Monthly Tax Update

Private Markets

This monthly briefing note summarises some tax and other news items of interest to UK-focused private companies and their management teams and shareholders.

United Kingdom  | Deloitte Private | 18/02/2021

COVID-19 measures and announcements

COVID-19: help and information

A reminder that we are running a series of webinars chaired by Ian Stewart, our Chief Economist, with contributions from experts across the firm. We will be sharing our insight on the global economic impact of COVID-19, the challenges organisations are facing, how they are responding and recommendations on the actions they can take. You can register for the webinars here. You can access more information here and also at our Deloitte global COVID-19 webpage.  

Coronavirus Job Retention scheme: Treasury Direction; new, updated HMRC guidance

HM Treasury has published a new Treasury Direction under sections 71 and 76 of the Coronavirus Act 2020. This covers the extension of the Coronavirus Job Retention Scheme (CJRS) for the period 1 April 2021 to 30 April 2021. The schedule to the Direction sets out the CJRS as it applies for the period beginning on 1 February 2021 and ending on 30 April 2021.

HMRC have started to publish details of employers who have made claims under the CJRS since 1 December 2020. New HMRC guidance has also been published which tells employers what to do if publishing their CJRS claim details could leave individuals at risk of violence or intimidation, and which adds information that there is no right of appeal for those ineligible for the CJRS. The following HMRC CJRS guidance has been updated:

Brexit announcements

Brexit: help and information

We have a wealth of information regarding Brexit, including a series of industry insights, guidance on preparing for Brexit, details of forthcoming and recordings of past webcasts and our blog series, all available on our dedicated Brexit website: We also have Brexit Pulse Alerts our series of short, action-orientated alerts which are designed to help you identify clear business actions to be taken with each government update. See

End of the transition period

It has now been seven weeks since the UK and the EU agreed the terms of a future economic partnership in the EU-UK Trade and Cooperation Agreement. The UK passed the Taxation (Post-transition Period) Act 2020, the EU (Future Relationship) Act 2020, and the UK Internal Market Act 2020. Appointed Day Orders brought parts of the Taxation (Cross-border Trade) Act 2018 into effect, as well as a raft of Statutory Instruments. You can read Deloitte’s analysis here. Our comments on the tax-related provisions are here, on the trade in goods here and on social security co-ordination here.

HMRC Employer Bulletin: transition issues

Following the UK’s exit from the EU on 31 December 2020, HMRC have published a transition edition of their Employer Bulletin. It covers:

  • New rules for trading with Europe;
  • New rules for business travellers;
  • Cash declarations; and
  • New rules on social security coordination.

UK direct tax developments

HMRC clearances – salary sacrifice

HMRC has updated its standard guidance on salary sacrifice at EIM42773 to say that they will no longer provide post-implementation clearances on salary sacrifice schemes unless there is "a point of legal uncertainty".

GAAR Panel opinion: artificial repayment of loan to participator

The GAAR Advisory Panel has published an opinion which covers the artificial repayment of a loan or advance to a participator, via a specially created company the value of which depended on the amount to be paid to it by its participator. The Panel’s opinion is that neither entering into the tax arrangements nor carrying out the tax arrangements in question is a reasonable course of action in relation to the relevant tax provisions – “In our view, the taxpayers have devised a contrived way of circumventing the s455 [loan to participator] rules.”

EIS: shares held to carry preferential rights: Upper Tribunal

The Upper Tribunal has dismissed the taxpayer company's appeal against the decision of the First-tier Tribunal (FTT) in Foojit v HMRC. The FTT dismissed the taxpayer's appeal against HMRC’s refusal to issue compliance certificates for the purposes of the enterprise investment scheme (EIS) in respect of shares that the company issued in 2014. The company issued B shares which paid a priority dividend of 44% of distributable profits. The taxpayer argued that the shares met the requirements of ITA 2007 because neither the amount nor the date of the preferential dividend depended to any extent on a decision of the company. The FTT held that the date on which the dividends were payable depended on a decision of the company. In the absence of a prescribed date in the Articles, a declaration or resolution was ultimately required to make the dividends payable.

On appeal, the essence of the company’s argument was that the Articles provided for dividends on the shares to be mandatorily 'payable' without the need for any declaration by directors. The company's Articles set out, among other matters, the terms of A Shares and B Shares to be issued, but also incorporated aspects of the Model Articles set out in the Companies (Model Articles) Regulations 2008. The Upper Tribunal held that, on a correct construction, the company’s Articles provided that all dividends, whether payable on the shares in question, or on any other class of share, can only become 'payable' by following the routes set out in Article 30 of the Model Articles. Those routes unambiguously involve 'decisions' being taken by the company, its shareholders and its directors, so the appeal failed.

Quentin Skinner Settlement: qualifying beneficiary for BADR: Upper Tribunal

The Upper Tribunal has granted HMRC’s appeal against the decision of the FTT in HMRC v The Quentin Skinner 2005 Settlement. This case concerns how long an individual who personally qualifies for entrepreneurs’ relief (now Business Asset Disposal Relief - BADR) needs to have an Interest In Possession (IIP) in settled shares in order for BADR to be available to the trustees on disposal. The Upper Tribunal found that a trust beneficiary required an IIP for a period of at least 1 year ending in the 3 years preceding the disposal by the trustees (2 years under current rules), in addition to meeting the other qualifying conditions. The taxpayer had argued (and the FTT had agreed) that there was no minimum period over which the IIP needed to be in place before the trustees' disposal.

HMRC’s case was based on a technical interpretation of how two provisions in the BADR legislation interact (s169J and s169O). The Upper Tribunal also considered the purpose of the legislation, and considered the drafting of retirement relief, which preceded BADR. 

UK indirect tax developments

VAT on imported goods to private individuals

It has been widely reported in the media that changes to the UK VAT rules from 1 January have resulted in some overseas suppliers suspending sales of goods direct to UK consumers. Suppliers are now required to register for UK VAT if they supply goods directly to UK consumers in consignments worth up to £135. This measure does not directly relate to the end of the Brexit transition period, and similar rules will be introduced by the EU from 1 July 2021. Instead, it forms one of the measures intended to prevent overseas businesses which take orders online from selling goods to UK consumers without charging UK VAT. Until 31 December 2020, EU suppliers selling goods to UK consumers would have had to register for UK VAT once their annual UK turnover reached £70,000 under the distance sales rules, so the change, from an EU supplier perspective, is likely to only impact smaller EU businesses. Further complications can, however, arise in relation to online marketplace sales (which can involve deemed supplies by the marketplace) and when goods are supplied to consumers in Northern Ireland.

Repaying any VAT deferral: guidance updated

HMRC have updated their guidance relating to the COVID-19 VAT deferral. The ability to repay the deferral by instalments is no longer conditional on an ability to pay by direct debit, and the first instalment must be paid when businesses opt in to the new payment scheme (not by 31 March, as before).

Revenue and Customs Brief 12(2020): update on compensation and termination payments

HMRC have updated the webpage which introduced RCB 12(2020) concerning HMRC's new policy on VAT on early termination and compensation payments. It confirms that, following representations by businesses and advisers, the new policy will only have to be applied in the future. A new RCB is to be published as well as revised versions of HMRC's manuals. For the moment, however, RCB 12(2020) and the VATSC manuals remain unchanged.

The Deloitte customs service

Now that the UK has left the European Union, businesses need to make customs declarations when exporting goods to, or importing from, the EU. The UK government estimates an additional 215 million declarations will be required each year, but many businesses, particularly small-to-medium enterprises, are finding it difficult to understand what they need to do, or how to do it – and there is not enough customs intermediary capacity to support them. Deloitte is building a ‘trader-centred’ digital service which allows businesses to complete and submit their own declarations in a simple and straightforward manner, reducing the reliance on third-party brokerage services. Our offering and guidance will help people understand what they need to do, and our trusted experts will be available on the phone to provide additional support and answer questions. We are looking to create an ‘Alpha Community’ of businesses where we can test and improve the first version of this service during February and March. By working with us to provide valuable feedback you will gain early access to this new service, an opportunity to provide input to new features, and a reduced price when we launch the full service. Please register your interest by emailing us at

International developments

OECD updated analysis of tax treaties and the impact of COVID-19

The OECD has published updated guidance on tax treaties and the impact of the COVID-19 pandemic. The guidance considers the interpretation of tax treaty provisions on the creation of permanent establishments, the tax residence of companies and individuals, and the taxation of income from employment. This revisits and updates the guidance issued by the OECD Secretariat on 3 April 2020. Deloitte has produced an alert on the updated guidance.

UK/Germany double tax convention: protocol, declaration

A new protocol to the 2010 UK/ Germany double tax convention was signed in London on 12 January 2021. The protocol will enter into force when both countries have completed their legislative procedures and exchanged diplomatic notes. The protocol will make BEPS-related changes to the 2010 double tax convention, for example by introducing a principal purpose test article and a permanent establishment anti-fragmentation rule. Such changes could have been made via the BEPS multilateral instrument (the BEPS MLI), but Germany and the UK have chosen to make them bilaterally. The protocol does not make any changes to the 2010 convention’s withholding tax rates. However, a joint declaration by Germany and the UK was also signed on 12 January 2021. This records that the German and the UK governments are willing to enter into negotiations for further amendments to the convention by the end of 2021.

Other developments

Scottish Budget

The Scottish Budget was presented on 28 January 2021, including the proposed Scottish income tax bands and rates for 2021/22. There will be no change to Scottish income tax rates, with starter, basic and intermediate bands increasing at the same rate as inflation. Based on the changes as announced, there are modest tax savings for all Scottish taxpayers. However, the overall position depends on any changes to the personal allowance and tax rates and bands made in the UK Budget on 3 March 2021. No changes were announced to Land and Buildings Transaction Tax rates and bands, aside from confirming that the temporary COVID-19-related increase to the nil-rate band ceiling will lapse, as planned, from 1 April 2021. Increases to Scottish Landfill Tax were announced in line with inflation, also with effect from 1 April 2021. Changes were announced to business rates, together with a commitment to extend 100% business rates relief for retail, hospitality and leisure businesses for at least the first three months of 2021/22. The Scottish government is a minority administration, so votes from at least one of the other parties will be needed to pass the proposals.

Office of Tax Simplification: making tax easier via use of third party data: call for evidence

The Office of Tax Simplification (OTS) has published a call for evidence in connection with its review of ways to make tax easier for people through the better use of third party data. This follows publication of the OTS scoping document issued on 17 December 2020. The aim is to reduce the need for taxpayers and agents to submit additional information to HMRC that HMRC either already hold or could verify themselves. For example, instead of individuals having to provide to HMRC details of potentially taxable income and gains on their investments, the review will consider whether these could be uploaded by the taxpayer’s investment or wealth management company and reflected in the online tax account or self-assessment return. Responses are invited by 9 April 2021. The survey can be accessed here.  

Call for input: review of the UK funds regime

HM Treasury have issued a new call for input on a review of the UK funds regime. The call is wide-ranging and encompasses many non-tax areas. Chapter 2 of the Treasury document deals with tax issues, and includes questions inter alia on neutrality via tax exempt funds, on potential REIT reforms, on treaty issues and on limited partnership funds. The deadline for submissions is 20 April 2021. A separate review is being conducted by the Treasury, focussed on the taxation of asset holding companies in the funds industry. The second stage of this review opened in December 2020.

BEIS consultation on subsidy controls

The Department of Business Energy and Industrial Strategy (BEIS) is consulting on its proposed approach for establishing a UK-wide subsidy control regime. This will be the long-term replacement for the EU’s State aid regime. Under the new system, local authorities, public bodies and the devolved administrations in Edinburgh, Cardiff and Belfast will be empowered to design taxpayer subsidies by following a set of UK-wide principles. The accompanying press release states that the new system will ensure the UK honours its international obligations under World Trade Organisation (WTO) rules, the UK-EU Trade and Cooperation Agreement and other free trade agreements. Views are sought on a number of matters, including whether the UK should apply additional principles on subsidy control as well as those set out in the UK-EU Trade and Co-operation Agreement; how to best ensure transparency; the possible roles of the independent body that will oversee the new system and possible exemptions. The consultation closes on 31 March 2021.

Taxing work and investment - IFS report

On 26 January 2021, the Institute for Fiscal Studies (IFS) published a new report Taxing work and investment across legal forms: pathways to well-designed taxes. The report sets out a range of problems with the current system for taxing different legal forms of work and how radical reform could fix most of them. It also suggests smaller reforms that would move the system in the right direction while mitigating the trade-offs inherent in partial reforms. The authors’ findings include:

  • Preferential tax rates for business owner-managers cannot be justified by differences in social security benefits or employment rights and are poorly targeted at incentivising entrepreneurship. The differential tax rates create inefficiency, unfairness, complexity and revenue loss.
  • A ‘big-picture solution’ would involve reforming the tax base to remove distortions to the level, type and financing of investment while aligning overall marginal tax rates across all forms of income.

Dbriefs webcasts

The next Dbriefs webcast is on Wednesday 24 February 2021 at 12:00 GMT/13:00 CET on the topic of The M&A Market in EMEA and Practical Considerations for Transactions in 2021. During the webcast our panel of experts will discuss the M&A market in EMEA, practical considerations for transactions in 2021, and what legal aspects to consider for transactions in 2021. For more information and to view past webcasts on demand visit