Monthly Tax Update

 

13/11/2020

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New Finance Bill draft clauses, consultations, policy announcements

The government has published responses to a number of consultations the deadlines for which were extended due to COVID-19, together with draft legislation for the measures concerned. These cover the proposed plastic packaging tax, measures to tackle construction industry scheme abuse, the R&D SME tax credit PAYE cap, the tax implications of the withdrawal of the London Inter-Bank Offered Rate (LIBOR) and the rules on hybrid and other mismatches. The consultation on draft clauses will close on 7 January 2021. It has also published a summary of responses to the call for evidence on the market for tax advice, as well as a consultation on Making Tax Digital for corporation tax. Other announcements have been made including extending the temporary £1 million cap set at Budget 2018 for the Annual Investment Allowance until 1 January 2022, on tobacco and vehicle excise duties, on measures to tackle promoters of tax avoidance, on a technical change to off-payroll legislation, and on delaying other measures and reviews. HMRC’s consultation tracker has been updated following these announcements.

Spending Review will be on 25 November 2020; Scottish Budget 28 January 2021

The Chancellor has announced that he will deliver the 2020 Spending Review on 25 November 2020. This was originally meant to be a comprehensive spending review, setting departmental budgets for the next three financial years, but COVID-19 has caused the government to limit it to 2021-22 only.

Finance Secretary in the Scottish government Kate Forbes MSP has announced that the Scottish government’s Budget will be published on 28 January 2021.

Coronavirus Job Retention Scheme and Self-Employment Income Support Scheme extended

The Chancellor announced on 5 November 2020 that the Coronavirus Job Retention Scheme (CJRS) will remain open until 31 March 2021 (although the funding level will be reviewed in January to consider whether it remains at an appropriate level). Employees will receive 80% of their usual salary for hours not worked, up to £2,500 a month (with any reduction in government funding following the review taking effect from 1 February 2021 at the earliest). This supersedes the Chancellor’s announcement made following the Prime Minister's confirmation of new COVID-19 restrictions in England that the CJRS, which had been due to end at midnight on 31 October, would be extended by one month. It follows that the original purpose of the Job Retention Bonus, i.e. to incentivise employers to keep people in work until the end of January, falls away, so this will not proceed as planned. Instead, the government 'will redeploy a retention incentive at the appropriate time.' 

Guidance has been published for CJRS claims for periods starting on or after 1 November 2020 to 31 January 2021, when there will be a review of the policy. Updated guidance has been published as follows:

Pay CJRS grants back

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

Other types of employees you can claim for 

Steps to take before calculating your claim using the CJRS 

Reporting employees' wages to HMRC when you've claimed through the CJRS 

Calculate how much you can claim using the CJRS 

Find examples to help you calculate your employees' wages

Claim for wages through the CJRS 

Check which employees you can put on furlough to use the CJRS 

Check if your employer can use the CJRS  

The Chancellor also announced changes to the Self-Employment Income Support Scheme (SEISS), to mortgage holidays and to business grants on 5 November. The third SEISS grant covering November to January will now be calculated at 80% of average trading profits, up to a maximum of £7,500 (instead of 55% of profits up to a maximum of £5,160, the figures announced earlier in the week). The government had already announced that there will be a fourth grant covering February 2021 to April 2021. Further details, including the level of the fourth grant, will be set out in due course.

Office of Tax Simplification: capital gains tax review: first report

The Office of Tax Simplification (OTS) has published a new report which highlights ways capital gains tax (CGT) can distort behaviour, and sets out a framework of policy choices about the design of the tax for government. The report was written in response to a request from the Chancellor made in July 2020 as part of the overall review of CGT, and follows an earlier cause for evidence. The suggestions made by the OTS include:

  • If the government considers the priority is to reduce distortions to behaviour, it should consider either more closely aligning CGT rates with income tax rates, or addressing boundary issues as between CGT and income tax.
  • Any reduction to the annual exempt amount should be combined with considering inter alia reforms to the current chattels exemption.
  • The government should consider removing the capital gains uplift on death, and instead providing that the person inheriting the asset is treated as acquiring the assets at the historic base cost of the person who has died.
  • The OTS considers that business asset disposal relief (formerly known as entrepreneurs’ relief) is mistargeted if its objective is to stimulate business investment. It recommends that the government should consider replacing it with a relief more focused on retirement. The OTS also recommends that investors’ relief should be abolished.

A second report will be published by the OTS in early 2021 which will explore technical and administrative issues. This is likely to include matters such as private residence relief.

New HMRC Charter published

HMRC’s new Charter has been published, following a consultation launched in February 2020. The Charter sets out the relationship HMRC wants with taxpayers and what taxpayers can expect from them. HMRC have also published key principles for customers who need extra help with the Charter.

HMRC online portal: tax relief on COVID-19 homeworking expenses

HMRC have launched an online portal to process tax relief on additional expenses for employed workers who have been told to work from home by their employer to help stop the spread of COVID-19. Employees do not need to provide evidence to show their bills have increased unless they are applying for tax relief on costs above the applicable flat rate (£6 per week for 2020-21).

Update on HMRC office closures and regional centres

The Financial Secretary to the Treasury has provided an update on the status of HMRC’s programme of office closures. HMRC offices across the country continue to be closed in line with previous plans, with 13 larger regional centres opening in their place. The latest regional centre to open was Queen Elizabeth House in Edinburgh in September. Regional centres in Leeds, Cardiff and Stratford (London) are due to open in the spring.

Unallowable purpose and transfer pricing: First-Tier Tribunal

The First-Tier Tribunal has published its decision in BlackRock Holdco 5 LLC v HMRC. BlackRock Holdco 5 LLC, a UK tax resident US LLC, entered into loans of US$4 billion with its parent company to fund an acquisition of a US business of a third party seller. The use of a UK borrower in a US chain of businesses was challenged by HMRC under the legislation on loan relationships for unallowable purposes and under transfer pricing legislation. HMRC argued that the effect of both sets of provisions was to reduce the UK finance cost deductions to nil. The Tribunal found in the taxpayer’s favour in respect of both challenges.

Upcoming Dbriefs webcasts

We have four Dbriefs webcasts coming up over the next few weeks covering:  UK Coronavirus Job Retention Scheme Extended, LIBOR Reform: The Clock Is Ticking, Tax Transparency And Sustainability - Achieving Tax Clarity, Offshore Receipts In Respect Of Intangible Property. For more information visit www2.deloitte.com/uk/en/pages/dbriefs-webcasts.

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 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.