A round up of other news this week.
New Chancellor Rishi Sunak has confirmed the Budget will go ahead on 11 March 2020 as planned. Sunak became Chancellor on 13 February following the unexpected resignation of his predecessor, Sajid Javid, and there was speculation that the Budget may be delayed as a result.
On 10 February 2020, the Government confirmed import controls on EU goods at the border will be introduced after the Brexit transition period ends on 31 December 2020. The Government also announced plans to create up to 10 freeports in locations across the UK and published a consultation document to inform this policy. The stated aim is to “establish freeports, which have different customs rules than the rest of the country, that are innovative hubs, boost global trade, attract inward investment and increase productivity”. One of the chapters is focused on tax and, in addition to VAT and customs duties, consideration will be given to making changes in a number of other areas including stamp duty land tax, research and development tax credits, Employer’s NIC and enhanced capital allowances. Comments have been requested by 20 April 2020.
In a webcast held on 13 February 2020, the OECD released its analysis of the expected effect of its proposed two pillar solution for taxation of the digital economy on global tax revenues. The OECD has forecast that the proposed tax reforms could bring in up to USD 100 billion annually or 4 percent of global corporate income tax revenues. The OECD’S estimated revenue gains are broadly similar across high, middle and low-income economies, as a share of corporate tax revenues.
As reported previously in Tax Matters Digest, from 6 April 2020, corporate non-resident landlords (NRLs) will be subject to UK corporation tax on profits from their UK property rental business. However, unless the NRL has registered for gross payment, agents will still be required to withhold and account for UK income tax on rentals paid to such NRLs (with the NRL then being required to register for corporation tax and either pay top-up tax or claim a refund, to the extent its corporation tax liability is higher or lower than the tax withheld). Where the agent settles expenses on behalf of the corporate NRL, it will need to be reasonably satisfied that the expenses are deductible under corporation tax principles in order for them to be deducted in calculating the withholding tax liability. However, under new SI 2020/151 (which was published on 17 February 2020, along with an accompanying HMRC guidance note), if the agent settles “financing costs” on behalf of the corporate NRL, the agent will be allowed to elect to apply a simplified corporate interest restriction (CIR) regime to determine to what extent such financing costs are disallowed by CIR. Broadly speaking, the simplified regime would cap relief for financing costs at 30 percent of the net rental income after relief for deductible expenses other than financing costs, with any unused allowance or excess financing costs being carried forward to future quarters.
On 11 February 2020, the Office of Tax Simplification (OTS) published a call for evidence to support a review it is undertaking of taxation-based claims and elections made by individuals, businesses and partnerships. The purpose of the review is to establish the broad numbers and types of claims and elections across the main taxes in the UK and then focus on how the administration of the more significant or frequently used claims and elections may be simplified. The OTS is particularly interested in identifying specific common claims and elections where there are unnecessary or disproportionate burdens in securing the relief or benefit. The consultation will be open until 8 May and the OTS plans to issue a report of its findings in Autumn 2020.
On 10 February 2020, details were published in the Official Journal of Fiat’s appeal to the Court of Justice of the European Union (CJEU) in relation to the joined cases (T-755/15 and T-759/15) Luxembourg and Fiat Chrysler Finance Europe v Commission (C-885/19). Fiat is requesting that the CJEU annul the decision of the General Court of the European Union that tax rulings granted by Luxembourg constituted illegal State aid. The alleged State aid in this case arises from the method laid down in the ruling for the calculation of the taxable basis of a Luxembourg subsidiary performing intra-group financing and treasury activities. According to the original European Commission decision from October 2015, the ruling endorsed “artificial and complex methods” that do not “reflect economic reality” and thereby granted a selective and unfair competitive advantage to those companies. The General Court upheld the Commission’s findings. Fiat claims in its appeal, that the General Court misapplied the legal test of whether the advance pricing agreement endorsed a methodology that exceeded the applicable margin of appreciation and also failed to properly define the relevant undertaking that was the beneficiary of the agreement. In addition, Fiat is challenging the General Court's decision to uphold the Commission's use of an “ill defined” arm's length principle.
A weak final quarter of 2019 highlighted the difficulties faced by the Government to reignite growth momentum in the UK, according to Yael Selfin, Chief Economist at KPMG UK who commented on the latest GDP figures.
The Scottish Retail Sales Monitor has been published detailing a positive start to 2020 with an increase in sales by 1.3 percent compared with January 2019.
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