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 | 19/01/2021

Budget date

It has been announced that the Budget will be on 3 March 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. You can also sign up to our Deloitte Tax Atlas COVID-19 Tax and Fiscal Measures microsite, which provides a high-level summary of tax and fiscal coronavirus measures that have been announced by governments.

Coronavirus Job Retention Scheme extended

The Chancellor has announced that the Coronavirus Job Retention Scheme (CJRS) has been extended until the end of April 2021. The government will continue to pay 80% of the salary of employees for hours not worked until the end of April. Employers will only be required to pay wages, NICs and pensions for hours worked and NICs and pensions for hours not worked.

COVID-19: new top up grants for retail, hospitality and leisure businesses

Following the announcement of the third national COVID-19 lockdown in England, and of similar measures in the devolved administrations, the Treasury has announced new grants for retail, hospitality and leisure businesses in England. Any business which is legally required to close, and which cannot operate effectively remotely, is eligible for a one-off grant ranging from £4,000 to £9,000, depending on the rateable value of property. This is in addition to existing support grants and business rates relief. Corresponding amounts have been made available to the devolved administrations to support businesses in Scotland, Wales and Northern Ireland.

OECD guidance: transfer pricing and COVID-19

On 18 December 2020, the OECD published new guidance on the transfer pricing implications of the COVID-19 pandemic. Our client alert on the guidance is here.

Repaying business rates relief: tax deductibility

HM Treasury has published guidance to businesses on how to repay any business rates relief received in 2020-21 if they should wish to make a repayment. Different processes apply for England, Scotland, Wales and Northern Ireland. It is confirmed that the government will legislate so that repayments are deductible for tax purposes. The government also intends to specify the timing of the deduction as being the same period the original payment of business rates would have related to.

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

With only days left before the end of the transition period, 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.

DAC6 changes in the UK

The government has announced changes on the implementation of DAC6 (disclosure of certain cross-border arrangements) in the UK. Under the terms of the EU-UK Trade and Cooperation Agreement, the UK must not reduce the level of protection in its legislation in relation to, inter alia, the exchange of information concerning potential cross-border tax planning arrangements below the level of protection afforded by the OECD’s Mandatory Disclosure Rules (MDR). The government has legislated to restrict reporting only to those arrangements which would be reportable under Hallmark D of DAC6 (undermining or circumventing automatic exchange of financial account information, and using non-transparent legal or beneficial ownership chains). HMRC have confirmed that this change applies to historical arrangements as well as to future arrangements. In the coming year, the UK will consult on and implement the OECD’s MDR as soon as practicable to replace DAC6.

UK direct tax developments

Corporation tax residence: HMRC win in Court of Appeal

The Court of Appeal has decided in favour of HMRC in Development Securities plc and others v HMRC on corporation tax residence, reversing the decision of the Upper Tribunal (UT). The taxpayer companies were incorporated as part of a tax planning scheme intended to further increase an underlying capital loss to reflect indexation. The Jersey-incorporated companies would acquire the capital assets standing at a loss from a UK group company for consideration equal to base cost plus indexation (i.e. more than market value). The companies would then migrate tax residence to the UK, and then crystallise capital losses through commercial sales to third parties. To succeed, the planning required that the Jersey companies were not UK tax resident on the date of acquisition of the assets. The First-tier Tribunal (FTT) held that the only acts of central management and control occurred in the UK (by the UK-resident parent company), and thus the companies were UK resident throughout. The UT held that the FTT’s grounds for concluding that central management and control was exercised in London and not in Jersey were untenable, given the facts the FTT had found, and that its decision was wrong in law. The Court of Appeal has held that the UT had mischaracterised the basis for the FTT’s conclusion. The UT was not justified in setting aside the FTT’s decision for the reasons it gave, and the FTT’s decision was restored.

Preference shares: definition of ‘ordinary share capital’: Upper Tribunal

The Upper Tribunal has dismissed HMRC’s appeal against the decision of the First-tier Tribunal in Stephen Warshaw v HMRC in which the First-tier Tribunal held that the taxpayer, Mr Warshaw, was entitled to entrepreneurs’ relief (since renamed ‘business asset disposal relief’) on a disposal of shares. The issue was whether certain preference shares held by the taxpayer were ‘ordinary share capital’ as defined by ITA 2007 s 989. If so, the company concerned would have been his ‘personal company’, and the taxpayer would be entitled to relief on the disposal of his shares. Preference shares with a right to dividends at a fixed rate are excluded from the statutory definition of ‘ordinary share capital’. However, as the cumulative preference shares held by Mr Warshaw carried a compounding right for unpaid dividends, the Upper Tribunal agreed with the First-tier Tribunal that the rate was not fixed and that the shares therefore counted as ‘ordinary share capital’.

Transfer of Assets Abroad: Upper Tribunal upholds FTT decision

The Upper Tribunal has dismissed HMRC’s appeal in the income tax case Andreas Rialas (AR). The case concerns the application of the ‘transfer of assets abroad’ (TOAA) anti-avoidance legislation to a transaction whereby AR’s business partner sold shares in a UK trading company to AR’s offshore family trust/company structure. HMRC argued that the TOAA provisions applied and that AR should be assessed to income tax on the dividends subsequently paid by the trading company. The Upper Tribunal agreed with the First-tier Tribunal that the conditions of the TOAA rules were not met. In particular; AR did not make the share transfer, nor did he procure it - his business partner was an independent person who could decide if and to whom he wanted to sell his shares. Furthermore, the Tribunal found that the transfer of the shares was not ‘associated’ with AR’s creation of the trust/company structure. The Tribunal suggested that any HMRC appeal in Rialas could be co-ordinated with Fisher’s pending appeal at the Court of Appeal.

Changes to penalties chargeable re Follower Notices: consultation

HMRC are consulting on proposed changes to penalties that may be charged to recipients of Follower Notices as a result of using avoidance schemes. The proposals would:

  • reduce the rate of Follower Notice penalty from 50% to 30% of the tax in dispute;
  • introduce a penalty of 20% for those who the Tribunal decides acted unreasonably by continuing their litigation against HMRC’s decision.

Responses are invited by 27 January 2021.

Loan charge: permission to appeal judicial review dismissed

On 18 December 2020, the Court of Appeal dismissed an adjourned application by Cartref Care Home Ltd for permission to appeal against the High Court's dismissal of its judicial review claim. The judicial review proceedings had been brought to challenge the imposition of a charge to tax in respect of the loan charge, introduced by Finance (No. 2) Act 2017, on human rights grounds.

UK indirect tax developments

VAT value shifting consultation

HMRC have published a new consultation on VAT and value-shifting. The consultation is principally aimed at retailers who provide bundles of supplies to consumers which have different VAT liabilities. HMRC are concerned that the current rules are too vague, that guidance from the courts (e.g. the 2019 M&S Upper Tribunal decision on meal deals comprising zero-rated food and standard-rated wine) tends to be specific to a particular set of facts, and that some businesses artificially shift value to reduce their overall VAT liability. New legislation is proposed which would require the actual market values of bundled items to be used in calculating an apportionment. HMRC note that the broad principles of the new rules are set, but are inviting comments on how they might be enacted, what issues might arise, and whether greater clarity is required in some areas.

Revenue and Customs Brief 1(2021): tampon tax abolished

As set out in Revenue and Customs Brief 1(2021), FA 2016 provided that a new zero rate should apply to women’s sanitary products in place of the 5% reduced rate, from the earliest date that was consistent with the UK’s EU obligations. Article 3 of SI 2020/1642 has now brought this into effect from 1 January 2021. HM Treasury’s press release notes that this only became possible when the end of the Transition Period meant that the UK was no longer bound by the Principal VAT Directive. The government has been ring-fencing VAT on sanitary products for several years and allocating it to the Tampon Tax Fund. The new zero rate, although welcome in its own right, may not lead to widespread acceptance of many of the other requests for new or extended zero rates that have been submitted to the government since the Brexit process began.

International developments

Digital services taxes: deadlines

A number of countries introduced new unilateral digital services taxes (DSTs) during 2020. Each of the DSTs has a different scope but taxes are typically applied to gross revenues arising from a range of digital activities. The first compliance obligations for many of the new DSTs are due in the coming months, including: Italy - payment deadline of 16 February 2021 for 2020 liability and filing deadline of 31 March 2021 for 2020 DST return; Kenya - deadline of 20 February 2021 for payment of January 2021 liability and filing associated return. Further information is available at or please contact Zubin Patel.

Global Forum: Automatic Exchange of Financial Account Information: peer review

The Global Forum on Transparency and Exchange of Information for Tax Purposes (the Global Forum) has published the first peer review report on the Automatic Exchange of Financial Account Information. This shows that 88% of jurisdictions engaged in automatic exchange since 2017-18 (including the UK) were deemed to have satisfactory legal frameworks in place. A second stage of the monitoring process, now underway, will assess the effectiveness of automatic exchange in more than 100 jurisdictions. The Global Forum notes that, in 2019, countries automatically exchanged information on 84 million financial accounts worldwide, covering total assets of USD 10 trillion.

Other developments

Company governance; transparency: consultations

The government has published three consultations on the governance of companies, on which comments are invited by 3 February 2021: Improving the quality and value of financial information on the UK companies register; Powers of the registrar; Implementing the ban on corporate directors. The key proposals are:
Querying power consultation: Companies House would have new powers to query information received, to be exercised on a risk-based approach. The consultation also explores strengthening powers to close various loopholes and remove information from the companies register.
Accounts filing consultation: Views are invited on how companies might in future be able to file accounts once with the government, instead of providing separate filings to Companies House, HMRC and other agencies. It is also proposed to require all companies to file accounts at Companies House in digital format, and to give Companies House more powers to check information in those accounts.
Corporate directors’ consultation: It is proposed that corporate directors will be prohibited unless their own boards comprise all natural persons, and those natural persons have their identities verified.

Welsh draft Budget 2021-22

The Welsh government has published its draft Budget for 2021-22. The major tax announcements are changes to Land Transaction Tax (LTT). With effect from 22 December 2020, the ‘higher residential rates’ i.e. the rates of LTT payable on purchases of additional homes, such as second homes and buy-to-let investments all increased by one percentage point. Also with effect from 22 December 2020, the bands that apply to the non-residential property transactions changed so that the zero rate band increased from £0-£150,000 to £0-£225,000. In line with previous political commitments, income tax rates for Welsh taxpayers will remain aligned with rates in England and Northern Ireland.

Dbriefs webcasts

We have a number of Dbriefs webcasts coming up over the next few weeks including SAP S/4HANA®: Operational Transfer Pricing, Digital Services Tax – UK, Spain, Italy and Africa Latest Developments and UK Tax Monthly Update. For more information and to view past webcasts on demand visit