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Monthly Tax Update - 12/05/2017

Finance Act: Royal Assent
The Finance (No 2) Bill 2017 passed through its remaining stages in the House of Commons and House of Lords on 25 and 26 April 2017, respectively, and received Royal Assent on 27 April becoming Finance Act 2017. The text of the Act as passed is at

Due to the calling of the snap general election, extensive omissions were made from the Bill as originally introduced. Some of the major omissions include:

       corporate loss carried forward rules;
       corporate interest restriction rules;
       the changes to the substantial shareholdings exemption;
       the non-domicile changes; and
       the changes on Making Tax Digital and the associated changes regarding trading and property allowances.

For full details of what has been included and what has been omitted see

Some, generally helpful, amendments were passed to the following: Clause 48 (disguised remuneration - employment income provided through third parties); Schedule 1 (workers’ services provided to public sector through intermediaries); Schedule 2 (optional remuneration arrangements); Schedule 3 (overseas pensions); Schedule 4 (pensions: offshore transfers) and Schedule 16 (employment income provided through third parties). For Explanatory Notes see

The Financial Secretary to the Treasury said during the Committee Stage debate “The Bill is progressing on the basis of consensus and therefore, at the request of the Opposition, we are not proceeding with a number of clauses. However, there has been no policy change. These provisions will make a significant contribution to the public finances, and the Government will legislate for the remaining provisions at the earliest opportunity, at the start of the new Parliament”. See

Criminal Finances Act: Royal Assent
A number of amendments have been made to the Criminal Finances Bill, prior to it receiving Royal Assent and becoming the Criminal Finances Act on 27 April 2017. See
Amongst other things, the Act creates offences for cases where a person associated with a company or partnership facilitates the commission by another person of a tax evasion offence and contains measures to create new offences of failure to prevent facilitation of tax evasion. The Act includes a compromise new clause on overseas territories adopting publicly accessible registers of beneficial ownership (now Section 9 of the Act). Broadly, this commits Ministers to lay before Parliament, prior to 1 July 2019, a report on the arrangements in place between the UK and each relevant territory, including an assessment of their effectiveness having regard to international standards.

Reference to CJEU refused
The Upper Tribunal has dismissed an application in a case arguing that there should be a reference to the Court of Justice of the European Union (CJEU) before the substantive appeal is heard, in order to protect the taxpayers from being deprived of their ability to seek the assistance of the CJEU in resolving their EU-law based claim because of the UK’s decision to leave the EU. The judge said that, although it appears at present that the Government intends to bring an end to the jurisdiction of the CJEU in the UK, transitional provisions will be needed because there are likely to be very many people in the same position as the taxpayer. Those arrangements will apply to them. See

OECD update on status of country-by-country reporting to tax authorities (BEPS Action 13)
On 4 May, the OECD issued an update on the current implementation status of country-by-country (CbC) reporting to tax authorities – part of Action 13 of the G20/OECD BEPS Project. The update sets out inter alia the progress that has been made to put relationships in place to facilitate the automatic of exchange of CbC reports between different jurisdictions. The OECD reports that over 700 such relationships are now active between over 30 of the signatories to the Multilateral Competent Authority Agreement on the Exchange of CbC Reports (the CbC MCAA) and between EU Member States under the Directive on Administrative Cooperation in Taxation. See

HMRC warning about new email phishing scam
HM Revenue & Customs (HMRC) are strongly advising taxpayers to be on the lookout for a new phishing scam. A number of bogus emails with the subject line ‘Your 2016 Tax Report’ and an attachment have been reported. Taxpayers are advised not to open the email. See for HMRC’s general guidance on recognising phishing emails.

Work and Pensions Committee
The House of Commons Work and Pensions Committee released its report “Self-employment and the gig economy” on 1 May. The report’s recommendations include that the next government should set out a roadmap for equalising the National Insurance contributions paid by employees and the self-employed and that it is incumbent on government to close loopholes that can incentivise behaviour by a minority of companies to use bogus self-employment to pass the burden of safety net support to the welfare state, whilst reducing tax revenue. See

Australian Federal Tax Court finds against Chevron's financing
The Federal Court of Australia has ruled against Chevron in a case concerning the transfer pricing of debt on a loan from the US to Australia. A US group company lent funds to its Australian parent at about a 9% interest rate from money raised by it from the issue of commercial paper in the United States at a rate of about 1.2%. The Federal Court found no reason to interfere with the Australian Taxation Office's assessment, which reduced the interest expense allowed from $162 million to $91 million. See

VAT: revised guidance on holding companies
HMRC have published revised guidance on VAT recovery by holding companies. The guidance, as expected, confirms HMRC’s position on a number of important issues in this area. Where a holding company receives advisors’ services and undertakes (or intends to undertake) an economic activity that supports the taxable trading activities of a business that it plans to acquire, HMRC accept that it should be able to recover VAT on acquisition costs as overhead input tax. Providing management services to the acquired trading entities can be sufficient economic activity to support VAT recovery, provided that the services are ‘genuine’ and supplied in return for consideration which is more than nominal. The guidance also states that interest earned by a holding company on intra-VAT group loans to the acquired business, which support the making of taxable supplies by the VAT group, will also potentially justify VAT recovery. See Although the guidance clarifies HMRC’s policy on this area, VAT recovery on acquisitions remains a complex area. To discuss the guidance, please contact Richard Vitou on 020 7007 0578.

European Commission working paper: VAT Implications of Transfer Pricing
The VAT Committee of the European Commission has published a working paper on the ‘Possible VAT Implications of Transfer Pricing’. See This sets out some observations around when transfer pricing (TP) adjustments are likely to have VAT consequences, and notes a tension between TP rules which seek to arrive at the arm's length valuation of a transaction and VAT rules where consideration is seen as a subjective value (i.e. the price actually paid). For there to be any VAT implications, though, the paper considers that basic VAT principles must first be applied: there must be a supply for consideration, which must be directly linked to that supply. The paper sketches out areas that the Committee consider would need to be taken into account in assessing this. Ordinarily, a working paper will lead to VAT Committee Guidelines, which may then lead to changes in national practices and even, perhaps, changes in relevant EU law. Even if such changes take place after the UK has left the EU, consideration of this area will remain important for multinational businesses, particularly those which are reviewing international TP methodologies in light of BEPS changes. To discuss the working paper, or its implications, please contact Mark Junkin on 020 7303 0539.

Dbriefs webcasts
There are a number of Dbriefs webcasts over the next month covering such topics as Comparables And Economic Valuation In The EU and the UK Tax Monthly Update (June). For more information visit

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This publication has been written in general terms and therefore cannot be relied on to cover specific situations; application of the principles set out will depend upon the particular circumstances involved and we recommend that you obtain professional advice before acting or refraining from acting on any of the contents of this publication. Deloitte LLP would be pleased to advise readers on how to apply the principles set out in this publication to their specific circumstances. Deloitte LLP accepts no duty of care or 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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