Tax Matters Digest

25/04/2024

Welcome to our refreshed Tax Matters Digest which we hope you will enjoy!  As usual, we highlight key developments in tax over the last fortnight and explore how they will impact your business.

Whilst Tax Administration and Maintenance Day (TAM Day) on 18 April was a very quiet affair with only four relatively niche announcements, case activity has stepped into the gap with several high-profile developments.

Our spotlight article covers the Court of Appeal judgment in BlackRock where the Court concluded that related party interest costs were consistent with the arm’s length principle but should nonetheless be disallowed as they were fully attributable to an ‘unallowable purpose’. The judgment provides useful commentary on both topics and adds to the growing body of recent decisions on the application of the unallowable purpose test.

In another case, Hargreaves Property Holdings Ltd v HMRC, the Court of Appeal has dismissed the taxpayer’s appeal against an Upper Tribunal decision. This case concerned the duty to deduct withholding tax on interest payments. The decision provides a helpful overview of the principles of purposive interpretation of tax legislation and the concept of beneficial ownership.

In an EU development, Advocate General Medina has proposed that the Court of Justice should annul the Commission’s decision that the UK’s CFC FinCo exemption constituted illegal state aid and that the judgment of the General Court should be set aside. Although the opinion is non-binding this is the latest in a string of recent Advocate General opinions recommending that findings of state aid be annulled.

Our Other News in Brief round-up includes details of case that will be of interest to Private Equity funds where the First-tier Tribunal considered the taxation of carried interest in the context of the grandfathering provisions.

Some were hoping that TAM Day would see further information related to the Government’s reforms of the non-dom regime. Our article on TAM Day covers the four measures announced and gives our latest thinking on anticipated timings on what’s next on the non-dom and Inheritance Tax (IHT) reforms. IHT is also the focus of a recent report from the Institute for Fiscal Studies which makes suggestions targeting IHT reliefs and untaxed pension pots that could increase tax revenues by ‘billions’.

In his latest City A.M. article, Tim Sarson, Head of Tax Policy at KPMG in the UK, discusses why closing the tax gap remains a worthy endeavour, even if it is a difficult nut to crack.

And if you are hungry when you are reading this, then be warned that the descriptions of how you can eat jumbo marshmallows in our VAT case update (a win for the Taxpayer), might just cause you to reach for the biscuit tin.

Enjoy reading these articles and others and please do get in touch with our experts if you want to discuss them further.