Tax update - September 2019

In this month’s update we report on (1) HMRC’s consultation on draft regulations implementing the requirement to disclose certain cross-border arrangements; (2) the Financial Secretary to the Treasury’s statement to Parliament on HMRC powers; and (3) the government’s response to the Joint Committee’s recommendations on the Draft Registration of Overseas Entities Bill.

We also comment on three recent cases relating to (1) the setting aside of follower notice penalties; (2) the tax residency of Jersey incorporated SPVs; and (3) entrepreneur’s relief.

News items

HMRC consults on draft regulations implementing the requirement to disclose certain cross-border arrangements

HMRC is seeking views on new rules that will require the disclosure to HMRC of certain cross-border arrangements that could be used to avoid or evade tax. The International Tax Enforcement (Disclosable Arrangements) Regulations 2019 will implement European Directive 2018/822, which requires the mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements from 1 July 2020.  Read more

Written statement to Parliament on HMRC’s powers and taxpayer safeguards

In a written statement to Parliament, Jesse Norman has set out actions HMRC are taking to maintain and develop public trust in its operations in response to the House of Lords Economic Affairs Committee report entitled: “The Powers of HMRC: Treating Taxpayers Fairly”.  Read more

Government response to recommendations on the draft Registration of Overseas Entities Bill

The government has published its response to recommendations made by the Joint Committee regarding the draft Registration of Overseas Entities Bill. The government has welcomed the report of the Committee and has committed to acting in several areas.  Read more

Case reports

Corrado – follower notice penalty set aside

In Giulio Corrado v HMRC [2019] UKFTT 275 (TC), the First-tier Tribunal (FTT) has set aside a follower notice (FN) penalty as the taxpayer’s failure to take corrective action in response to a FN was reasonable in all the circumstances.  Read more

Development Securities – Jersey incorporated SPVs not UK tax resident

In Development Securities plc and others v HMRC [2019] UKUT 0169 (TCC), the Upper Tribunal (UT) has held that a number of Jersey-incorporated companies were in fact resident for tax purposes in Jersey. This decision overturned the decision of the FTT, which had held that the companies were UK tax resident as a result of the central management and control (CMC) of the companies being exercised in the UK (through the companies’ parent). The UT took the view that the FTT had incorrectly concluded that the Jersey company directors had abdicated their decision-making responsibility.  Read more

Warshaw – preference shares can amount to ordinary share capital for the purposes of entrepreneurs’ relief

In Steven Warshaw v HMRC [2019] UKFTT 268 (TCC), the FTT has confirmed that as the relevant preference shares did not attract a fixed dividend, they could amount to ordinary share capital, for the purpose of entrepreneurs’ relief (ER).  Read more