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Corporate tax update

Published on 15 February 2018

Welcome to the latest edition of our Corporate Tax Update, written by members of RPC’s tax team and published quarterly. In this final 2017 edition we highlight some of the key tax developments of interest to UK corporates from the fourth quarter of 2017.

Autumn 2017 Budget

On 22 November 2017, the Chancellor delivered the Autumn 2017 Budget.

Finance Bill 2018

On 1 December 2017, the first version of Finance Bill 2018 was published. This includes draft legislation for certain of the measures announced as part of the Autumn 2017 Budget, for example the further amendments/refinements to the hybrid mismatch rules and new interest deductibility restriction rules.

Corporation tax – general

Upper Tribunal allows corporation tax loss to be offset against (rental) income tax profit
On 14 December 2017, the Upper Tribunal upheld a First-tier decision that a UK permanent establishment’s (PE’s) trading losses could be offset against the non-UK company’s rental income from UK land.

Move from income tax/NRCGT to corporation tax for certain non-resident companies holding UK land – summary of consultation responses
On 1 December 2017, HMRC and HM Treasury published a summary of responses to the March 2017 consultation on proposals to move from an income tax/non-resident CGT (NRCGT) charge to a corporation tax charge for (respectively) (1) UK rental income received by non-resident companies, and (2) sales of UK residential property by non-resident companies.

Corporation tax instalment payment regime for “very large” companies – regulations made and guidance published
On 7 November 2017, regulations accelerating the date when “very large” companies must pay corporation tax by instalments, were made.

Draft HMRC guidance published on new corporation tax losses regime
On 7 November 2017, HMRC published draft guidance on the commencement rules for the new corporation tax losses regime which took effect from 1 April 2017.

Upper Tribunal confirms that appointment of receivers results in “degrouping” for corporation tax group relief purposes
On 4 October 2017, the Upper Tribunal held that from the date of appointment of receivers over a (would-be surrendering) group company, it was no longer grouped with a would-be claimant
company for corporation tax group relief purposes.


Overpaid VAT – Investment Trust Companies Supreme Court decision – HMRC Brief published
On 19 December 2017, HMRC published Revenue & Customs Brief 4 (2017) following the Supreme Court’s decision in HMRC v The Investment Trust Companies (in liquidation).

Making tax digital – draft secondary VAT legislation published
On 18 December 2017, HMRC published draft secondary VAT legislation for the implementation of the “making tax digital” project. The draft legislation is open to consultation, and will take effect from 1 April 2019.

No VAT recovery for input tax on providing deposit accounts – Court of Appeal decision
On 13 December 2017, the Court of Appeal held that a bank could not recover input VAT incurred on provision of its deposit accounts.

HMRC clarifies position on impact of retaining existing buildings for VAT zero-rating treatment of construction services
On 2 December 2017, HMRC published VAT Information Sheet 07/17 which explains HMRC policy on the application of VAT to the construction of buildings where part of the existing building is retained. This follows on from three recent Upper Tribunal decisions.

VAT grouping consultation – HMRC publishes summary of responses
On 1 December 2017, HMRC published a summary of responses to its December 2016 VAT grouping consultation. The catalyst for the consultation was development in European case law and, in particular, the ECJ decisions in Larentia + Minerva and Skandia.

OTS publishes report on VAT simplification
On 7 November 2017, the Offce of Tax Simplification (OTS) published its report on potential “simplifications” to the UK VAT system.

HMRC changes policy on VAT treatment of pension fund management services supplied by insurers
On 5 October 2017, HMRC announced the withdrawal of its policy treating supplies of pension fund management services by regulated insurers as VAT-exempt.

Stamp taxes

ECJ holds that UK’s 1.5% stamp duty charge on transfer to clearance service for sole purpose of listing existing shares, or offering new shares, is contrary to EU law
On 19 October 2017, the ECJ held that UK legislation imposing a 1.5% stamp duty charge on transfers of shares to clearance services (section 70 Finance Act 1986) was contrary to EU law, where the transfer took place for the sole purpose of (1) listing the shares on a stock exchange, or (2) offering new shares for purchase.


European Commission to refer Ireland to ECJ over €13bn illegal state aid to Apple
On 4 October 2017, the European Commission announced its decision to refer Ireland to the ECJ over its failure to recover up to €13bn, plus interest, from Apple.

European Commission decision on Amazon’s tax treatment in Luxembourg
On 4 October 2017, the European Commission announced its decision that Amazon had been granted illegal state aid by Luxembourg pursuant to a 2003 tax ruling. All Amazon’s European sales, and related profits, were recorded in Luxembourg (through its Luxembourg-incorporated operating company (OpCo)). The amount of illegal state aid (ie the amount of tax unpaid as a result of the illegal state aid) has been estimated by the Commission at €250m, plus interest.


Court of Appeal rules that statutory interest payable on an insolvency is subject to UK withholding tax (reversing earlier decision)
On 19 December 2017, the Court of Appeal held that statutory interest payable on an insolvency (under rule 2.88(7) IR 1986) is “yearly interest” for UK tax purposes. Such statutory interest is therefore subject to UK withholding tax (20%). The Court's decision reversed the earlier High Court decision.

Further GAAR Advisory Panel opinions published
On 11 December 2017, the General Anti-Abuse Rule (GAAR) Advisory Panel published a further opinion, concluding that a scheme designed to exploit the close company “loans to participators” legislation was abusive.

Consultation on “tackling the hidden economy” proposals to require tax registration checks for public sector licences
On 8 December 2017, HMRC published a consultation on proposals to require evidence of tax compliance before the grant of certain licences by public sector bodies.

DPT judicial review – Court of Appeal upholds decision to refuse permission
On 2 November 2017, the Court of Appeal upheld the High Court’s decision to refuse permission for judicial review of HMRC’s issuance of a Diverted Profits Tax (DPT) charging notice.

HMRC updates its Litigation and Settlement Strategy (LSS)
On 30 October 2017, HMRC published an updated version of its Litigation and Settlement Strategy (LSS).