Tax Update 11/09

Keep up to date with the key announcements made this past week.

Loan Charge deadline looms large

The deadline for settling the highly controversial disguised remuneration loan charge is fast approaching. Following the findings of the report from Sir Amyas Morse, HMRC relented and narrowed the scope of the loan charge, removing a  large number of taxpayers loan charge liabilities. However there are still over 5,000 taxpayers hastily looking to reach an agreement with HMRC before the deadline on 30th September.

HMRC have dedicated around 1,000 officers to the cases but we are aware of a number of taxpayers that are facing difficulties when trying to reach their appointed officer.  

HMRC have produced a new policy paper on VAT and charity digital advertising relief

The policy paper which has now been published following further correspondence with the charity tax group in July 2020 sets out HMRC views on when digital advertising supplied to charities will qualify for VAT zero-rating.

 Following HMRCs correspondence with the charity tax group, they seem to have taken a more relaxed view on ‘location targeting’ and are accepting that subject to all other conditions being met, location targeting will quality for zero-rating.

Furthermore HMRC have confirmed that it will be accepting claims and adjustments from businesses that have accounted for and paid VAT on supplies of charity advertisements that are now  considered to be considered Zero-rated. All claims will be subject to the 4 year time limit in section 80(4) of the VAT Act 1994.

VAT registration applications where estimated turnover is zero

Following concerns raised by the Association of Taxation Technicians (ATT) regarding applications being automatically refused where the business indicate in their application that they will be making little or no taxable supplies in the next 12 months.

HMRC have now responded to these concerns explaining that where an application has been rejected, and the businesses believes it has been incorrectly rejected as a result of entering zero estimated taxable turnover then the business should email the VAT registration team at with evidence to prove its eligibility to register for VAT.

ATT calls for an extension of the increased Annual Investment Allowance

In advance of the Autumn Budget the ATT are also calling upon the Chancellor, Rishi Sunak to extend the temporary increase to the Annual Investment Allowance (AIA) past the current end date of 31st December 2020 in order to help recovering businesses.

The AIA limit which was temporarily increased from £200,000 to £1,000,000 for the calendar year 2019 and 20 allows businesses to offset the costs of qualifying capital expenditure on plant and machinery from taxable profits.

The ATT believe that as a result of the coronavirus pandemic and the uncertainties many businesses have faced, many businesses has not been in a position to take advantage of the increased AIA, as such they are calling for Mr Sunak to extend the temporary increase until at least 31st December 2021.

HMRC warn that up to 3.5bn may have been incorrectly paid out by the CJRS

HM Revenue and Customs (HMRC) have told MP’s on the Public Account Committee it estimates that between 5-10% of furlough cash has been wrongly awarded, with the latest government figures indicating around £35.4bn having been paid out through the scheme, already the upper end of this estimate would leave £3.5bn having been paid out incorrectly.

HMRC are now in the process of trying to differentiate between where claims have been incorrect as a legitimate mistake and where incorrect claims have been made as a deliberate tax fraud. With the revenue’s primary focus being looking to tackle any abuse and fraud with interest and penalties. A full breakdown can be found in our previous article (include link).

UN tax committee releases discussion draft of treaty article on software and royalties

The UN tax committee are now in the process of inviting public comments on their draft proposal to change the definition of royalties to include software payments. The proposal is seeking to see payments for computer software included in the definition of royalties for the purposes of the United Nations model double tax convention between developed and developing countries.

Source – Lexis Nexis via Tolley Guidance