Monthly Tax Update

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


Budget will be on 3 March 2021

It has been announced that the Budget will be on 3 March 2021. Guidance has been issued on making representations about the Budget 2021 via HM Treasury’s representations portal. Submissions will be accepted until 14 January 2021.

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.

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.

Digital services taxes: deadlines

A number of countries introduced new unilateral digital services taxes (DSTs) during 2020. As a reminder, 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.

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.

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.

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’.

OECD guidance: transfer pricing 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.

Forthcoming Dbriefs webcasts

We have a number of Dbriefs webcasts coming up over the next few weeks covering COVID-19 And Transfer Pricing – OECD Guidance, SAP Tax Compliance, Key Court Of Justice Of The European Union Decisions Of 2020: Interpreting VAT In Europe, The M&A Market In EMEA And Practical Considerations For Transactions In 2021, SAP S/4HANA®: Operational Transfer Pricing. For more information and to view past webcasts on demand visit

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.