Tax Bites - February 2021

Welcome to the latest edition of RPC's Tax Bites - providing monthly bite-sized updates from the tax world.

As always, if there are any areas on which you would like more information (or if you have any questions or feedback), please let us know or get in touch with your usual RPC contact.

News

Taxpayers permitted to make late elections to spread Loan Charge payments
HMRC has issued a statement of practice explaining how taxpayers who are subject to the Loan Charge can make a late election to spread their outstanding disguised remuneration loan balance evenly across three tax years (2018/19, 2019/20 and 2020/21). Read more 

Research and Development credit cap introduced to prevent abuse
HMRC has published a policy paper explaining the measures which have been introduced to prevent abuse of Research and Development (R&D) tax relief for small and medium­sized enterprises (SMEs). Read more

HMRC commences interest rate review
Following the 2019 independent review into the loan charge, which recommended, amongst other things, that HMRC review its interest rates policy, HMRC has announced that it will commence a review into how it will continue to set interest rates and charge and pay interest in the future on underpaid/overpaid tax. Read more

Proposed changes to Follower Notices penalties
HMRC has begun a consultation and published draft legislation regarding penalties for failing to take corrective action in response to Follower Notices. The legislation proposes a reduction in the penalty rate from 50% to 30% of the "denied advantage". Read more

Consultation launches on treatment of asset-­holding companies
HM Treasury has published a second consultation concerning the tax treatment of asset-­holding companies (AHCs) in alternative fund structures. Read more 

HMRC chooses to ignore decisions on retrospective penalties
HMRC has published guidance in the form of a Stamp Taxes Newsletter in which it confirms its view that notices imposing daily late filing penalties can be retrospective and do not need to be issued in advance of the date from which the penalty is payable. Read more

Case reports

RT Rate: Legitimate expectation rights not engaged
In RT Rate Ltd and Others v HMRC [2020] UKFTT 392 (TC), the FTT has held that it does not have jurisdiction to consider claims for repayment of VAT based on the EU law principle of legitimate expectation. Read more 

McCabe: HMRC not required to disclose documents relating to discussions with the Belgian tax authority
In Kevin McCabe v HMRC [2020] UKUT 266 (TC), the UT has held that the FTT was correct not to order HMRC to disclose documents relating to discussions it had had with the Belgian tax authority, as the documents had no probative value and the tax authorities had raised confidentiality issues. Read more 

Total ­ Court of Appeal considers meaning of "just and reasonable" apportionment of profits
In Total E&P North Sea UK Ltd and Another v HMRC [2020] EWCA Civ 1419, the Court of Appeal (CoA) allowed the appellant companies' appeal and decided that the basis of the companies' apportionment of adjusted ring­fence profits was "just and reasonable", for the purposes of an election under section 7(5), Finance Act 2011 (FA 2011). Read more