12 April 2024
Tax Administration and Maintenance Day – next week
At Spring Budget 2024, the government announced that it would bring forward a further set of tax announcements at a ‘Tax Administration and Maintenance Day’ (TAMD) on Thursday 18 April 2024. In previous years, the government has described TAMD announcements as outlining actions that “the government is taking to simplify the tax system, tackle the tax gap and modernise the tax system”. These have included new consultations and the government’s responses to earlier closed consultations.
Finance Bill published
The text of Spring Finance Bill 2024 has been published, alongside its Explanatory Notes and a press release from HM Treasury. The Bill’s dedicated pages on Parliament’s website are here. The Bill had its First Reading in the House of Commons on 12 March 2024 following MPs’ approval of the Budget Ways and Means Resolutions. The Bill is due to have its Commons Second Reading on 17 April 2024.
National Insurance Contributions Act – Royal Assent
The National Insurance Contributions (Reduction in Rates) Act 2024 completed its Commons and Lords stages last month and received Royal Assent on 20 March 2024. No amendments were made during the Act’s passage through Parliament. The Act legislates for the Spring Budget’s Class 1 employee NICs and Class 4 self-employed NICs rate cut announcements that took effect from 6 April 2024.
HMRC publish new salary advance and IR35 PAYE regulations and further consultation
Two sets of regulations relating to Pay As Your Earn (PAYE) were laid before the Commons in March and came into force on 6 April 2024:
HMRC also launched a technical consultation on draft PAYE regulations following changes made by Finance Act 2024 regarding data HMRC collects from taxpayers. These regulations would, from April 2025, require employers’ RTI returns to include details of each employee’s working hours within the relevant pay period. The consultation also covers draft income tax regulations that would, from April 2025, require additional information to be included in self-assessment tax returns on dividend income from any ‘close’ companies in which the taxpayer is a director and, for self-employed individuals, the self-employment start and end dates. The consultation is open until 9 May 2024.
Government launches further consultation on UK Carbon Border Adjustment Mechanism
On 21 March 2024, the government opened a new consultation on the design and administration of the future UK carbon border adjustment mechanism (CBAM). This follows on from the government’s announcement of December 2023 that it intends to introduce a UK CBAM, to take effect from 1 January 2027, that would apply a charge on importers based on the emissions embodied in imports of certain carbon-intensive goods in seven sectors: iron and steel; aluminium; cement; ceramics; fertilisers; glass; and hydrogen. The consultation sets out the proposed structure of the UK CBAM and includes questions on determining which goods are in scope, how CBAM liabilities will be calculated, how the applicable CBAM rate for each of the sectors will be determined, and how the rules will be administered. The consultation is open until 13 June 2024. A new Deloitte insights blog explores what the UK’s CBAM could look like, who should be thinking about it, and how it could affect businesses.
Treasury provides update on implementation of OECD guidance on Pillar Two safe harbour
On 14 March 2024, HM Treasury published a brief written statement confirming that the UK will be introducing anti-abuse rules for the Pillar Two transitional country-by-country (CbC) reporting safe harbour, in line with the latest administrative guidance published by the OECD/G20 Inclusive Framework in December 2023. This guidance included measures that cover certain transaction-based potential tax avoidance mechanisms. The government intends to apply these rules from 14 March 2024. The statement confirms that the government will consult on how the rules are implemented and will include the required legislation in a future Finance Bill.
Upper Tribunal dismisses appeal on distributions from overseas company’s share premium
The Upper Tribunal has dismissed the appeal of the taxpayer in Beard v HMRC, concerning the tax treatment of distributions received by a UK-resident individual from a Jersey limited company derived from its share premium account. After examining the relevant Jersey company law, and applying UK tax case law, notably First Nationwide, the Upper Tribunal upheld the conclusions of the First-tier Tribunal that the distributions received were dividends subject to income tax under section 402 Income Tax (Trading and Other Income) Act 2005, rather than capital distributions subject to capital gains tax.
HMRC publish guidance on overseas and contracted-out research and development expenditure
Finance Act 2024 introduced major changes to corporation tax research and development (R&D) reliefs, generally applicable for accounting periods beginning on or after 1 April 2024. These changes include restrictions to the extent to which contractor payments for R&D and payments for externally-provided workers can qualify for relief where R&D activity takes place overseas, and new rules for contracted-out R&D. Further to a consultation on draft guidance in February 2024, on 27 March 2024 HMRC published updated draft guidance on these specific changes. This guidance will be incorporated into HMRC’s Corporate Intangibles Research and Development (CIRD) Manual in due course.
The Prudential Assurance Company: VAT groups and continuous supplies – Court of Appeal
In 2007, Silverfleet Capital Limited completed a management buy-out and left the Prudential VAT group. Since 2002, it had been providing fund management services to one of Prudential’s with‑profits funds, and was entitled to an additional performance-related fee in the event that the fund exceeded certain benchmarks. Those benchmarks were eventually met in 2014 and 2015, triggering performance payments of £9.3 million. Given that Silverfleet carried out its fund management services before it left the VAT group, but received the performance-related payment several years afterwards, should it charge VAT? Silverfleet’s management qualified as a continuous supply of services, and HMRC therefore considered that VAT had to be charged by reference to when the performance fee was invoiced and paid. The Court of Appeal, by a majority, has agreed with HMRC. VAT rules on time of supply may have (based on the Court’s 1996 judgment in BJ Rice) been seen as determining “when, but not whether” VAT was due. However, that approach had been qualified by subsequent judgments (in Thorn, Svenska, and RSA), to the point where BJ Rice should not be treated as binding precedent in Silverfleet’s appeal. The correct approach was to consider whether Silverfleet was still a member of the VAT group when the rules on time of supply treated its services as supplied. By 2014 it was no longer a VAT group member, and must therefore charge VAT. Silverfleet’s appeal was dismissed.
EMEA Dbriefs webcasts
We have a number of Dbriefs webcasts over the next month including: UK Tax Update – April (16 April) and Sustainable And Resilient Supply Chains – How Does Tax Play Its Part? (30 April). For more information, and to view recent webcasts on demand including OECD Pillar One: Amount B Transfer Pricing Baseline Distribution Return (27 March), please visit our EMEA Dbriefs website.