Loss Relief: The Give and The Take
Share Loss Relief
There has been some good news for those companies wishing to offset losses from previous years to reduce their tax liability. This follows the European Commission’s challenge against the UK’s conditions to qualifying for the share loss relief scheme for income and corporation tax. Under this scheme, certain taxpayers could set a capital loss on a disposal of unquoted shares in a trading company against its income. The Commission took exception to one of those conditions, namely that the unquoted trading company had to carry on its business wholly or mainly in the UK.
A reasoned opinion was issued by the Commission in January 2019 which found such a condition to be incompatible with EU law. The Finance Bill 2020, which was debated at second reading on 27 April 2020, repeals this condition. However, this will only effect disposals that take place on or after 24 January 2019. This said, as the illegality of this condition has been confirmed by the Commission and impliedly accepted by the Government, it is possible that taxpayers could make claims for share loss relief where disposals occurred before 24 January 2019.
Should you be interested in the broader applicability share loss relief, please contact any member of our team who will be able to advise further.
Corporate Capital Loss Restriction
Unfortunately, the Finance Bill 2020 does not bring entirely good news for those seeking loss relief. This is because it also implements the corporate capital loss restrictions (CCLR) originally announced in Budget 2018.
This will bring carried-forward capital losses into the same regime as the corporate income losses restrictions (CILR) regime. Once enacted, this will mean that a deductions allowance of £5 million, which originally only applied to CILR, will be shared across the two restrictions. As such, where carried-forward capital losses exceed this allowance, the amount of chargeable gains that can be relieved will be restricted to 50%.
The CCLR will not, however, apply to the following:
- The offset of Basic Life Assurance and General Annuity Businesses (BLAGAB) losses against BLAGAB gains;
- Ring fenced allowable capital losses arising in certain UK extraction activities of oil and gas companies;
- Real estate investment trusts where the capital losses are attributable to property income distributions.
Although the Bill has only just debated at second reading at the end of last month, and the Public Bill Committee are not scheduled to report until 25 June 202, these provisions will apply to accounting periods beginning on or after 1 April 2020. Accounting periods that begin before this date but end after it will be split into two notional periods and will generally be treated as if they were two separate accounting periods.
The DBKAG & K (CJEU) decision: an opportunity for investment funds?
On 17 June 2021, the European Court decided the joint cases K (C-58/20) and DBKAG (C-59/20) regarding whether the supply of certain services constituted the “management of special investment funds”, benefiting from the VAT exemption enshrined in Article 135(1)(g) of Council Directive 2006/112/EC.
Raising the bar: UK Supreme Court clarifies the requirements for HMRC to issue Follower Notices
On 2 July 2021, the Supreme Court delivered its judgment in R (on the application of Haworth) v HMRC  UKSC 25, finding unanimously in favour of the taxpayer and upholding the Court of Appeal’s decision to quash the follower notice issued to him.
The Danish Supreme Court decides the Fidelity case
The Fidelity case concerned claims brough by three undertakings for collective investment in transferable securities (UCITS) for the repayment of Danish withholding tax on dividends received from companies resident in Denmark between 2000 and 2009. The Supreme Court rejected the claims on the grounds that the Fidelity UCITS did not fulfil the conditions for the exemption provided by Danish law.
A yellow card for footballers and their agents……let’s bring in another match official
There has been long running tension between HMRC and the way that footballers and their agents are remunerated. As the Professional Footballers’ Association wade into the debate, Helen McGhee discusses the problems arising from agents’ fees and image rights.