Originally published in Lexis®PSL Tax Analysis on 28 November 2016.
It seems that the proverbial white rabbit was the announcement of the single annual fiscal event. After the Spring Budget next year and the consequent Summer Finance Bill, from Autumn 2017 the Budget and Finance Bill cycle will move to the Autumn. Draft clauses for the next finance bill will be published in the Summer. This should allow longer and better debate before the clauses are enacted. There will still be a Spring Statement (from Spring 2018) in response to the OBR’s Spring forecast but normally the government would not use that Spring Statement to announce tax changes. The Chancellor intends that changes to the tax system should be announced in the Autumn. On balance this looks to be an improvement to the system and the CIOT and the IFS called for this change in an open letter back in September.
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Originally published by Lexis®PSL Private Client on 4 November 2016.
Helen McGhee, senior associate at Joseph Hage Aaronson, gives Lexis®PSL Private Client her predictions for Autumn Statement 2016. Includes Brexit, non dom changes, anti-avoidance, HMRC’s unquenchable thirst for more powers, digital tax, the downturn in the residential property market, pensions, and perhaps an increase in the personal allowance.
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Yesterday, the Court of Appeal delivered its judgment in the FII Group Litigation case confirming Henderson J’s judgment of 18 December 2014. This means that the method of computing double tax relief on EU sourced dividend income in the period 1973-1999 remains as established by the judge:
The only alteration to the judge’s judgment of note is that the Court of Appeal has overturned his finding on the date from which the extended 6 year period for issuing High Court claims runs. The judge had held that High Court claims had to be issued within 6 years of 8 March 2001. The Court of Appeal has amended that date to 12 December 2006.
HMRC’s application to appeal to the Supreme Court is pending.
This article appears in the JHA November 2016 Tax Newsletter, which also features:
The Chancellor has given his first (and last) Autumn Statement to the House of Commons. There were no announcements to accompany the Autumn Statement which affect EU claims. For a summary of the statement otherwise please read on.
It will be his last Autumn Statement because he has announced that with effect from autumn 2017, the Budget/Finance Bill cycle will move to the autumn from the spring. There will continue to be a spring statement each year as the Government is obliged to respond to the Office of Budget Responsibility’s spring forecast. However the Chancellor has said that he intends that, normally, all proposed tax changes will be announced in the Autumn Budget. Draft clauses will normally be published during the summer. This timetable should allow for full discussion of any proposals before the commencement of the tax year in April. On balance this new timetable should be an improvement on what happens at present. However much will probably depend on the publication of draft clauses in the summer rather than after announcement as part of a Budget speech.
The Chancellor announced the usual number of technical fiscal changes but nothing that seems overly dramatic. On the business tax front, the Chancellor has recommitted to the existing business tax roadmap which should lead to a reduction in the CT rate to 17% by 2020. However the ‘roadmap’ also contains plans regarding the implementation of BEPS and the tax transparency agenda. Apart from this the Chancellor announced that the Government is proceeding with plans to legislate to deal with the deductibility of corporate interest charges, the reform of loss relief and the reform of the substantial shareholding exemption. Each of these changes have been the subject of consultation already.
Interestingly the Chancellor announced that the Government is considering bringing the UK income of non-resident companies into the CT regime. As well as putting all companies onto the same footing in terms of the tax rules that apply, the suggestion would also probably serve to mitigate any rate discrimination as the rate of CT decreases. On the personal tax side the Chancellor has said that the Government will examine the taxation of different forms of remuneration. After consultation, it is intended that (with specific exceptions) the tax and NICs advantages of salary sacrifice arrangements will removed. At the same time the Government intends to consider the question of how benefits in kind are valued for tax purposes.
A low key but potentially significant announcement was that NICs are going to be removed from the ambit of the Limitation Act from April 2018 and be aligned with the time limits and recovery processes currently applicable to other taxes. Whilst this change has the obvious attractions of consistency and simplicity it will mean that HMRC will be able to go back up to 20 years in the enforcement of unpaid NICs. It will be interesting to see the commencement rules for the legislation implementing this proposal.
The blitz on avoidance (and evasion) continues. The changes in respect of disguised remuneration schemes used by employers and employees announced at Budget 2016 will now be extended to counter the use of such arrangements by the self-employed. The Government will legislate the much debated proposals for a new penalty for those who enable another to use a tax avoidance arrangement that is subsequently defeated by HMRC. Much of the debate has involved professional advisers who will be the asserted ‘enablers’ but as part of the proposal, those who use the tax arrangements will cease to be able to rely on the fact of having taken much professional advice as a defence of ‘reasonable care’ in relation to a penalty exposure. The ‘requirement to correct’ which has been the subject of consultation will be enacted. Finally the Government has announced a new requirement for intermediaries arranging complex structures for clients holding money offshore to notify HMRC of the structure and the related client lists. It proposes to consult on this proposal.
This article appears in the JHA November 2016 Tax Newsletter, which also features:
On 8 November 2016, the Council agreed on the criteria and guidelines for selecting and screening third countries with a view to establish an EU list of non-cooperative jurisdictions in tax matters. The broader aim of the initiative is to combat tax base erosion and profit shifting (‘BEPS’).
According to the Council Conclusions on the criteria for and process leading to the establishment of the EU list of non-cooperative jurisdictions for tax purposes (available here), the countries selected for screening will be assessed cumulatively under three criteria, namely:
Screening is due to be completed by September 2017, so that the Council can endorse the list of non-cooperative jurisdictions by the end of 2017. Screening is intended to be a continuous and regular process. Discussions with jurisdictions aimed at resolving concerns and agreeing on commitments are expected to take place by the summer of 2017.
This article appears in the JHA November 2016 Tax Newsletter, which also features:
The Belgian tax regime enables undertakings to carry forward losses without limitation to future assessment periods and to claim a deduction for so-called risk capital. This resulted in a situation where certain undertakings paid virtually no tax but still distributed profits.
Case C-68/15 X concerns a preliminary reference ruling on the Belgian “fairness tax” which was introduced to deal with this perceived unfairness. The “fairness tax” is calculated on the basis of the amount by which the company’s distributed profits exceeded its taxable profits and is levied on domestic companies and foreign companies with a permanent establishment in Belgium but not on subsidiaries.
Examining whether the tax was compatible with the freedom of establishment, Advocate General Kokott concluded that the tax regime did not pose an obstacle to non-resident companies by preventing free choice of legal form.
Further, article 49 did not preclude the levying of a tax in such a way that a non-resident company with a permanent establishment in a Member State is subject to it when it distributes profits, even though the permanent establishment’s profits were retained, whereas a resident company that retains profits in full is not.
However, article 4(3) of the Parent-Subsidiary Directive which sets a maximum tax burden, did render the tax offensive because it operates so as to exceed the tax limit when a company distributes a received dividend in a year subsequent to the year in which it received the dividend. Article 4(3) of the directive could not be interpreted so as to apply only to received dividends and not subsequent redistribution.
This article appears in the JHA November 2016 Tax Newsletter, which also features:
Originally printed in Tax Journal on 21 Oct 2016.
Henderson J handed down judgment in Six Continents v HMRC [2016] EWHC 2426 (Ch) on 5 October 2016. The issues concerned what foreign profits should receive credit at the foreign nominal rate in accordance with the ruling of the CJEU in Test Claimants in the FII Group Litigation v HMRC (Case C-35/11). The judgment holds that Six Continents are entitled to a credit at the FNR on the underlying foreign profits which incorporated adjustments to the commercial profits for the revaluation of shareholdings, the release of warranty provisions and exchange rate adjustments which were removed for local tax. It also held that the same credit would apply to capital gains even though exempt under the Dutch participation exemption.
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The Supreme Court has upheld the appeal of a company and its CEO regarding the scope of the duty of confidentiality owed by HMRC in respect of taxpayers’ affairs. The case concerned an interview given by a senior HMRC official to reporters from The Times regarding tax avoidance schemes allegedly carried out by the appellants.
One of the case’s main issues concerned the scope of the exception contained in section 18(2)(a) of the Commissioners for Revenue and Customs Act 2005, which allows for disclosures made “for the purposes of a function of the Revenue and Customs”. The court held that this must be interpreted narrowly and as permitting disclosure only “to the extent reasonably necessary for HMRC to fulfil its primary function”. It therefore found that HMRC’s reasons, which included a desire to foster good relations with the media, could not possibly justify the disclosure in question.
The Supreme Court also rejected the view of the lower courts that the decision to disclose was a matter for HMRC and that it was not their place to review the facts as though they were the primary decision makers. In doing so, the court emphasised the “cardinal error” of assuming that the principles of judicial review occupied the entire legal field and stated that “public bodies are not immune from the ordinary application of the common law, including… the law of confidentiality”.
The European Court of Justice has dismissed an appeal by Ukraine against an order for it to pay the legal costs of President Viktor Yanukovych and his sons.
The original decision of the General Court of the European Union resulted from an abortive attempt by the Ministry of Justice of Ukraine to intervene in legal proceedings brought by President Yanukovych and his sons seeking to overturn financial sanctions imposed on them by the European Union. In the face of their opposition to the intervention, in December 2014 the Ministry of Justice of Ukraine unilaterally withdrew from the proceedings. Despite the fact that the General Court ordered Ukraine’s Government to pay the legal costs of President Yanukovych and his sons in March 2015, Ukraine’s representatives waited over a year before attempting to appeal that order to the EU’s highest court, the European Court of Justice, in June 2016.
In an order dated 5 October 2016 and published yesterday, the European Court of Justice has now dismissed the appeal and confirmed that Ukraine’s Government will have to pay not only the legal costs of its failed intervention, but also the costs of its unsuccessful appeal. This ruling follows an earlier success in which the General Court found that the European Union had acted unlawfully in imposing a number of sanctions on President Yanukovych and his sons in 2014.
Joe Hage, of the English law firm Joseph Hage Aaronson LLP which represented President Yanukovych and his family in the European court proceedings, said: “This is an important ruling. Our clients challenged sanctions imposed by the EU in 2014 on the basis of one letter in which the Ukrainian authorities made politically motivated and unsubstantiated allegations. Their attempt to intervene in the EU sanctions proceedings, and to bring an impermissible appeal when ordered to pay our clients’ costs, is similarly politically motivated.”
ENDS
Notes to editors
Joseph Hage Aaronson LLP is a law firm based in London:
www.jha.com
The texts of the Court’s Orders are available on the website of the Court of Justice of the European Union.
Case C-317/16 P (Viktor Fedorovych Yanukovych)
Case C-318/16 P (Viktor Viktorovych Yanukovych)
Prohibiting price promotions or discounts which result in tobacco products being retailed below a stipulated price level
The case involves Colruyt, which operates a chain of supermarkets in Belgium under the same name. Following an investigation by the relevant Belgian authorities, it was found that Colruyt made use of tobacco advertising measures prohibited under Belgian law and it was ordered to pay a fine. Belgian law prohibits, inter alia, advertisements for tobacco/tobacco-based products. Any communication which is aimed at promoting sales is regarded as constituting advertising.
On 21 September 2016, the CJEU found that such national legislation, which prohibits retailers from selling tobacco products at a unit price lower than the price indicated by the manufacturer or importer on the revenue stamp affixed to those products, in so far as that price has been freely determined by the manufacturer or importer, is not precluded under EU law.
The CJEU held that such national provision is not encompassed by the situation referred to in Article 15(1) of Directive 2011/64/EU on the structure and rates of excise duty applied to manufactured tobacco. It also held that the Belgian provisions do not breach Article 34 TFEU and the right to free movement of goods because it applies to all relevant traders operating within the national territory and because it does not concern the determination by importers of the products from other Member States of the price indicated on the revenue stamp; those importers remain free to set that price. Moreover, such legislation neither requires nor encourages the adoption of agreements between suppliers and retailers and its direct effect is to set the price charged by retailers for the sale of tobacco products to the consumers, namely the price indicated by the manufacturer or importer on the revenue stamp affixed to those products and hence it does not render Article 101(1) TFEU ineffective.
This article appears in the JHA October 2016 Tax Newsletter, which also features:
