Corporate tax update - First quarter 2018

Welcome to the latest edition of our Corporate Tax Update, written by members of RPC’s tax team and published quarterly.

In this first 2018 edition we highlight some of the key tax developments of interest to UK corporates from the first quarter of 2018.

Spring Statement 2018

On 13 March 2018, the Chancellor delivered the first Spring Statement (under the new approach of having a single fiscal event – or Budget – in the Autumn).

Corporation tax – general

UK transfer pricing rules updated to reflect latest OECD guidelines

 On 1 March 2018, the Taxation (International and Other Provisions) Act 2010 Transfer Pricing Guidelines Designation Order 2018 was made.

Interest deductibility restriction rules – updated HMRC guidance published

On 28 February 2018, HMRC published further, updated, guidance on the interest deductibility restriction rules applicable from 1 April 2017.

Intangible fixed assets tax regime – consultation launched

On 19 February 2018, HMRC published a consultation document on reform of the UK’s intangible fixed assets (IFA) tax regime.

Simplified arrangements for carried-forward losses surrendered as group relief

 On 8 January 2018, regulations were made to simplify the arrangements for claiming group relief for carried forward losses.

VAT

University investment activity VAT recovery – Court of Appeal refers questions to ECJ

On 27 March 2018, the Court of Appeal referred to the ECJ questions as to the ability of the University of Cambridge (University) to recover input VAT incurred in connection with the University’s investment activities.

Revised HMRC guidance on VAT cost sharing exemption – bad news for insurers, banks

 On 22 March 2018, HMRC published Revenue and Customs Brief 3 (2018) in light of recent ECJ decisions on the VAT cost sharing exemption (CSE). Whilst expected, given the conclusions reached in those decisions, the revised HMRC policy will be disappointing for insurers and other financial services groups.

VAT zero-rating treatment denied for digital versions of newspapers

 On 8 March 2018, the First-tier Tribunal held that digital versions of certain newspapers did not qualify for zero-rating treatment available to the print editions of the same newspapers.

Upper Tribunal decision on VAT “builder’s block”

On 26 February 2018, the Upper Tribunal allowed, in part, the taxpayer’s appeal in relation to its ability to recover input VAT incurred on the provision of certain white goods, kitchen appliances and carpets installed in newly built properties.

VAT grouping rules – “informal” consultation
On 1 February 2018, HMRC wrote to the Chartered Institute of Taxation (CIOT) inviting CIOT to discuss HMRC’s “interim” views on possible changes to the VAT grouping rules. A response was requested by 16 March 2018.

First-tier Tribunal holds that UK broker did not constitute a UK fixed establishment of a non-EU insurer for VAT purposes

On 19 January 2018, the First-tier Tribunal held that the resources of a UK insurance broker did not constitute a “fixed establishment” for VAT purposes in the UK of a non-EU insurer. As a result, the UK broker was entitled to recover input tax attributable to the supplies it provided to the non-EU insurer.

Employment

EMI share options – lapse of EU state aid approval

On 4 April 2018, HMRC issued an announcement confirming that EU state aid approval for EMI options would expire on 6 April 2018. more>

HMRC wins high-profile TV presenter IR35 case

On 10 February 2018, the First-tier Tribunal held that a former BBC presenter was, for tax purposes, to be treated as an employee. This is the first in a large number of cases being taken by HMRC against TV presenters, relying on the application of the “IR35” tax rules. more>

Government launches consultation on employment status, following publication of the Taylor Review

On 7 February 2018, the government published a consultation on employment status, following the July 2017 publication of the Taylor Review. The consultation closes on 1 June 2018 and in it the government pose 64 questions, in 7 different sections.

Upper Tribunal considers companies to be MSCs due to provider’s involvement

On 19 January 2018, the Upper Tribunal held that five companies were “managed service companies” (MSCs) for tax purposes due to the level of involvement of the companies’ provider. more>

Stamp taxes

Welsh Land Transaction Tax – WRA guidance and HMRC SDLT guidance on “cross-border” transactions

In advance of the introduction of Welsh Land Transaction Tax (LTT), which replaced SDLT for Welsh land acquisitions from 1 April 2018, the Welsh Revenue Authority has published a number of pieces of guidance on the new rules.

International

BEPS – furtherOECD guidance on attribution of profits to (extendeddefinition of) PEs

On 22 March 2018, the OECD published further guidance on the attribution of profits to permanent establishments (PEs), in light of the changes to the definition of a PE resulting from the OECD’s Base Erosion and Profit Shifting (BEPS) project.

OECD Report on Tax Challenges Arising from Digitalisation

On 16 March 2018, the OECD published an “Interim Report 2018” on Tax Challenges Arising from Digitalisation.

Mandatory disclosure by intermediaries of cross-border tax planning arrangements

On 13 March 2018, the EU Council agreed to a measure to require the mandatory disclosure by intermediaries to their local tax authorities of certain cross-border tax planning arrangements.

Taxing the digital economy – draft EC directives published

On 21 March 2018, the European Commission published two draft Directives relevant to the taxation of the digital economy.

Luxembourg appeals against the European Commission’s ruling in respect of Amazon

On 26 February 2018, the European Commission (EC) published the text of its October 2017 decision against Luxembourg (which found that Luxembourg had, in the EC’s view, granted illegal state aid to Amazon).

Miscellaneous

“Loyalty bonuses” paid to investors not subject to withholding tax as “annual payments”

On 8 March 2018, the First-tier Tribunal held that so-called “loyalty bonuses” paid to investors by an investment platform service provider (Hargreaves Lansdown) were not “annual payments” subject to withholding of basic rate income tax.