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.
1.1 Tax at the Lib Dem conference
No new tax policy was passed at the Liberal Democrat conference, but the party reaffirmed earlier commitments, and passed a motion to support a universal basic income (UBI).
Reports from the party conference show that the Lib Dems agree with the consensus that tax rises should not happen immediately, due to the weak economy. The leader, Sir Ed Davey, did however state: ‘I think tax rises in a year or two need to be considered.’. He plans to look at tax reform, in particular to adjust the balance between multinational and small businesses.
The party did not set details of the proposed UBI. Previously announced Lib Dem policies include a wholesale reform of business taxation, and increases to IT and CGT rates.
1.2 AirBnB shares host data with HMRC
HMRC has resolved an investigation into the tax affairs of the popular holiday rental website AirBnB, by collecting both £1.8m tax from the company, and details of those advertising property on it.
AirBnB will supply HMRC with earnings data going back to 2017 from an estimated 225,000 UK hosts. Resolving an enquiry into a company by involving other taxpayers is unusual, though it is in addition to the extra tax paid by AirBnB itself.
Many hosts renting out a room in their main residence will be able to claim rent-a-room relief to exempt the earnings from income tax, but it is likely that the data share will lead to a number of investigations into taxpayers.
2. PAYE and employment
2.1 Guidance on the Job Retention Bonus
The new guidance on the Job Retention Bonus (JRB) confirms that it will be taxable income for businesses. Individuals receiving the JRB separately to a business will not, however, be taxed on the receipt.
The JRB is a one-off payment of £1,000 to employers for each eligible employee who was furloughed and then continuously employed until 31 January 2021. The guidance issued by HMRC explains the eligibility criteria and the steps that must be taken to be ready to claim the bonus between 15 February and 31 March 2021. It also confirms that payments under the JRB are subject to CT and IT if they are received by a business. An individual who employs someone otherwise than as part of a business will not be subject to IT on the JRB. This includes, for example, individuals employing nannies or domestic staff. The guidance will be updated by the end of January with details of how to access the online claim service.
2.2 NIC exemption for test and trace support payments
Secondary legislation has been passed to ensure that test and trace support payments are exempt from NICs.
The Government recently introduced the Test and Trace Support Payment Scheme. The Scheme provides payments of £500 to lower-income individuals who have lost income as a result of self-isolating at the request of the NHS. The legislation ensures that these payments will be exempt from Class 1 and Class 1A NICs from 22 October 2020. HMRC has stated that it will exercise its administrative powers in the interim period to exempt the payments from NICs until the legislation comes into force.
3. Business Tax
3.1 OECD announces delays to the global digital services tax
The deadline for the members of the OECD to reach a consensus on the framework for a global digital services tax has been delayed until mid-2021. The UK Digital Services Tax (UK DST) is therefore likely to apply for longer than initially expected.
The OECD has been developing a framework for a global digital services tax, which is comprised of two ‘pillars’. The blueprints of these pillars have now been published in a report by the OECD and the G20 Inclusive Framework on Base Erosion and Profit Shifting. The report notes, however, that the original deadline of December 2020 has been delayed until mid-2021.
When the Government introduced the UK DST, it was made clear that this domestic measure would be replaced with the global tax regime when it is finalised. The delay to the global consensus therefore means the UK DST is likely to apply for longer than expected.
4.1 Updated post-Brexit rules for goods arriving in the UK
The rules for the VAT treatment of goods arriving in the UK from 1 January 2021 have been updated. The guidance now includes more details on the commencement date and VAT registration requirements.
The rules were initially published in July 2020, and set out the changes that will be introduced when the transition period has ended. The update confirms that the rules will only apply to transactions with a time of supply on 1 January 2021 or later. Transactions with an earlier time of supply will not be subject to the new rules, even if dispatch and delivery occur after 1 January 2021.
It also explains that online marketplaces must register for UK VAT to be able to account for VAT on deemed supplies. Businesses directly selling to customers where the goods are outside the UK at the point of sale also need to register for VAT. The distance selling threshold for sales from the EU will no longer apply from 1 January 2021. Registration will therefore be required for non-UK businesses that incur a UK VAT liability, regardless of the volume of sales.
4.2 Deduction of import VAT by non-owners of goods
Revenue & Customs Brief 15 (2020) clarifies HMRC’s policy on import VAT deducted as input tax. It confirms that only the legal owner of the goods is eligible to reclaim import VAT.
The Brief sets out HMRC’s review of Revenue & Customs Brief 2 (2019). That earlier Brief explained HMRC’s policy on reclaiming VAT paid on imports which were challenged by a number of businesses and advisers. Having reviewed the position, the outcome of the review is set out in Brief 15 (2020) which confirms that in HMRC’s view, their policy is correct. The owner of the imported goods is the person who is eligible to reclaim import VAT paid. Their details should be included in box 8 of the import declaration.
The brief also confirms that it is the owner of the goods who can used postponed VAT accounting. Other parties involved in the import of the goods cannot use the process.
5. Tax publications and webinars
5.1 Tax publications
The following Tax publications have been published
6. And finally
6.1 Top sliced
In the March Budget, practitioners were pleased to hear that top slicing relief would be resolved once and for all. As anyone with experience will know, the calculation is painful enough without disagreement on how personal allowances are used. After a taxpayer won that point at the FTT, (see Silver v HMRC  UKFTT 263 (TC)) and this legislation confirmed that his calculation method should be used from then on, it seemed that we could all move on.
HMRC, however, has not moved on. It accepts that this calculation method should be used now. It accepts that it can be used for 2018/19, and will write to those taxpayers affected. But for the taxpayers in limbo over the prior years? Hmm…no. The Silver decision, being FTT, is not binding on HMRC, and HMRC withdrew its appeal to the UT shortly after the Budget. Result: no case law for taxpayers to rely on, many taxpayers unaware that they could be affected, and uncertainty over minor allowances.
Taxpayers should not have to fight for tax relief that is clearly due. It is possible that no taxpayer will wish to follow Silver into the courts, so HMRC may get away with leaving this point seemingly unresolved. Shame.
|ATT – Association of Tax Technicians||ICAEW - The Institute of Chartered Accountants in England and Wales||CA – Court of Appeal||ATED – Annual Tax on Enveloped Dwellings||NIC – National Insurance Contribution|
|CIOT – Chartered Institute of Taxation||ICAS - The Institute of Chartered Accountants of Scotland||CJEU - Court of Justice of the European Union||CGT – Capital Gains Tax||PAYE – Pay As You Earn|
|EU – European Union||OECD - Organisation for Economic Co-operation and Development||FTT – First-tier Tribunal||CT – Corporation Tax||R&D – Research & Development|
|EC – European Commission||OTS – Office of Tax Simplification||HC – High Court||IHT – Inheritance Tax||SDLT – Stamp Duty Land Tax|
|HMRC – HM Revenue & Customs||RS – Revenue Scotland||SC – Supreme Court||IT – Income Tax||VAT – Value Added Tax|
|HMT – HM Treasury||UT – Upper Tribunal|
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.