Supreme Court judgment
for HMRC in Rangers EBT case
The Supreme Court has unanimously dismissed the taxpayer's appeal in RFC 2012 Plc (in liquidation) v Advocate General for Scotland (the Rangers EBT case), upholding the judgment of the Court of Session. The Supreme Court held that Parliament has sought to tax remuneration paid in money or money’s worth. Lord Hodge, who gave the judgement of the Court, said: ‘The central issue in this appeal is whether it is necessary that the employee himself or herself should receive, or at least be entitled to receive, the remuneration for his or her work in order for that reward to amount to taxable emoluments. A careful examination of the provisions of the primary legislation reveals no such requirement.’ As the facts as found by the First-tier Tribunal made it clear that the amounts paid into trust were in relation to the footballers’ employments, the general charge to tax arose before taking into account any other possible charges, for instance on loans. References to making a relevant payment 'to an employee' or 'other payee' in the PAYE regulations covered payment either to the employee or to the person to whom payment is made with the agreement of the employee. Lord Hodge emphasised that the imposition of a specific tax charge does not necessarily mean that there is not a more general charge to tax which may supersede the specific charge. He also warned against being ‘distracted by judicial glosses which have enabled the courts properly to apply the statutory words in other factual contexts.’ He went on to say: ‘the Courts must now adopt a purposive approach to interpreting tax legislation, and must identify and analyse the facts accordingly’. See http://deloi.tt/2sMZloc
HMRC have welcomed this decision, which will have implications beyond the facts of the individual case.
MEPs approve draft report on public country-by-country reporting
The European Parliament has voted in favour of the proposals for public country-by-country reporting contained in the report adopted on 12 June by the JURI and ECON Committees of the European Parliament. Under the proposals, the income tax information of multinationals with worldwide turnover of €750 million or more would be published in a common template in each tax jurisdiction in which it operates. The data would be available free of charge and made publicly accessible on the company’s website. The multinational would also be responsible for filing a report in a public registry managed by the European Commission. The Parliament also supported measures to protect commercially-sensitive information by allowing Member States to grant exemptions from the requirement to provide one or more pieces of information, subject to limitations on those exemptions. The Report now goes back to the Committees to start further negotiations on the basis of a plenary mandate. See http://deloi.tt/2tJc7sk
The next Dbriefs webcast is on Tuesday 11 July at 12.00 BST/13.00 CEST. The topic is Corporate Interest Restrictions: Practical Guidance and it is from our UK tax focus series. During the webcast, our panel of experts will discuss the draft corporate interest restriction legislation which is expected to be reintroduced and enacted later this year and how this may impact your organisation. To register, click here.
On Tuesday 18 July at 12.00 BST/13.00 CEST there is another webcast from our UK Tax Focus series: A New Era For Tax Compliance: Mastering The UK’s Tax Digital Journey. During the webcast, our panel of experts will discuss HMRC’s making tax digital transformation programme and similar initiatives in other countries and what your organisation could and should be doing now to prepare for the ‘Age of Digital’. To register, click here.
Treasury ministerial responsibilities
The details of the ministerial responsibilities of the new Treasury team are now available. As expected, Financial Secretary to the Treasury Mel Stride MP is the lead tax minister. See http://deloi.tt/1oYgLYq
Exchequer Secretary Andrew Jones MP supports Mel Stride as lead tax minister, and is responsible for indirect taxes, including excise duties and the soft drink industry levy, environment and transport taxation, North Sea oil, gas and shipping. See http://deloi.tt/1l3g101
OECD Secretary-General Report to the G20 Leaders
The OECD has released the report given by OECD Secretary-General Angel Gurrķa to the G20 Leaders ahead of their meeting in Hamburg. The report highlights the exchange of information on tax rulings in line with BEPS Action 5, which has resulted in information exchanged on more than 6,000 tax rulings, and the signing of the Multilateral Convention by nearly 70 jurisdictions. Over 60 jurisdictions will have activated nearly 2,000 bilateral relationships for the automatic exchange of CRS information by July 2017, including all 50 jurisdictions committed to undertaking first exchanges in 2017, and a further 51 will exchange information in 2018. See http://deloi.tt/2tUznUs
Office for Tax Simplification report: simplification of the corporation tax computation
The Office for Tax Simplification (OTS) has published its report on the simplification of the corporation tax computation. Recommendations include:
· The smallest companies should use the accounting profit prepared under accounting standard FRS105 as the taxable profit without any adjustments. For slightly larger companies, it is proposed that they need only consider five or six potential tax adjustments.
· Aligning the tax definition of capital and revenue more closely aligned with the accounts definitions, aligning the rules for trading and management expenses and replacing the schedular system by a ‘whole business’ approach.
· Exploring the possibility of replacing capital allowances by an accounts depreciation approach. Read more
Littlewoods: compound interest: Supreme Court hearing
The Supreme Court has considered two of the issues arising in the Littlewoods’ compound interest appeal. The first issue concerned whether s.78 VATA (interest) should be read together with s.80 VATA (output tax claims) as a coherent tax code, meaning that restitutionary claims for compound interest are prevented by statute. The Supreme Court has reserved its judgment. A finding in HMRC’s favour would mean that Littlewoods has to establish that payment of simple interest is contrary to EU law, in order for its claim to have any chance of success. Detailed arguments from the parties on this second issue, in particular on the meaning of ‘adequate indemnity’, led the Supreme Court to ask whether another reference to the CJEU was required. The parties were in agreement that, if the Court was minded to refer the matter to Europe, there was no point in considering the other issues. The Supreme Court normally takes around three months to deliver its judgment, although the summer recess and the possibility of a reference may affect the timetable. See http://deloi.tt/2swzeCl To discuss the case or its implications, please contact David Walters on 0113 292 1552.
RGEX-Geissel and Butin: German invoicing rules too restrictive: Advocate General
In a number of recent decisions, the CJEU has found that irregularities in VAT invoices should not deny input tax recovery to customers. In RGEX-Geissel and Butin, two car dealers in Germany were purchasing cars from suppliers who only showed letterbox addresses on their invoices. Advocate General (AG) Nils Wahl considers that German rules which require the principal place of business to be shown on any invoice are too strict: a letterbox address is a valid address for the purposes of the invoicing rules in the Principal VAT Directive. The AG recognises that the German tax authorities may have had some doubts as to whether the suppliers would account for VAT properly, and noted that input tax recovery can be compromised where a customer ‘knew or should have known’ that a transaction was connected with fraud. However, this principle did not allow tax authorities effectively to transfer their investigative responsibilities to taxpayers. A car dealer cannot be expected to visit the principal place of business of each supplier, especially when modern business practices mean that businesses are increasingly mobile. See http://deloi.tt/2sKHAe1 To discuss the case, please contact Darren Hattersley on 0113 292 1739.
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.
Deloitte LLP is a limited liability partnership registered in England and Wales with registered number OC303675 and its registered office at 2 New Street Square, London, EC4A 3BZ, United Kingdom.
Deloitte LLP is the United Kingdom affiliate of Deloitte NWE LLP, a member firm of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”). DTTL and each of its member firms are legally separate and independent entities. DTTL and Deloitte NWE LLP do not provide services to clients. Please see http://www.deloitte.com/about to learn more about our global network of member firms.