Tax Day 23 March 2021
On 23 March 2021, the government published a command paper ‘Tax Policies and Consultations (Spring 2021)’ which set out a number of tax-related announcements, including twelve new consultations, discussion documents and calls for evidence. These all close on dates between 1 June and 13 July and are available here. We have produced an alert and video commentary on the announcements.
Finance Bill progress
The second reading of the Finance (No. 2) Bill is scheduled for Tuesday 13 April. A Committee of the Whole House will consider selected parts of the Bill on 19 and 20 April. The clauses to be considered by the Whole House are set out in a programme motion to be put to the Commons on 13 April. The rest of the Bill will go to a Public Bill Committee for scrutiny; this stage is due to finish by 6 May. The House of Commons Library has produced a briefing on the Bill and its passage through Parliament.
Council of the EU adopts Directive on reporting rules for online platforms (DAC 7)
The Council of the EU has adopted DAC 7, the EU Directive which will introduce a new reporting requirement for digital platforms. From 1 January 2023, the Directive will extend the scope of the existing provisions on exchanges of tax information between EU Member States by requiring digital platforms to collect and report information on income realised by their sellers. The rules will apply in respect of platforms that allow sellers to be connected with customers for the provision of the sale of goods, the rental of immovable property (e.g. accommodation), the provision of personal services and the rental of transport. HM Treasury published a policy paper at the Budget, confirming that there will be a consultation this summer on the introduction in the UK of reporting rules for digital platforms, based on the OECD model rules.
Coronavirus Job Retention Scheme: updated guidance
HMRC have updated their guidance on the Coronavirus Job Retention Scheme (CJRS):
Companies House: automatic filing extensions come to an end
Companies House has confirmed that the automatic extensions granted by the Corporate Insolvency and Governance Act came to an end for filing deadlines that fall after 5 April 2021. The Act granted automatic extensions for filing deadlines for accounts, confirmation statements, event-driven filings and mortgage charges between 27 June 2020 and 5 April 2021 in response to the COVID-19 pandemic. For accounts filing deadlines that fall after 5 April, companies can still apply for a three month extension.
Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension) Regulations
The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2021 come into force on 26 March 2021. They further extend some of the temporary measures introduced by the Corporate Insolvency and Governance Act 2020 in response to the COVID-19 pandemic, including restrictions on the use of statutory demands and winding up petitions and the provisions suspending liability for wrongful trading from 31 March 2021 to 30 June 2021, and the modifications to moratorium provisions from 30 March 2021 to 30 September 2021.
HMRC cryptoassets manual
HMRC have published their new manual on cryptoassets. The manual largely consists of material that has been previously published by HMRC, though the guidance has been expanded in places. In particular, HMRC set out more detail on their view of allowable costs and expenses for capital gains tax (CGT) and state that non-fungible tokens should not be pooled with other assets for CGT purposes. The guidance on the situs (location for tax and legal purposes) of assets for CGT purposes is largely consistent with the previous guidance. As before, HMRC comment that situs for inheritance tax purposes will follow the common law position and do not elaborate further.
Low Pay Commission: consultation; report on new National Living Wage rates
The Low Pay Commission, the independent body which advises the government on the levels of the National Living Wage (NLW) and National Minimum Wage (NMW), is seeking evidence to help shape the recommendations it will make this autumn on the 2022 rates. Responses are invited by 18 June 2021. New rates of the NLW and NMW came into force on 1 April 2021. The NLW now applies to all workers aged 23 and over. The previous age of eligibility was 25. The age of eligibility will come down to 21 by 2024. The Low Pay Commission has published a report on its remit for the year ahead.
Freeports selection decisions
HM Treasury and the Ministry for Housing, Communities and Local Government have published a note on the process and rationale for the selection of the eight successful Freeport locations in England announced at the Budget in March 2021. The eight successful bids were: East Midlands Airport, Felixstowe & Harwich (Freeport East), Humber, Liverpool City Region, Plymouth and South Devon, Solent, Teesside and Thames.
Lapsed share options: permission to appeal to Supreme Court
HMRC have been given permission to appeal to the Supreme Court against the Court of Appeal’s judgment in HMRC v NCL Investments Limited & Another. The issue is the availability of a ‘general principles’ deduction for the accounting cost associated with employee equity awards in cases where a statutory deduction was not available. These deductions were claimed prior to an amendment to Part 12 of CTA 2009 in March 2013, which was introduced to prevent any further deductions being claimed on this basis. The cases involved deductions claimed under five different share plans, as well as the use of an Employee Benefit Trust to grant and settle the awards and recharge agreements for the subsidiaries to pay the IFRS2 cost to the parent. The Court of Appeal, the Upper Tribunal and the First-tier Tribunal all held that the accounting debits arising under IFRS2 were deductible as a trading expense of the employing companies.
Forthcoming Dbriefs webcasts
We have a number of Dbriefs webcasts over the next few weeks covering: UK Tax Monthly Update, SAP S/4HANA®: Trade Compliance Opportunities For Tax, Tax Controversy – Supporting M&A, IP- Tax and Transfer Pricing Strategy Within The Modern World and Tax And The Road To Net Zero.
Senior Accounting Officer: update on penalties
HMRC updated their Senior Accounting Officer (SAO) guidance on 25 March 2021, responding to the decision in Castlelaw. In Castlelaw, an SAO appealed a penalty where they had erroneously omitted a dormant entity from their SAO filings. HMRC’s guidance now confirms that HMRC may exercise discretion in relation to the assessment of penalties in such circumstances. It notes that, in exercising discretion, HMRC will consider the company’s compliance record and HMRC risk assessment.
Sale and leaseback does not trigger VAT self-supply charge: Supreme Court
Balhousie Holdings Ltd had a new care home constructed, and financed its development through a sale and leaseback with a Real Estate Investment Trust. The construction qualified for zero-rating, but in 2019 the Court of Session ruled that Balhousie had disposed of its entire interest in the property through the sale (which immediately preceded the leaseback), and this triggered a self-supply charge that clawed back the zero-rating relief. The Supreme Court has now overturned that decision. The purpose of the self-supply charge was to encourage businesses like Balhousie to commit to building and operating care homes for at least ten years. In the Supreme Court’s judgment, the sale and leaseback occurred simultaneously and were indissolubly bound together, and in that context, there was no point when Balhousie did not have an interest in the property. As Balhousie had not disposed of its entire interest, the self-supply charge did not arise. The majority of the Court found it unnecessary to apply the CJEU’s reasoning in Mydibel, which suggests that sale and leaseback transactions should in some situations be regarded as a means of finance rather than as two separate transactions for VAT purposes.
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