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Monthly Tax Update - 08/09/2017

Finance Bills
The Finance Bill 2017-19 was published today. As expected, the Bill covers the areas that were carried over from the previous Finance Bill which were not enacted due to the calling of the Election. These include corporate tax loss carried-forward rules, corporate interest restrictions and changes to the substantial shareholding exemption and the non-domicile rules. The Bill also includes legislation relating to Making Tax Digital See:

The Financial Secretary to the Treasury, Mel Stride, has also announced that certain clauses for the December 2017 Finance Bill will be published on 13 September 2017, for comment by 25 October 2017. These clauses will cover measures announced at Spring Budget 2017 and are being released as part of the transition to the new Budget timetable.

Country-by-country reporting: UK-US exchange agreement signed and updated OECD guidance
The US Internal Revenue Service's website indicates that the US and UK tax authorities signed a bilateral agreement to exchange country-by-country (CbC) reports on 16 August 2017. It had been expected that an agreement would be entered into but US-headed and UK-headed groups will now have comfort that alternative filing arrangements will not be required in the other country. The text of the agreement is expected to be published shortly. The full list of current US CbC exchange agreements is available at

The OECD has also updated its country-by-country guidance, which now addresses the following points:
1) the definition of revenues;
2) the treatment of MNE groups with a short accounting period; and
3) the treatment of the amount of income tax accrued and income tax paid.

HMRC guidance: R&D: amended claim for reimbursed expenses
For many years, HM Revenue & Customs (HMRC) accepted that, where employees who undertake research and development (R&D) work incur expenses in the performance of their duties and those expenses are repaid by the company, that amount can be included as qualifying staffing costs for the purposes of an R&D tax relief claim. However, a note issued by HMRC on 8 October 2014 suggested that such 'reimbursed expenses' should not be included as qualifying staffing costs. HMRC have now issued guidance to clarify their position. Broadly, reimbursed expenses can be included as qualifying staffing costs where:
       the expense constitutes an expense to the company of employing staff; and
       the expense is an expense the employee pays in order to fulfil the requirements of the employment.
This means that an expense does not qualify as a staffing cost just because an employee has initially incurred that expense but only if it was incurred in carrying out the duties of the job. In practice, this largely limits the costs that qualify to those relating to travel and subsistence where those costs have some connection to the R&D activities but any other costs that meet the above criteria should also be considered. HMRC acknowledge that, as a result of their October 2014 statement, some companies may have excluded costs which are now confirmed as appropriate. They will therefore accept amendments relating to accounting periods ending between 9 October 2014 and 31 January 2016. The original claim must have been made on or after 9 October 2014 and the revised claims must be submitted to HMRC by 31 January 2018. For HMRC guidance on this issue see

HMRC settlements following Supreme Court decision in Rangers EBT case
HMRC have announced that, following the decision of the Supreme Court in the Rangers employee benefit trust (EBT) case, they will be inviting participants in 'disguised remuneration schemes' to register an interest in settling the tax liabilities arising from the use of these arrangements. HMRC say that the decision affects a wide range of earnings-related tax avoidance schemes including employee benefit trusts, employer-funded retirement benefit schemes, contractor loans schemes and self-employed benefit schemes. They will publish further details 'over the coming weeks'. See

Government proposals on corporate governance reform
The Government has announced proposals for a number of corporate governance reforms following the Green Paper published in January this year. They include:
       inviting the Financial Reporting Council (FRC) to revise the UK Corporate Governance Code to be more specific about the steps that premium listed companies should take when they encounter significant shareholder opposition to executive pay policies and awards (and other matters), giving remuneration committees a broader responsibility for overseeing pay and incentives across their company and extending the recommended minimum vesting and post-vesting holding period for executive share awards from three to five years;
       introducing secondary legislation to require quoted companies to report annually the ratio of CEO pay to the average pay of their UK workforce; and
       introducing secondary legislation requiring all companies of significant size (private as well as public) to explain how their directors comply with the requirements of Companies Act section 172 to have regard to employee and other interests and disclose their corporate governance arrangements in their Directors’ Report and on their website. See

Legitimate expectation case: possible Supreme Court appeal
In July 2017, the Court of Appeal allowed HMRC's appeal in the case of HMRC v Ralph Hely Hutchinson ('Hely Hutchinson'), which concerns the extent to which HMRC could resile from guidance issued in 2003 in respect of capital losses in respect of shares acquired via share options arising from the case of Mansworth v Jelley and taxpayers' legitimate expectations as a result of that guidance. We understand that the taxpayer has lodged an application for permission to appeal against the Court of Appeal's decision.

Continuation of HMRC’s risk-based approach to charging late filing PAYE penalties.
The August 2017 edition of HMRC’s Employer Bulletin includes an item on the continuation of HMRC’s risk-based approach to charging penalties. HMRC have decided to continue the approach for the tax year beginning 6 April 2017; thus late filing penalties will continue to be reviewed on a risk-assessed basis, rather than issued automatically. This means that, as before, penalties will not be charged where Full Payment Submissions are filed late but within three days of the payment date, provided that there is no pattern of persistent late filing. Late payment penalties will also continue to be raised on a risk-assessed basis, rather than automatically. HMRC will review their approach to PAYE penalties after 5 April 2018 in line with the wider review of penalties. See

New advisory fuel rates from 1 September 2017
HMRC have announced new advisory fuel rates from 1 September 2017, applicable to business mileage claims by employees with company cars. See The previous rates can be used for up to one month from the date the new rates apply. Some of the rates have been decreased by 1p. For historical rates see

VAT: Sportsdirect distance sales decision to be considered by First-tier Tribunal
The Upper Tribunal has ruled that HMRC's decision about Sportsdirect's internet sales to customers located in other EU Member States can be considered by the First-tier Tribunal and has dismissed HMRC’s strikeout application. Sportsdirect regarded the sales as UK sales and hence accounted for UK VAT on those supplies. HMRC later concluded that the place of supply was in fact the EU Member States in which the customers resided, meaning that the sales potentially should have been subject to VAT in the relevant Member State and not in the UK. In correspondence, HMRC had stopped short of saying that UK VAT had been overpaid but in the Upper Tribunal’s judgment, HMRC had decided that the rules on distance sales should apply in principle. Even though HMRC's letter did not state whether UK VAT should be charged, its conclusions were 'material to the chargeability of the taxpayer to VAT', and was therefore an appealable decision. See To discuss the case, please contact David Walters on 0113 292 1552.

Forthcoming Dbriefs webcasts
There are a number of Dbriefs webcasts over the next month covering such topics as UK Tax Monthly Update, SAF-T And Other E-Audit Developments, G20/OECD – BEPS: Permanent Establishments, G20/OECD – BEPS: Profit Splits, Alternative Asset Management Groups: A UK Tax Update, Impact Of CJEU Judgments On The Cost Sharing Exemption, Preparing For Year End: Harnessing Technology And Planning Systems To Get Ahead, G20/OECD – BEPS: Country-By-Country Reporting – Preparing And Filing CbyC Reports and Update On VAT In The Gulf Cooperation Council. For more information visit

This publication has been written in general terms and we recommend that you obtain professional advice before acting or refraining from action on any of the contents of this publication. Deloitte LLP accepts no liability for any loss occasioned to any person acting or refraining from action as a result of any material in this publication.

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