legal Point Of View and hosted by John Paans. Our panel will be discussing the legal and business transformation implications of the implementation of Pillar Two global minimum tax rules around the world, looking at the issues legal counsels may need to take into consideration and how legal teams can work with their tax departments to support Pillar Two projects.
The next EMEA Dbriefs Tax webcast is on Thursday 30 May 2024 at 10:00 BST/11:00 CEST. 2024 Japan Tax Reform Proposals: Inflation, Investment and Inhibition, hosted by David Bickle, will discuss Japan’s 2024 tax reforms, enacted in March 2024. The reforms will have a significant impact on some Japanese subsidiaries of European multinationals and will also affect European companies supplying goods and services in Japan. A new regime will also apply to those selling through (or operating) an online platform.