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Monthly Tax Update - 13/04/2017

Finance (No 2) Bill published
The Finance (No 2) Bill was published on 20 March 2017. It runs to 774 pages, making it the longest ever Finance Bill. See The explanatory notes are at
The Bill will have its Second Reading in the House of Commons on 18 April 2017.

A number of consultation documents were published with the Finance Bill. The direct tax topics include:
       Possible models for late submission penalties. The proposals have been developed with the new Making Tax Digital for Business obligations in mind but also explore their suitability for other regular submission obligations. See
       Whether to levy corporation tax on the income profits of non-resident landlords and other non-residents liable to income tax on UK activities. See
       Withholding tax on multilateral trading facilities. See

There is also a consultation and call for evidence on employee expenses. See  

In addition, the Government has published a number of response documents on earlier consultations, including that on changing partnership reporting and profit allocation. The response document states that, where the allocation of profits between partners reported on the partnership return is disputed, the Government will legislate to protect the partners from being taxed on incorrect profit shares. See The changes will apply to returns for accounting periods starting on or after 5 April 2018. Draft clauses will be published for technical consultation in due course. There is a bulletin on the response at

Update to regulations on country-by-country reporting to tax authorities
The Taxes (Base Erosion and Profit Shifting) (Country-by-Country Reporting) (Amendment) Regulations 2017 were laid on 30 March 2017 and come into force on 20 April 2017. They extend country-by-country reporting requirements to partnerships and LLPs and add UK notification requirements. See You can find more information in our Special Bulletin here

Hybrids and other mismatches: HMRC updated draft guidance
HM Revenue & Customs (HMRC) have updated their guidance on hybrids and other mismatches following the consultation on draft guidance issued on 9 December 2016. See They have also published a summary of the changes made as a result of the consultation. See HMRC will migrate the guidance into their International Manual over the next six months, once the additional material has been worked through.

Making Tax Digital
The House of Lords Finance Bill Sub-Committee has published its report on the Draft Finance Bill 2017: Making Tax Digital for Business. It concludes that the Government should delay the digitisation of tax for businesses. The Committee agrees that the digitalisation of tax is to be welcomed, but concludes that the roll-out of the scheme is being rushed, is imposing unnecessary burdens on small businesses and will yield little benefit to the Government. See

HMRC have published a research report on Making Tax Digital (MTD) based on research carried out on the attitudes of small businesses and their agents. The research indicates that it will not be easy to convince taxpayers of the advantages of MTD. The majority of businesses do not welcome an increase in their tax-related obligations and, as the report puts it, the disadvantages of MTD are more immediately apparent than the potential benefits. It notes that ‘The most common reaction was a somewhat resentful level of resignation …’. However ‘many businesses, given space and time to consider it, do see some potential benefits’. What does emerge is that the design of the software will be crucial to successful implementation, as will the provision of good guidance and support. See

In addition, HMRC have published updated details of their cost methodology for MTD. See By their calculations, a business or landlord complying with the new record-keeping and filing requirements will see over 80 of the current 100 obligations reduced or eliminated. HMRC also expect that 60% of the 3.4 million small businesses will use free software and that they will need just six hours to learn how to do it. The Chairman of the Treasury Select Committee has called for a comprehensive pilot study to establish the facts before the mandatory roll out of the digital regime. See

Double Taxation Treaty Passport scheme: updated terms and conditions
The Government published its response to the Double Taxation Treaty Passport scheme review on 20 March 2017. The scheme, allowing interest payments to be made subject to withholding tax (WHT) at the reduced tax treaty rate, will now be made available to all UK borrowers that have an obligation to deduct WHT, including UK partnerships, individuals and charities. Transparent entities (including partnerships) will be admitted to the scheme as lenders where all of the constituent beneficial owners of the income are entitled to the same treaty benefits under the same treaty. Sovereign wealth funds and pension funds which are utilising WHT treaty rates will also be admitted as lenders. HMRC have now published the scheme’s Terms and Conditions and Guidance, which will apply to loans entered into on or after 6 April 2017. See

HMRC issue briefing on changes to the PAYE tax system
HMRC have published a briefing on changes to the PAYE tax system which will be introduced from the end of May 2017.  This draws attention to HMRC’s plans to start making in-year adjustments to tax codes, so as to reduce the number of over and under-payments after year-end.  Apparently 41 million people are paid through PAYE. Currently about 5 million end up having overpaid tax, while 3 million have underpaid.  HMRC will start making changes from May this year to reduce these numbers. If there is a change which affects their tax, HMRC will send taxpayers a tax code change notice which will explain the change, and will also encourage taxpayers to set up and use an Online Personal Tax Account. See

VAT: Revenue & Customs Brief 1(2017) - historical bad debt relief claims
In October 2016, the Court of Appeal ruled in GMAC that features of the bad debt relief (BDR) regime which existed in UK law before 1997 (in particular, that a retention of title clause precluded any claim) were disproportionate. HMRC have now published Revenue & Customs Brief 1(2017), responding to this judgment and inviting BDR claims in certain specific circumstances. In principle, HMRC accept that BDR claims can now be made for supplies of goods between 1989 and 1997, although periods prior to 1989 are time-barred. However, HMRC are naturally concerned to ensure that relief is not claimed twice and that taxpayers do not submit claims where BDR was given at the time. This is likely to mean that issues will arise in relation to the evidence that is available for supplies that were made many years ago. For example, retention of title would not have prevented a BDR claim if the customer had resold the goods (albeit in breach of a Romalpa clause). HMRC note that this might be rare in the case of high value goods that were routinely repossessed but would be more common in businesses which purchased goods for resale. The challenge, therefore, will now be to establish what evidence will satisfy HMRC that claimants suffered bad debts on supplies of goods made under retention of title terms, have not previously claimed relief and are now claiming the correct amount of BDR. To discuss the Brief, or its implications, please contact Peter White on 0113 292 1711. See

VAT: Advocate General suggests ‘cost sharing exemption’ should be widely available
Advocate General (AG) Wathelet has delivered his opinion in the ‘cost-sharing exemption’ infringement case brought by the European Commission against Germany. See The case concerns Germany's approach to the ‘cost sharing exemption’, which restricts the benefit of exemption to the supply of services by independent groups of persons whose members carry on activities or professions in the health sector. AG Wathelet agreed with the Commission that the restriction imposed in German law had no basis in EU law and suggested that the exemption was available to a wide range of businesses. His opinion differs in a number of respects from the views expressed recently by AG Kokott in the ‘cost sharing exemption’ cases of DNB Banka and Aviva, in which she proposed a narrower interpretation of the relevant EU law. The decisions of the CJEU in these cases, and in the case of Commission v Luxembourg, should clarify the scope of the EU law exemption for supplies by ‘cost sharing groups’. For further information about the cases, please contact Richard Insole on 020 7303 0062.

Dbriefs webcasts
There are a number of Dbriefs webcasts over the next month covering such topics as Life After (Shareholder) Debt, The Requirement To Correct And The Worldwide Disclosure Facility and the UK Tax Monthly Update (May). 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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