'L' day: draft legislation and other announcements
Draft clauses for the next Finance Bill were published for technical consultation on Tuesday 20 July 2021 (‘L’ day). These include measures on:
• Tax treatment of asset holding companies in alternative fund structures
• Notification of uncertain tax positions by large businesses
• Income tax basis period reform
• Real Estate Investment Trusts (REITS) amendments
• Changes to the hybrid rules in respect of certain transparent entities
• Capital allowances: amendment to allowance statement requirements for structures and buildings allowance
• Increasing the normal minimum pension age
• Pensions: ‘Scheme Pays’ reporting deadlines
• VAT: powers to tackle electronic sales suppression
• Insurance Premium Tax: location of risk
• Tobacco Duty: sanctions to tackle evasion
• Clamping down on promoters of tax avoidance
• Plastic Packaging Tax: secondary legislation and guidance
The Financial Secretary to the Treasury gave a Written Ministerial Statement on the draft clauses, consultations, consultation responses and other statements issued. There is a summary here. The consultation on the draft clauses will close on 14 September 2021.
The announcement of reforms to income tax basis period rules was unexpected. The proposal would change the rules to a ‘tax year basis’ – requiring affected taxpayers to calculate time-apportioned results for each tax year. The changes would fully come into effect for the 2023/24 tax year, with 2022/23 being a transition year. The Treasury press release refers only to the self-employed and ‘small businesses’, but it seems that partnerships, including LLPs, of all sizes will be affected. A consultation has been launched on implementing the reform of the basis period; this closes on 31 August 2021.
UK consultation: Reporting rules for digital platforms
Following the announcement at Spring Budget 2021, the UK government is consulting on the implementation of the OECD’s Model Reporting Rules for Digital Platforms. From January 2023, at the earliest, these rules will require platforms to report information about the income of sellers providing goods and services to help sellers get their tax right and to enable HMRC to detect and tackle non-compliance.
The consultation seeks views on the UK government’s implementation, including on optional elements of the rules. Comments are invited by 22 October 2021.
Validity of enquiry notice: Supreme Court allows HMRC's appeal
The Supreme Court has allowed HMRC's appeal in Tinkler v HMRC which concerns an appeal against a closure notice. The issue is whether HMRC had ever validly opened an enquiry into the taxpayer's tax return for 2003-04 because, the taxpayer maintained, HMRC had failed to give notice of their intention to enquire into the return to the taxpayer within the time allowed. The Court of Appeal held inter alia that the taxpayer was not precluded under 'estoppel by convention' from denying that the enquiry had been properly opened, as neither the agent nor the taxpayer ever assumed the requisite 'element of responsibility for the assumption made'. HMRC appealed to the Supreme Court on the 'estoppel by convention' point. The Supreme Court held that the taxpayer was estopped from denying that a valid enquiry had been opened into his return. It went on to say that an estoppel by convention will arise when the parties have acted upon a common assumption that a given state of facts or law is true. Each will then be estopped against the other from denying the truth of their common assumption. The Court also set out and explained the five principles governing estoppel by convention. Applying them to the facts of this case, it concluded that HMRC satisfied all the requirements for establishing an estoppel by convention.
COVID-19: updated Companies House guidance
Companies House have updated their guidance which makes clear inter alia that any automatic accounts filing extensions granted by the Corporate Insolvency and Governance Act have come to an end. Companies can apply for a three month filing extension, if something has happened that is outside their control as a result of which they cannot file their company accounts on time. Companies that are eligible and cite issues around COVID-19 in their application will be granted an extension. Any such application must be sent before the normal accounts filing deadline and include a full explanation of why the extension is needed. If there is no application for an extension and the accounts are filed late, an automatic penalty will be imposed.
Coronavirus Job Retention Scheme: HMRC guidance update
HMRC have updated their guidance on the Coronavirus Job Retention Scheme (CJRS) with the CJRS end date and information on when claims for September must be submitted:
Self-Employment Income Support Scheme: Commons research briefing updated
The House of Commons Library has updated its research briefing on the Self-Employment Income Support Scheme (SEISS). The update takes account of the Treasury Direction published on 6 July 2021 for the fifth SEISS grant, applications for which opened on 29 July 2021 and close on 30 September 2021, and of the revised HMRC guidance for the SEISS.
Our programme of Dbriefs webcasts is taking a break over the summer. The programme will recommence in September. You can catch up on any titles you may have missed, including: Demystifying The New UK Patent Box Regime; G20/OECD The Digitalised Economy - Political Agreement On Taxation Of Digital Economy (Pillar One) And Global Minimum Rate (Pillar Two); Taking Action On Tax Evasion: Corporate Criminal Offence And Beyond; HMRC Review Of Transfer Pricing Documentation and many more. For further details of our webcasts available to view on demand see here.
Legitimate expectation arguments in the First-tier Tribunal
If a taxpayer legitimately expects that HMRC should act in a particular way, and they do not, then can the First-tier Tribunal (FTT) adjudicate? The FTT is a creature of statute – it has the power to rule on matters listed in s.83(1) VATA 1994, but it does not have any general supervisory jurisdiction over HMRC. However, appeals against VAT assessments stem from s.73 VATA, under which HMRC may (but do not have to) assess a taxpayer. In KSM Henryk Zeman, the Upper Tribunal (UT) therefore concluded that any appeal against a VAT assessment involved consideration of HMRC’s discretion. In such cases, VATA does not exclude public law defences like legitimate expectation – indeed, the UT thought that such defences fell squarely within the subject matter which the FTT should consider. In the circumstances of this case (which related to a VAT assessment on a Polish company that installed a boiler in the UK for another Polish company) no legitimate expectation arose. However, in some other cases, the UT’s conclusion could allow public law defences such as legitimate expectation to be considered by the FTT, rather than having to be dealt with exclusively by separate judicial review proceedings.