USA Weekly Tax Update 20 October 2021
The latest tax update and VAT round up for the week.
Tax Update provides you with a round-up of the latest tax developments. Covering matters relevant to individuals, trusts, estates and businesses, it keeps you up-to-date with tax issues that may impact you or your business. If you would like to discuss any aspect in more detail, please speak to your usual Smith & Williamson contact. Alternatively, Ami Jack can introduce you to relevant specialist tax advisors within our firm.
1. General
1.1 HMRC agent update 89
HMRC has published Agent Update 89, which provides an overview of the recent issues of which tax agents should be aware. It includes updates on HMRC services, and forthcoming changes.
The latest Agent Update summarises various recent issues and changes, including:
- the new UK-Swiss convention on social security coordination, which will be available to use later this year;
- guidance on declaring COVID-19 support scheme overpayments on company tax returns;
- the winding up of the Coronavirus job retention scheme;
- information about the new health and social care levy;
- a reminder of the extended loss carry back measure;
- information on viewing customer data on the Trust Registration Service;
- an update on making tax digital for income tax; and
- how to use the new agent view of employer liabilities and payments for PAYE.
1.2 UT upholds FTT decision on disclosure of documents
The UT has agreed with the FTT on its analysis of what documents could be disclosed to one shareholder to assist his appeal, in circumstances where some of the documents were about another shareholder’s personal tax affairs, but might be relevant. It struck a balance between privacy and relevance, as only some documents were disclosed.
Following an HMRC investigation, two companies went into liquidation while in debt to HMRC. HMRC issued personal liability notices to two of the shareholders (M and B), on the basis that HMRC held they were responsible for deliberate inaccuracies in the companies’ tax affairs. Their appeals against these were directed to be heard together. B’s case was that M was solely responsible for the running of the companies, and M’s that he was not responsible.
In HMRC’s statement of case for the appeal, it referred to previous investigations into M’s tax affairs, including accusations of fraud. B asked HMRC to disclose documents relating to these to him, but M objected. HMRC applied to the FTT for a direction permitting them to disclose the documents to B, and M applied asking for the documents to be excluded from evidence at the hearing.
The parties had agreed to classify the documents as various levels of confidentiality, and the FTT allowed both applications in relation to some documents, but not others. M and B both appealed, but the UT upheld the FTT decision. Essentially, documents that were irrelevant were excluded. Of the relevant evidence, some should be excluded where the relevant material came with a lot of irrelevant and prejudicial material.
Mitchell and Bell v HMRC [2021] UKUT 250 (TCC)
www.bailii.org/uk/cases/UKUT/TCC/2021/250.html
1.3 Tax at the party conferences
Following the party conferences the CIOT has published a brief summary of discussion around tax at each. Below are some of the headlines.
Conservatives
The Chancellor defended the forthcoming tax rises at the conference, and informed members that tax cuts would be made once the public finances are on a sustainable footing. The tax rises were debated at conference, but naturally announcements will wait for the Budget. At a fringe debate about the prospect of a wealth tax, the proposal did not meet with much support.
Liberal Democrats
At the Lib Dem conference, business tax was discussed extensively. The party supports a global minimum corporation tax rate, but at a higher level than the current 15%. It suggested 21% instead in line with original US proposals, and with more attention to the concerns of developing countries. The party continues to support restricting profit movement out of the UK to low tax jurisdictions, encouraging investment with simplified and increased national allowances, and introducing a general anti-avoidance rule.
In relation to COVID-19, there was some support for a windfall tax on companies that have benefited from the pandemic, such as online delivery companies. The party supports an extension of the support schemes for the employed and self-employed, open to more of the self-employed.
Small business support is a priority, with proposals including an increased NIC employment allowance, boosts for young companies, and support for those struggling post-COVID-19, for example debt restructuring.
The Lib Dem manifesto policy of adding 1p to each income tax rate to increase NHS funding and social care was reaffirmed. It opposes the Government’s National Insurance increase, and criticised the freezing of the personal allowance. Consultation on a universal basic income policy continues, possibly funded by a land value tax.
‘Green’ taxes are also a focus, with proposals including income tax deductions for the cost of insulating homes, retargeting transport taxes to support environmentally friendly options, and measures to limit emissions in industry, though a single carbon tax is no longer supported.
Labour
The Leader of the Opposition has refused to rule out tax rises if in power, but has stated that it is too far from an election to make firm tax commitments.
At conference, the party set out new proposals to reform business taxation, including scrapping business rates to support high streets. Online companies would face higher taxes. The replacement for business rates is not finalised, but could be a levy based on property values.
As with the Lib Dems, Labour supports a global minimum tax rate, but of 21% rather than 15%. It does not support the NIC increase, but has not set out a firm alternative. There was some interest in a wealth tax at a fringe debate.
The party plans to review every tax relief to ensure that they are ‘value for money’. One target is the taxation of carried interest, which they plan to make taxable as income, and another the exemption for private schools on VAT and business rates, by removing their charitable status.
www.tax.org.uk/conservative-conference-2021-swallow-tax-rises-now-and-low-tax-agenda-will-return-promise-ministers
www.tax.org.uk/labour-conference-2021-labour-promises-biggest-overhaul-of-business-taxation
www.tax.org.uk/lib-dem-conference-2021
2. Private client
2.1 Making tax digital guidance clarified for non-UK residents and non-UK domiciliaries
HMRC has updated the Making Tax Digital (MTD) for income tax guidance to confirm that taxpayers not resident in the UK or not domiciled in the UK need only follow the MTD rules for their UK self-employment and property income.
HMRC has added a section to the guidance as follows:
If you’re domiciled or resident outside the UK you only need to follow Making Tax Digital for Income Tax rules for your UK self-employment and property income.
“We’ll ask you to confirm your domicile status when you sign up for Making Tax Digital for Income Tax. You’ll not need to sign up in relation to your relevant foreign income.”
It was assumed that this is how the rules would work, but the updated guidance removes any ambiguity.
www.gov.uk/guidance/check-if-youre-eligible-for-making-tax-digital-for-income-tax
3. PAYE and employment
3.1 HMRC Employer Bulletin: October 2021
The latest Employer Bulletin from HMRC covers information and updates on COVID-19 support measures as well as taxable benefits for employees.
It includes information on:
- the new health and social care levy;
- PAYE reporting over the Christmas period;
- PAYE settlement agreements;
- payrolling expenses and benefits;
- the new UK-Swiss convention on social security coordination, which will be available to use later this year;
- the winding up of the coronavirus job retention scheme;
- updated guidance voluntary disclosures — PAYE liability involving offshore matters; and
- new guidance for businesses using temporary workers.
www.gov.uk/government/publications/employer-bulletin-october-2021
4. Business Tax
4.1 New HMRC guidance on joint and several liability notices
HMRC has issued guidance on anti-avoidance legislation introduced in 2020 that targets the use of corporate insolvency to avoid paying tax or penalties following avoidance or evasion. Individuals controlling the company (or LLP) can become liable for its tax debts.
Finance Act 2020 includes legislation that can place a company’s tax liabilities on those controlling it if the company is or is likely to become insolvent and has been involved in tax avoidance or evasion. Company directors, shadow directors, and some other individuals connected to a company can be issued with joint and several liability notices for tax owed by it. This applies if the company has engaged in tax avoidance or evasion, or been issued with penalties for facilitating such, and is going through an insolvency procedure or there is a serious possibility that it will do so. The legislation also applies to cases of repeated insolvency and non-payment of tax.
The guidance explains how the legislation will operate, including a number of examples of how it would work in various scenarios. It also covers how this provision interacts with other legislation and penalties, and explains the safeguards in force.
4.2 Political agreement on global minimum tax rate and the digital economy
Countries representing 90% of the world’s GDP have agreed at the OECD to implement a minimum 15% tax rate for large multinational enterprises from 2023.
136 countries out of the 140 OECD members have agreed that multinational enterprises will be subject to a minimum 15% tax rate, pillar two of the overall new agreement. It will apply to companies with revenue over €750m. It is hoped that this will assist in stabilising the international tax system, and give increased certainty to taxpayers and administrations.
Under pillar one, profits for many companies will also be reallocated around the world to ensure that the largest and most profitable enterprises pay a fair share of tax wherever they operate and generate profits. This will apply to companies with global sales over €20bn, and profitability over 10%, with 25% of profit above that threshold to be reallocated.
The multinational convention finalising this agreement should be signed in 2022 ahead of the 2023 implementation.
www.oecd.org/tax/international-community-strikes-a-ground-breaking-tax-deal-for-the-digital-age.html
5. Tax publications and webinars
5.1 Tax publications
5.2 Webinars
The following client webinars are coming up over the next month:
- 10 November 2021: S&W Sessions: Autumn Budget 2021
6. And finally
6.1 Better than the Derby
This week, And finally is getting its thrills from the ICAEW – specifically, a video that shows yearly tax revenue evolving from 1965 in the form of a race between the different taxes. Whilst we never need gimmicks to get excited about tax history, watching the dashing rise of VAT/purchase tax from a lowly fifth to a fine second place amongst a keen field cannot fail to thrill.
Sport aside, the insights are fascinating, showing as they do the changing face of tax. Does it truly reflect Government priorities, or wider economic changes? For all the noise about CGT and IHT, they never move out of the last two places.
Disclaimer
This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.
