Following the UK’s exit from the European Union earlier this year, and with the economy in the COVID doldrums, the UK Chancellor, Rishi Sunak, made a number of attention-grabbing announcements in his March 3 speech, including a hike to the headline corporate tax rate, new value-added tax and property tax relief measures for businesses, and the creation of a number of new freeports.
The Chancellor revealed that the corporate tax rate will be hiked to 25 percent from April 2023. Businesses with profits of GBP50,000 (USD69,800) or less will continue to benefit from the 19 percent rate, while a tapered rate will be introduced for profits above this ceiling such that only businesses with profits of GBP250,000 or more will be fully subject to the new 25 percent rate.
The Government has also announced that the rate of VAT for the tourism and hospitality … Read More »
The EU has been mulling over the anticipated economic impact of the Brexit split. Releasing its Winter 2021 Economic Forecast, the EU suggested that Brexit will dent UK economic growth considerably, more than for the European Union, despite the new free trade deal between the two parties.
The free trade deal between the UK and the EU provides for zero tariffs and zero quotas on all goods trade that complies with the appropriate rules of origin. However, the report highlights that non-tariff barriers have increased substantially for both imports and exports from and to the UK.
“…[W]hile the FTA improves the situation as compared to an outcome with no trade agreement between the EU and the UK, it cannot come close to matching the benefits of the trading relations provided by EU membership,” the report observed.
It estimated that, for the EU, on … Read More »
The UK authorities have launched a consultation on VAT as it relates to the sharing economy in the UK.
In a new call for evidence on the need for reform of the UK’s VAT rules, the Government noted that the sharing economy (covering services such as ride-sharing and temporary accommodation) creates huge opportunities for the UK economy but also potentially presents certain challenges to the VAT tax base.
Specifically, the call for evidence noted the potential for long-term erosion of the VAT base due to consumers shifting their consumption to the sharing economy. Without reform, this erosion will take place, for instance, because individual suppliers are typically not required to charge and remit VAT because their turnover falls under the VAT registration threshold, the paper said. In addition, as they are not required to register for VAT, their payments of commission fees … Read More »
In the UK, while things are gearing up to get more complicated on pretty much all fronts, the tax authority sought to provide clarity certain aspects of the VAT rules, including with regard to the new reverse charge regime for the building and construction industry, now set to come into force in March 2021. (Originally due to be in place from October 2019, the measure had been postponed to October 2020. But now here we are, so…)
HM Revenue and Customs released three publications offering in-depth guidance on the introduction of the VAT reverse charge mechanism on the supply of building or construction services.
Under the new regime, in order to remove the possibility of “missing trader” fraud, a VAT-registered business which supplies certain construction services to another VAT-registered business for onward sale will be not be required to account for VAT, … Read More »
In the UK, new proposals were recently released designed to address the promotion and enabling of tax avoidance schemes.
The Government unveiled a number of planned legislative changes to existing anti-avoidance regimes to strengthen HMRC powers to further clamp down on the market for tax avoidance.
These included changes under the Disclosure of Tax Avoidance Schemes (DOTAS) regime to ensure that the UK tax authority can act quickly and decisively where promoters fail to provide information on their avoidance schemes and clients.
Changes have also been proposed to enable HMRC to more effectively issue “stop notices” to promoters under Promoters of Tax Avoidance Scheme (POTAS) rules, to make it harder to promote schemes that do not work, and to prevent promoters from abusing corporate entity structures to avoid their obligations these rules.
The proposed legislative amendments would also ensure that HMRC can obtain information … Read More »
The finance ministers of France, Italy, Spain, and the United Kingdom have reportedly sent a letter to the US Treasury Secretary, Steven Mnuchin, proposing that new international tax rules for digital companies could be gradually phased in.
The ministers suggest in the letter, seen by Bloomberg News, that tax rules for providers of digital services could initially be restricted to those companies providing “automated” digital services and later could be applied more widely.
By offering such a compromise, the European countries are hoping to persuade the US to re-join negotiations towards the creation of an internationally-agreed framework of tax rules for digital companies. They reportedly suggested that an agreement that includes the US could be reached by the end of 2020 if a phased approach to the introduction of these rules was on the table.
For more information on this, and other topical … Read More »
The new UK Chancellor, Rishi Sunak, revealed his maiden budget on March 11. In it, Sunak pledged to waive business rates on small retailers, to introduce a new tax on plastics, and to remove value-added tax on electronic publications.
The Chancellor announced that any eligible retail, leisure, or hospitality business with a rateable value below GBP51,000 (USD65,670) would, over the coming financial year, pay no business rates, the UK’s commercial property tax. Further, he revealed that the government will provide support for businesses struggling with paying their tax dues, by “scaling up” the Time to Pay service.
It also emerged in the budget that the UK Government had decided to reduce the lifetime limit for Entrepreneurs’ Relief to GBP1m (USD1.25m) from GBP10m, affecting qualifying disposals on or after March 11, 2020. Entrepreneurs’ Relief reduces the amount of capital gains tax paid on … Read More »
Following their election win, the UK’s Conservative Party has said it will use new “freedoms” from Brexit to set its own tax policies, including in the area of VAT.
In its pre-election manifesto, the Conservatives promised to not raise rates of income tax, VAT, or National Insurance. It also cancelled plans to lower the corporate tax rate from 19 percent to 17 percent from April 2020. The Government has however committed to lower the tax burden of business rates (the UK’s commercial property tax), and increase the employment allowance tax relief for small businesses. Further, the research and development tax credit rate will be raised to 13 percent, and the Government intends to review the activities in scope.
It also reportedly intends to also raise the National Insurance threshold to GBP9,500 next year.
On tax enforcement, the Conservative Party committed to:
Double the maximum … Read More »
At the time of writing, Prime Minister Johnson’s slight variation on his predecessor’s plan had passed the House of Commons, but MPs had rejected the government’s moves to force the plan through in just three days. The deal, which had previously secured the agreement of the European Union, would involve a hard Brexit for the UK but ensure that a hard border does not materialize between Northern Ireland and the Republic of Ireland to its south.
According to the EU, the deal provides that Northern Ireland would remain aligned to a limited set of rules related to the EU’s Single Market in order to avoid a hard border. Specifically, it would be bound by EU legislation on goods, sanitary rules for veterinary controls (SPS rules), rules on agricultural production/marketing, VAT and excise in respect of goods, and state aid rules.
It was … Read More »
It had been reported that Boris Johnson’s UN General Assembly appearance would be dominated by announcements of “rolling out the red carpet” to investors, particularly from the United States, with a proposed reduction in the corporate income tax rate to 17% planned to set the cat among the European pigeons, post-Brexit, and a trade deal with the US hoped to be on the cards.
However, the major Boris Brexit Blockbuster speech was somewhat derailed by events in the courts back home, and his speech on technology matters (a key planned focus area once freed from European regulatory and tax ‘shackles’) as delivered to the UNGA was – by all accounts – both perplexing and perplexed, taking in limbless chickens, Greek mythology and malevolent household AI.
Matters of tax and economics have remained mostly off the table since the Prime Minister’s earlier than anticipated … Read More »