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Business Tax Briefing - 01/09/2017

Chancellor responds to OTS on corporation tax computation; stamp duty
The Chancellor has written to the Office of Tax Simplification (OTS) following its recommendations on simplifying the computation of corporation tax and on reforming stamp duty
on paper documents, both of which were published in July 2017. The main recommendations on simplifying the computation of corporation tax included:

       Small companies - For the very smallest companies, to use the accounting profit prepared under accounting standard FRS105 as the taxable profit without any adjustments. For slightly larger companies, companies should only need to consider five or six potential tax adjustments.

       Aligning tax with accounts – For all companies, for the tax definition of capital and revenue to be more closely aligned to the accounts definitions; for the rules for trading and management expenses to be aligned and for the schedular system to be replaced by a whole business approach.

       Relief for capital expenditure – The OTS should explore the issues involved in replacing the present capital allowances system by an accounts depreciation approach.

The Chancellor agrees that minimising the number of adjustments required to calculate taxable profits and aligning tax definitions with accounting definitions would help to simplify the regime for small companies. The recommendations will be considered further in the light of their potential impact on the Exchequer and the possible synergies in simplifying tax for unincorporated businesses.
While recognising the complexities of the schedular regime, the Chancellor observes that reform, while a sensible long-term objective, would result in significant change to the CT calculation which would produce considerable uncertainty and transitional burdens. There are therefore no current plans for reform.
Using accounting depreciation instead of capital allowances would depend on resolving a number of issues, including fiscal cost, avoidance opportunities and likely winners and losers. The OTS is asked to explore these points in more depth. The terms of reference will be agreed shortly. See

The Chancellor is sympathetic to the proposed reforms to stamp duty, in particular putting stamp duty on a digital footing. They will be considered further in the context of other reforms to the tax system. See

Second Finance Bill: Commons Library update

Following the Budget on 8 March 2017, the Government published the Finance (No.2) Bill 2016/17 on 20 March 2017. Due to the timing of the General Election, the Bill completed all its remaining stages in the Commons on 25 April before receiving Royal Assent as Finance Act 2017. In the light of the abbreviated timetable, the Government removed a significant number of clauses, to be introduced in a Finance Bill later this year. Prior to this second Finance Bill being presented, the House must approve a series of Ways and Means Resolutions relating to the Bill which it is scheduled to do on 6 September. The House of Commons Library has published a short update in anticipation of the second Finance Bill. See

Dbriefs webcasts

The next Dbriefs webcast is on Wednesday 6 September at 12.00 BST/13.00 CEST. The topic is EU Update and it is from our international tax series. The call will be hosted by Bill Dodwell. Our panel of experts will discuss the EU Commission’s developing approach to taxation, including the anti-tax avoidance directives (ATAD and ATAD2) and anticipated next steps such as the Common (Consolidated) Corporate Tax Base (C(C)CTB) and Public Country-by-Country Reporting. To register for the webcast, click

New advisory fuel rates from 1 September 2017

HMRC have announced new advisory fuel rates from 1 September 2017. 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

Forthcoming CJEU decisions, including in Trustees of the BT Pension Scheme case

The CJEU will give judgment in the following cases on 14 September in:

Trustees of the BT Pension Scheme
v HMRC Case C-628/15. The case concerns claims made by the trustees of the BT pension scheme for tax credits on dividends received by pension funds before the abolition of payable credits in 1997. The Opinion of Advocate General Wathelet is
Trustees of the P Panayi Accumulation & Maintenance Settlements
Case C-646/15. The case was referred by the UK First-tier Tribunal and concerns whether the exit charge on trusts (TCGA 1992 s 80) infringes the treaty freedoms. The Opinion of Advocate General Kokott is

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;

       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

VAT: CJEU judgments on cost sharing exemption

On 21 September 2017, the CJEU will be publishing its judgments in three key cases concerning the applicability of the cost sharing exemption (CSE): DNB Banka, Aviva, and EC v Germany. Under the CSE, a cost sharing group (CSG), established by organisations that cannot recover VAT, is able to exempt supplies it makes to its members. The Advocate General’s opinions in
DNB Banka and Aviva were, inter alia, that the CSE operated as an extension to the public interest exemptions in the Principal VAT Directive, and could not be extended to financial services organisations. (The Advocate General was also of the view that the CSE should not apply to CSGs that span different jurisdictions; therefore, the CSE would not be available for cross-border CSGs.) The Advocate General in EC v Germany took a different approach, namely that the CSE should be available to all exempt taxpayers, regardless of the sector from which the taxpayer generates its income. The decisions of the CJEU in these cases should clarify the scope of the EU law exemption for supplies by CSGs. For further information about the cases, or to discuss the implications of them, please contact Richard Insole on 020 7303 0062. On 25 September at 12.00 BST, there will be a Deloitte webcast to discuss the judgments and their implications. For more information, and to register for the webcast, click here.

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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