A round up of other news this week.
The Chancellor has announced that the next Budget will take place on Wednesday 3 March 2021. The Budget will “set out the next phase of the plan to tackle the virus and protect jobs and will be published alongside the latest forecasts from the Office for Budget Responsibility (OBR)”. HM Treasury has also confirmed that representations will be accepted until 5pm on 14 January via its online portal.
On 17 December 2020, HM Treasury announced an extension of the furlough scheme to the end of April 2021. The Government has confirmed that it will continue contributing 80 percent towards employees’ salaries for hours not worked with employers required to pay wages, national insurance contributions (NIC) and pension contributions for hours worked, and NIC and pension contributions only for hours not worked. The eligibility criteria for claiming furlough support will remain the same and will continue to apply in the same way as it applies now. HM Treasury has also announced that the government-guaranteed Covid-19 business loan schemes, which were due to come to an end at the end of January 2021, will remain in place for businesses to apply for and use until the end of March 2021. Once these schemes end, a successor loan scheme will be introduced, with details to be included in the Spring Budget due to take place on 3 March 2021.
On 15 December 2020, HMRC published a policy paper outlining proposed changes in relation to employer-reimbursed COVID-19 antigen tests. The measure will disregard, for NIC purposes, advance payments or reimbursements by employers of the cost of a relevant coronavirus antigen test. Tests qualifying for this exemption are those that are made between 25 January and 5 April 2021. This exemption means that the payments will not attract either Class 1A or Class 1 (employee’s or employer’s) NIC. The Government intends to legislate for an income tax exemption in the next Finance Bill, which is likely to be published in Spring 2021, after the Budget is delivered. However, HMRC will exercise their collection and management powers and refrain from collecting any NIC or income tax due on the reimbursement of a relevant coronavirus antigen test made during the 2020/21 tax year. The policy paper does not currently state what the exemption conditions will be, but if the income tax and NIC exemptions for reimbursed antigen tests work in a similar way to the exemptions for employer provided antigen tests, employer reimbursement would need to be made to all employees on similar terms. It is also important to note that not all COVID-19 tests will qualify for the exemption. Tests that detect relevant coronavirus antigens or viral ribonucleic acid (RNA), both factors that indicate a current infection and need to self-isolate, are within the scope of the exemption. However, the exemption does not extend to coronavirus antibody tests.
The Treasury has published the Government’s response to its recent Tax Treatment of Asset Holding Companies (AHCs) in Alternative Fund Structures consultation, and launched a second stage consultation which seeks views on the detailed design features of a new regime for AHCs, as well as certain targeted changes to the Real Estate Investment Trust (REIT) regime. Respondents are asked to comment on various aspects of the proposed regime including eligibility criteria, taxation of capital gains, and the application of transfer pricing, hybrid mismatch, stamp duty and withholding tax provisions. The consultation will close on 23 February 2021 with draft legislation planned to be published during 2021. The consultation forms part of a proposed broader review of UK funds announced at Budget 2020. Further announcements are expected shortly.
On 17 December 2020, HMRC published their annual report on the operation of the Code of Practice on Taxation for Banks which covers the period from 1 April 2019 to 31 March 2020. The report lists banks that have adopted the code, identifies any bank that has not adopted it, and can identify any bank that is found to be in breach of its code commitments. The report also covers the work that HMRC have done to monitor code compliance and how they address concerns when they arise around the code.
In March 2019, the First-tier Tribunal (FTT) released a decision dealing with the intra-group transfer of assets from a UK company to group companies resident overseas. It concluded that, in relation to transfers to group companies in other EU member states, but not those in third countries, the imposition of an immediate tax charge on transfers was a breach of EU law. As such, the tax charge was disapplied. The decision was appealed and the Upper Tribunal (UT) published a decision (Gallaher Limited v HM Revenue  UKUT 0354 (TCC)) on 14 December 2020. The UT was unable to conclude on the EU law questions ‘with complete confidence’ and therefore a request for a preliminary ruling is to be submitted to the Court of Justice of the European Union (CJEU) before the end of the transition period on 31 December 2020. In response to the FTT decision, Finance Act 2020 introduced legislation to allow taxpayers to apply for deferral of the payment of corporation tax on group asset transfers within the EU or EEA during accounting periods ended on or after 10 October 2018. Any decision of the CJEU will relate to the legislation at issue in the proceedings, which concerned transfers in earlier accounting periods. However, the UT made the point that “the responses of the CJEU to the questions that we have raised may well inform the interpretation of the new instalment regime”.
In an important case (Revenue And Customs v Development Securities Plc & Ors  EWCA Civ 1705) the Court of Appeal has considered whether certain wholly owned Jersey incorporated subsidiaries of a UK property development and investment group were resident in the UK for corporation tax purposes. Last year the Upper Tribunal (UT) overturned the First-tier Tribunal’s (FTT) decision in this case, finding in the taxpayer’s favour that the Jersey incorporated special purpose vehicles were centrally managed and controlled in Jersey at the material times and were not therefore UK tax resident. However, the Court of Appeal has now overturned the UT decision and reinstated the FTT’s findings in favour of HMRC. We will provide further commentary on this latest decision in the new year.
On 16 December 2020 HMRC published a consultation seeking views on proposed changes to penalties that may be charged to people receiving Follower Notices as a result of using ‘avoidance schemes’. HMRC are proposing to reduce the rate of Follower Notice penalty from 50 percent to 30 percent of the tax in dispute and introduce a penalty of 20 percent for those who the tribunal decides acted unreasonably by continuing their litigation against HMRC’s decision. Comments are requested by 27 January 2021.
This week’s Talking Points includes HM Treasury’s call for evidence on VAT and the Sharing Economy and in particular structures under which overseas digital platforms act as agent for numerous individual UK suppliers, to enable the latter to provide their services to end consumers. As well as some other end of transition updates, there are some COVID-19 related updates. These include HMRC’s Brief on 13th Directive claims where overseas applicants are unable to obtain a certificate of status because of the COVID-19 pandemic and the European Council’s adoption of new rules to support VAT free access to COVID-19 vaccines and testing kits.
The Wealth Tax Commission has published its recommendations on whether the UK should have a wealth tax, with proposals affecting anyone with assets over £500,000. Jo Bateson, Partner with KPMG UK’s Family Office & Private Office team, commented “the decision of whether to introduce a wealth tax in the UK should not be taken in isolation and instead should be part of a broader review of how the UK taxes capital.”
And finally, Tax Matters Digest is taking a break and will be published again on 15 January 2021. Happy Christmas to all our readers and a prosperous New Year.
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