Monthly Tax Update

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

08/10/2021

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Deferral of Making Tax Digital for income tax and of basis period reform 

Financial Secretary to the Treasury Lucy Frazer has given a written Ministerial Statement on the deferral of Making Tax Digital (MTD)  for income tax and of basis period reform. The government will now be introducing MTD for income tax self-assessment (ITSA) a year later than planned, in the tax year beginning in April 2024. General partnerships will not be required to join MTD for ITSA until the tax year beginning in April 2025. The date at which all other types of partnerships will be required to join will be confirmed later. Two statutory instruments on the MTD measures have been laid before parliament, and a Tax Information and Impact Note has been published. HMRC have issued a press release summarising the main MTD changes. It was also announced that the basis period changes which were the subject of recent consultation will not come into effect before April 2024, with a transition year not coming into effect earlier than 2023. The consultation document envisaged changes coming in with effect from April 2023, with a transition year from April 2022.  The government will respond to the consultation in due course.

EU Council approves public CbCR directive

Following the political compromise reached in June 2021 between the EU Council and European Parliament, the EU Council has now formally approved the text of a draft public country-by-country reporting (CbCR) directive. The directive would require multinationals with worldwide revenues of more than €750 million to disclose publicly, on a country-by-country basis, corporate income tax information relating to their operations in each of the 27 member states, as well as information for certain third countries on the EU list of non-cooperative jurisdictions. Both EU-parented groups and non-EU parented groups with EU subsidiaries or branches would have to comply with these new reporting obligations. The reporting would take place within 12 months of the date of the balance sheet for the financial year in question. The directive sets out the conditions under which a company may defer the disclosure of certain information for a maximum of five years.

21 member states (representing 94% of the EU population), sufficient for a qualified majority, voted for the measure; Cyprus and Sweden voted against it, while the Czech Republic, Ireland, Luxembourg and Malta abstained. The next step is the formal approval of the provisional agreement by the European Parliament, which is expected to take place in November. The directive will enter into force on the 20th day following its publication in the Official Journal of the European Union. Member states will have 18 months from the entry into force of the directive to transpose it into national law. For further detail see the Deloitte tax@hand article here.

Treasury team changes

There have been a number of changes to the UK Treasury ministerial team. The Chancellor, Rishi Sunak, remains in place. Simon Clarke has replaced Steve Barclay as Chief Secretary to the Treasury. Lucy Frazer has been appointed Financial Secretary to the Treasury in place of Jesse Norman. Helen Whately has been appointed Exchequer Secretary to the Treasury in place of Kemi Badenoch. 

Scottish Budget will be on 9 December

Finance Secretary Kate Forbes MSP has announced that the Scottish government will publish its Budget for 2022/23 on Thursday 9 December 2021. The Budget will include proposals for tax rates and bands for 2022-23 for the devolved elements of income tax and Land and Buildings Transaction Tax (LBTT). 

Coronavirus Job Retention Scheme: HMRC guidance

HMRC have updated their guidance on the Coronavirus Job Retention Scheme (CJRS). The CJRS ended on 30 September 2021. Claims for September must be submitted on or before 14 October 2021. Any amendments must be made on or before 28 October 2021:

Check if your employer can use the CJRS

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

Claim for wages through the CJRS

Self-Employment Income Support Scheme: guidance

HMRC have withdrawn their guidance on the Self-Employment Income Support Scheme (SEISS). Claims for the fifth grant have now closed. The last date for making a claim was 30 September 2021:

Claim a grant through the SEISS

Check if you can claim a grant through the SEISS 

Office of Tax Simplification report: moving the end of the tax year

On 4 June 2021, the Office of Tax Simplification (OTS) published a scoping document exploring the benefits, costs and wider implications of changing the date of the end of the tax year for individuals. It focussed on the implications of moving the tax year end date from 5 April to 31 March and on addressing practical issues connected with the UK’s tax year running to 5 April, as well as the costs and benefits that would need to be considered if the end of the tax year were moved to 31 December. The OTS has now published its findings.

The OTS suggests that there would be clear advantages from having a different tax year end date, but that transitional costs and impacts are significant, and that such a change would require detailed advance planning. In the short term, the OTS recommends that government and HMRC focus on arrangements to allow self-employed taxpayers and individual landlords to use 31 March in place of 5 April when reporting their income, to facilitate Making Tax Digital for income tax. The OTS held a webinar on 15 September 2021 which covered this report, and its recent publications on Capital Gains Tax first and second reports and on making better use of third party data. The recording and slides are available here.

Residential Property Developer Tax: draft legislation

In February 2021,  the government announced that it intended to introduce a tax on the residential property development sector from 1 April 2022 to help fund a five-point plan to ‘bring an end’ to the use of unsafe cladding on residential buildings. The Residential Property Developer Tax (RPDT) will apply to the profits of companies from in-scope activities above an annual group-wide allowance. The government held a consultation seeking views on the policy design of the RPDT between 29 April and 22 July 2021. Draft legislation for the RPDT has now been published, together with an explanatory note. The rate of the tax has not been announced; this will be confirmed at the Budget on 27 October. The draft legislation does not cover the treatment of build-to-rent activity or affordable housing. Comments are invited by 15 October.

Economic Crime (Anti-Money Laundering) Levy: draft legislation

At Budget 2020, the government announced a new levy to raise £100 million per year from the anti-money laundering (AML) regulated sector - the Economic Crime (Anti-Money Laundering) Levy (ECL). The levy will be collected by the three public sector AML statutory supervisors: the Financial Conduct Authority, HMRC and the Gambling Commission. The government launched a consultation on the design principles of the levy in July 2020. The government is now consulting on draft legislation on the ECL ahead of its inclusion in the next Finance Bill.  The consultation will run until 15 October 2021. Responses should be sent to: eclevyconsultation@hmtreasury.gov.uk.

Forthcoming Dbriefs webcasts

The next Dbriefs webcast UK Tax Monthly Update is on Tuesday 12 October 2021, 12.00 BST/13.00 CEST hosted by Andrew Clarke.

On Wednesday 13 October 2021, 12.00 BST/13.00 CEST, we have a webcast SAP S/4HANA®: Automating Data For Tax Provisioning And Transfer Pricing With Longview Tax, hosted by Thomas Picton-Turbervill. Our panel will discuss how your organisation can automate tax and transfer pricing data collection in SAP S/4HANA®.

Reduced rate of VAT on hospitality from 1 October

On 1 October, the 5% reduced rate of VAT which applied since 15 July 2020 to certain supplies in the hospitality and tourism sectors increased to 12.5%. The reduced rate applies to certain supplies of food and non-alcoholic drinks in the course of catering from restaurants, pubs and cafés etc.; supplies of holiday accommodation; and the right of admissions to shows and certain attractions.

Businesses involved in those sectors will need to ensure that their systems are correctly configured to apply the correct rate – a number of complications (for example, around how deposits should be handled) became evident when the reduced rate was initially introduced. Businesses outside the sector will need to ensure that they recover the correct amount of VAT on services that they purchase (for example, when employees expense a meal). The 12.5% rate is also temporary – it will run for six months until 31 March 2022, after which the standard rate is due to apply once again.