Monthly Tax Update

A monthly round-up of corporate, employment and indirect tax issues


 31 January tax return filing deadline: no penalties for returns filed up to 28 February

HMRC have announced that they will not issue late filing penalties for 2019/20 tax returns for ‘self- assessment customers’ filed online by 28 February 2021. The extension relates only to the filing deadline. The 2019/20 enquiry window will also be extended from the first anniversary of the tax return being filed to 30 April 2022 if 2019/20 returns are filed between 1 and 28 February. Any tax payable was still due on 31 January, and interest will be levied on late paid tax. It is clear from HMRC’s initial announcement that this easement would apply to forms SA100 (the tax return for individuals). HMRC have since confirmed their position in relation to penalties and other self-assessment returns to the Chartered Institute of Taxation.

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. It 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, 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. 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.

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. 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.

HMRC updated guidance on Coronavirus Job Retention Scheme

HMRC have updated their guidance on the Coronavirus Job Retention Scheme (CJRS), including by adding information that there is no right of appeal for those ineligible for the CJRS:

Claim for wages through the CJRS

Check if you can claim for your employees' wages through the CJRS

Check if your employer can use the CJRS

Steps to take before calculating your claim using the CJRS

Calculate how much you can claim using the CJRS

Find examples to help you calculate your employees' wages

Jersey: economic substance rules for partnerships from 1 July

The government of Jersey has published a consultation on extending the scope of Jersey’s economic substance regime to apply to partnerships in addition to Jersey tax resident companies. This is necessary in order to fully deliver on commitments made to the EU Code of Conduct Group in 2018. In-scope partnerships are expected to be those that are managed and controlled in Jersey, which could include certain foreign partnerships, and the rules could also apply to Jersey limited liability partnerships (LLCs). Jersey officials are in discussions with the EU Commission on various possible exemptions, e.g. for fund vehicles. Legislation is anticipated by 30 June and the extended scope is likely to take effect from 1 July 2021, with a maximum six-month extension for existing partnerships. The consultation period will run until 1 March 2021. There is an alert with more details here. Guernsey and the Isle of Man have made similar political commitments to the EU, and we understand that Guernsey has announced its intention to legislate for similar rules by 30 June but that consultation is with interested industry groups only.

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. Responses, which can be provided through an online survey, are invited by 9 April 2021.

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.

Apple State aid case: appeal to CJEU

The European Commission confirmed in September 2020 that it will be appealing to the CJEU against the General Court's judgment of July 2020 in the Apple/Ireland State aid case. The General Court annulled the Commission's decision of August 2016 that Ireland granted illegal State aid to Apple via tax rulings issued by the Irish Revenue on the method to determine chargeable profits in Ireland. The Commission's grounds of appeal were published in the EU’s Official Journal on 1 February 2021.

News Corp: online newspapers subject to VAT pre-May 2020: Court of Appeal

In News Corp, the Court of Appeal has ruled that online newspapers, including The Times, despite being a faithful reflection of the zero-rated print edition, were subject to VAT at 20% (until May 2020). The court had to resolve two conflicting principles: on the one hand, zero-rating should not be denied simply because online newspapers did not exist when the rules were written; on the other hand, the zero rate was subject to standstill provisions, and could not be extended under EU law. In the court’s judgment, both principles needed to be taken into account in a single exercise of statutory construction. The language originally used in the zero-rating provisions specifically refers to goods (such as printed music, and covers or cases for printed matter), and later changes assumed that the relief applied only to goods, whereas online newspapers are digital news services. The Upper Tribunal had allowed itself to imagine what Parliament might have done had it contemplated online newspapers when it introduced VAT, and paid insufficient attention to the wording of the provisions and the need to construe VAT reliefs strictly. HMRC’s appeal was allowed.

 Forthcoming Dbriefs webcasts

We have two Dbriefs webcasts coming up over the next few weeks covering SAP S/4HANA®: Tax Data Management And Analytics and The M&A Market In EMEA And Practical Considerations For Transactions In 2021. You can find more information and view past webcasts on demand here.

COVID-19: help and information

To help inform our clients and to enable them to understand how businesses can respond, recover and thrive in these times we are running a series of webinars focused on the economy, on particular sectors and on key roles within an organisation. You can register for future webcasts and view archived webcasts 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, and our COVID-19 Signal Topic email alerts, here.