A round up of other news this week.
On 2 July, Finance Bill 2020 completed its Report Stage and third reading, meaning it has now finished its journey through the House of Commons. A number of COVID-19 related government amendments to the Bill were passed during Report Stage, most of which were discussed in the last edition of Tax Matters Digest. A further government amendment was published on 29 June providing welcome confirmation that where, because of COVID-19, an individual takes unpaid leave, is furloughed or works reduced hours, this does not constitute a disqualifying event for enterprise management incentive (EMI) purposes. An updated copy of the Bill was then published including these amendments and this has now had its first reading in the House of Lords. Because the Finance Bill is a ‘Money Bill’ it cannot be amended by the House of Lords, so the remaining stages are a formality. The second reading in the House of Lords - the general debate on all aspects of the Bill – and all remaining stages are scheduled for 17 July, but at the time of writing, a date for Royal Assent had not been confirmed.
As part of its wider strategy for taxation of the digital economy, the OECD has published model rules for reporting by platform operators with respect to sellers in the sharing and gig economy (MRDP). Under the MRDP, digital platforms are required to collect information on the income realised by those offering accommodation, transport and personal services through their platforms and to report the information to tax authorities. Following the publication of these rules the OECD will now turn its attention to taking forward work on the international legal and technical framework to facilitate the automatic exchange of the information collected under the MRDP.
The OECD published the second edition of its Corporate Tax Statistics database on 8 July 2020. For the first time, the database includes anonymised and aggregated Country-by-Country Reporting (CbCR) statistics for 2016, the first year covered by the requirement. The anonymised statistics have been prepared by 26 OECD Inclusive Framework members and submitted to the OECD. The statistics highlight the importance of corporate tax revenues in developing countries and commodity exporters. The aggregated CbCR reporting data need to be treated with considerable caution due to the way the dataset has been constructed and presented. The data does reinforce the growing dominance of China in terms of volume and scale as well as the importance of investment hubs like Ireland and Singapore as magnets for intercompany transaction flows within multinational enterprises. It will be interesting to see what trends emerge over the next few years as the dataset expands and the impact of the BEPS measures becomes more visible. However, to understand the trends and be able to draw reliable conclusions from the data it is likely that the OECD will need to refine some of the methodology for collecting, analysing and presenting the data. The inclusion of China within the ‘investment hubs’ category is one area we think the OECD will need to look at carefully as this may distort the picture and make it more difficult to draw reliable conclusions from the data. Other wrinkles which will need to be ironed out are consistency in how countries aggregate their data and consistency in the income tax accrued data and the treatment of dividend income within the datasets.
As previously reported in Tax Matters Digest, the Government introduced a temporary VAT zero rating of personal protective equipment (PPE) with effect from 1 May 2020 applying to disposable gloves, disposable plastic aprons, disposable fluid-resistant coveralls or gowns, surgical masks, filtering face piece respirators and eye and face protection (including single or reusable full face visors or goggles). The zero rate was due to be in place until 31 July. The guidance above, and other related documents, have been updated confirming the end date will be extended until 31 October 2020.
HMRC updated their guidance on the treatment of certain expenses and benefits provided to employees during the COVID-19 outbreak. This now confirms that no taxable benefit arises where employers provide PPE, or reimburse employees for the cost of providing their own PPE, where there is a high risk of workplace transmission and the employer’s risk assessment shows that PPE is required. The guidance also confirms that COVID-19 tests provided by the Government, as part of its national testing scheme, are not treated as a benefit in kind for tax purposes. Similarly testing kits provided by employers outside of the Government’s national testing scheme, either directly or by purchasing tests that are carried out by a third party, will not be taxed as benefits in kind. The Government will legislate for a specific new income tax and NIC exemption, which is expected to apply to employer provided COVID-19 antigen tests provided in 2020/21. HMRC will issue further guidance on the new exemption in due course.
The third Treasury Direction made on 25 June, which sets out the legal basis for the Job Retention Scheme (JRS), included new language on the purpose of the scheme. This stated that JRS grants must be “used by the employer to continue the employment of employees in respect of whom the … claim is made”, which led to press speculation that JRS grants could not be used to fund notice pay. However, in his response to a written question given on 8 July, the Financial Secretary to the Treasury stated that “employers may continue to claim under the scheme for a furloughed employee who is serving a statutory notice period subject to eligibility based on [their contract] of employment”.
HMRC have updated their guidance on the Deferral of VAT payments due to coronavirus (COVID-19) confirming the end of the VAT payment deferral scheme and what actions need to be taken for those taxpayers that deferred payments between 20 March 2020 and 30 June 2020. The guidance explains that businesses can pay or make payments towards their deferred VAT at any time up to 31 March 2021. Any businesses who have cancelled their Direct Debits to HMRC to take advantage of the deferral may need to set up a new Direct Debit arrangement in time for their next VAT payment. Any businesses struggling to pay their VAT on time may be able to agree a ‘Time to Pay’ arrangement with HMRC on a case by case basis.
Angela MacDonald has been appointed as Deputy Chief Executive and Second Permanent Secretary at HMRC with effect from 1 August 2020. The post has been vacant since Jim Harra took over as First Permanent Secretary and Chief Executive in October 2019. MacDonald is currently Director General for Customer Services Group at HMRC. Prior to joining the Civil Service in 2009 MacDonald worked in a number of leadership roles at Aviva plc.
The latest KPMG and REC, UK Report on Jobs survey indicated a further drop in hiring activity during June as clients continued to freeze or cut back on their recruitment plans due the COVID-19 pandemic. That said, both permanent placements and temp billings fell at notably softer rates than in April and May. Demand for staff also fell at a weaker, albeit still marked, rate.
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