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Business Tax Briefing - 13/04/2017


Finance (No 2) Bill  progress
The programming motion for the Finance (No 2) Bill shows that the following have been selected for debate in a Committee of the Whole House: Clause 7 and Schedule 1 (services provided to public sector through intermediaries); Clauses 58 and 59 (insurance premium tax); Clause 65 (alcohol liquor duties); Clause 107 (soft drinks industry levy); Clauses 120 to 122 and Schedule 25 (digital reporting and record-keeping);  Clauses 124 to 129 and Schedules 27 to 29 (tax avoidance and evasion) plus any New Clauses and Schedules on these topics. The remainder of the Bill will be remitted to a Public Bill Committee for examination. Proceedings in the Public Bill Committee must finish by 4 May 2017, if not already concluded. The Bill will have its Second Reading on 18 April 2017.

Tax policy: Treasury Committee hearings on Budget 2017
Financial Secretary to the Treasury Jane Ellison has written to Andrew Tyrie, Chair of the Treasury Select Committee, to say the Government is not persuaded it would be helpful to invite experts to give oral evidence to parliament on the Finance Bill. See http://deloi.tt/2p9wvjQ
This was recommended by the Select Committee, and by the Chartered Institute of Taxation (CIOT), the Institute for Government and the Institute for Fiscal Studies (IFS) in their report on improving tax policy making published in January. Accordingly, Mr Tyrie has announced that, for this year’s Budget, the Treasury Committee will be holding four additional evidence sessions focussed on taxation. These will start on 18 April with evidence from the CIOT and other tax professional bodies, followed by a session on self-employment with the Resolution Foundation and the Association of Independent Professionals and the Self-Employed and another on business rates with the CBI and Royal Institution of Chartered Surveyors, before the sessions with HMRC and the Chancellor. See http://deloi.tt/2ouXIwi

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 http://deloi.tt/2p1rIku

Dbriefs webcasts
The next Dbriefs webcast is on Tuesday 25 April at 13.00 BST/14.00 CEST. The topic is Life After (Shareholder) Debt and it is from our new Real estate series. David Brown will be hosting the webcast and during the call our panel of experts will discuss the impact of the UK Finance (No. 2) Bill 2017 on real estate companies and investors and what actions need to be taken in response. To register for the webcast, click here.  

UN Practical Manual on Transfer Pricing for Developing Countries
The second edition of the United Nations Practical Manual on Transfer Pricing for Developing Countries was launched on 7 April. See http://deloi.tt/2p1CAPh The revised Manual takes into consideration the outputs of the G20/OECD BEPS Project, including providing revised guidance on documentation, comparability analysis, and bringing in an additional section on commodity transactions in the Methods chapter. See http://deloi.tt/2oWZms0  

Taxing Wages 2017: OECD report
The OECD has published its annual publication on details of taxes on wages in OECD countries. It covers personal income taxes and social security contributions paid by employees, social security contributions and payroll taxes paid by employers, and cash benefits received by in-work families. The publication shows that taxes on labour income for the average worker across the OECD continued to decrease for the third consecutive year during 2016, dropping to 36% of labour costs. See http://deloi.tt/2ppnRuj

PML Accounting: HMRC win in judicial review claim re information notices
The High Court has rejected a judicial review claim arising out of an enquiry into whether clients of the claimant are ‘managed service companies’, and whether the claimant itself is a ‘managed service company provider’. HMRC had issued an information notice, as a result of which the claimant provided HMRC with some information and documents. In an appeal against penalties imposed because these were incomplete, the First-tier Tribunal held that the underlying information notice was invalid and therefore the penalties could not stand. HMRC returned the documents to the claimant and undertook not to rely on them. In the judicial review proceedings, the claimant argued that HMRC should destroy the information provided in response to the notice and undertake not to make use it for any future purpose.  HMRC contended that they should be able to continue their enquiry and the separate criminal investigation they had launched. The Court held the First-tier Tribunal was wrong in assuming that it had had jurisdiction to consider the validity of the information notice. The claimant had failed to establish the grounds it advanced, based on alleged public law illegality on HMRC's part and alleged breaches of Article 8 ECHR. Even if it had succeeded in doing so, the Court would have refused the orders sought. See http://deloi.tt/2plPq7A

Investment Trust Companies: Supreme Court rejects claims for restitution
The case of Investment Trust Companies considers whether, rather than seeking repayment of incorrectly charged VAT from suppliers, taxpayers can look directly to HMRC for restitution. In this case, a High Court action potentially allowed investment trusts to circumvent the time limits that would apply to claims under s.80 VATA 1994, and avoid set-off provisions under which their suppliers (investment managers) could only reclaim overpaid VAT net of input tax that they had recovered. However, the Supreme Court has now ruled that such an approach is available only in limited circumstances. The English law of restitution might support a claim by the trusts against their investment managers, but not against HMRC. The fact that the managers had incorrectly charged output tax to the trusts could not be treated as part of the same event as the managers accounting to HMRC for VAT on their returns. In any event, the scheme for claims created by s.80 was not consistent with a concurrent non-statutory ability for trusts to claim direct from HMRC. Finally, the Supreme Court confirmed that s.80 was compatible with EU law. An EU law claim might be possible if it was impossible or excessively difficult for the trusts to secure repayment of VAT incorrectly charged. However, none of the managers had become insolvent, and therefore the trusts had an ability to pursue the managers, and no reason to seek overpaid VAT direct from HMRC. Although the judgment does not entirely exclude the possibility of customers claiming VAT directly from HMRC, it appears that such situations will be rare in practice. See http://deloi.tt/2ptvjEu To discuss the case, please contact Richard Insole on 020 7303 0062.

Excise Duty: EU consultation on harmonisation and simplification
The European Commission has launched a consultation about a set of possible options for the revision of
Council Directive 2008/118/EC, which sets out the general procedures for the holding and movement of excise goods (alcohols and alcoholic beverages, manufactured tobacco products, energy products) in the European Union. It also explains the procedures for deferring payment of excise duty available to authorised traders who hold or move excise goods. The consultation is based on an on-line survey and responses are sought from EU citizens, economic operators and other stakeholders by 4 July 2017.


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