A round up of other news this week.
The Taxes (Amendments) (EU Exit) Regulations 2019 were published on 27 March 2019 demonstrating that the Government is still planning for the possibility of a no deal exit from the European Union (EU), as this statutory instrument is designed to make changes to keep tax law working in the same way as it does now, if the UK leaves without a negotiated deal. The areas of tax affected by these changes include income tax; corporation tax; stamp taxes; pensions; the treatment of financial products and services for the purposes of income tax, corporation tax, capital gains tax, the bank surcharge and the bank levy; reliefs in relation to video games development, theatrical productions, orchestra tax relief, museums and galleries tax relief; and gift aid claims by community amateur sports clubs.
As promised at Budget 2018, HMRC have now published a consultation document entitled ‘Preventing abuse of the R&D tax relief for SMEs’. To help prevent abuse of the small or medium enterprise (SME) scheme, the amount of payable tax credit that a qualifying loss-making business can receive through the relief in any one accounting period will be capped. The cap will be three times the company’s total PAYE and NICs liability for that year and will be implemented from April 2020. The consultation, which closes on 24 May 2019, looks at how the cap will be applied, with the stated aim of minimising any impact on genuine businesses. KPMG in the UK will be submitting a response to the consultation in due course. If you have any views you would like to share, please get in touch with your existing contact or Carol Johnson.
The First-tier Tribunal decision in Gallaher Limited v HMRC was published on 28 March 2019. The case concerns the compatibility with EU law of reliefs, such as s171 TCGA 1992, that allow tax neutrality for UK-UK intra-group transfers but deny such tax neutrality on transfers to group companies in other EU member states or in third states. The judgment is lengthy and analysing it will require some time. Based on an initial view, in relation to transfers to group companies in other EU member states, in brief the judgment appears to say that denial of tax neutrality is a breach of freedom of establishment, which in principle is justified by overriding reasons of public interest. However, requiring the tax to be paid immediately rather than by instalments is disproportionate and on this basis tax neutrality applied to the transfers to group companies in other member states.
The OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes (the Global Forum), in partnership with the Inter-American Development Bank, has released its first ever beneficial ownership toolkit. The toolkit is designed to help governments implement the Global Forum’s standards, to give law enforcement officials reliable information about who is behind a company (or other legal entity). The idea behind this is to stop criminals hiding their illicit activities behind opaque legal structures. You can read the OECD’s full statement about the tool here.
SI 2019 No. 658 The Tonnage Tax (Exception of Financial Year 2019) was issued on 25 March. This confirms that the UK’s tonnage tax flagging test will not have effect in financial year 2019. The decision is made based on the trend of European Union (EU)/European Economic Area (EEA) flagged tonnage with the overall UK tonnage tax fleet over the three years ended 1 October 2018. On this basis, companies which are within UK tonnage tax do not need to worry about whether or not their new ships are flagged in the EU/EEA in financial year 2019.
The continuous evolution of digital transformation is outstripping the pace of cyber security in organisations. As a result, we're witnessing a fundamental disconnect between consumer expectations and concerns, and the ability of organisations to meet those expectations, according to KPMG's Consumer Loss Barometer report.
According to KPMG UK’s quarterly Economic Outlook, the lack of clarity around Brexit and headwinds from the global economy has resulted in a downgrade of the short-term outlook for the UK economy.