Other news in brief

On 28 February HMRC published their final guidance on the requirement for large businesses to notify HMRC of uncertain tax treatments (see our earlier article for background). The final guidance is substantially in line with draft guidance, published earlier this year. Additional detail has been added on the notification triggers including clarity on the position where an accounting provision has built up over multiple years, and in what circumstances notification would be needed where a clearance application has been made. The guidance also confirms that where a business approaches HMRC to provide information and discuss an uncertain tax issue, HMRC will confirm when the general exemption has been met. Once a notification is received, the guidance notes an automatic receipt will be provided however HMRC will not confirm if it has been validly made (as earlier guidance suggested). If you have any queries on the requirement please speak to your usual KPMG contact. Our separate article also contains further information on the PAYE specific issues to consider.

On 18 February 2022 the OECD published a short consultation on the draft rules for tax base determinations under Amount A of Pillar One, which closed on 4 March 2022. The tax base determinations rules establish the profit (or loss) of an in-scope multinational enterprise that will be used for the Amount A calculations to reallocate a portion of its profits to market jurisdictions. There was also an update on the OECD’s earlier Pillar One consultation on nexus and revenue sourcing under Amount A, with the publication of public comments received in response to the consultation. According to a 4 February 2022 press release, the OECD had expected to launch a public consultation on the Implementation Framework to facilitate the co-ordinated implementation of the Pillar Two global anti-base erosion rules before the end of February, but this had not yet been published at the time of writing. The OECD Secretary-General’s report to the G20 stated that it is still planned, as previously announced, for a public consultation event on implementation to be held in March 2022.

The updated transfer pricing country profiles published by the OECD add new information on countries’ legislation and practices regarding the transfer pricing aspects of financial transactions and the application of the Authorised OECD Approach (AOA) on the attribution of profits to permanent establishments. In addition, the country profiles reflect updated information on a number of transfer pricing aspects such as methods, comparability, intra-group services, cost contribution agreements, transfer pricing documentation and administrative approaches to prevent and resolve disputes. The OECD also announced the publication of six new country profiles for Honduras, Iceland, Jamaica, Papua New Guinea, Senegal and Ukraine.

In 2021 HM Treasury recommended in its five-yearly review of the Office of Tax Simplification (OTS) that the OTS should “undertake a project to articulate its approach to and interpretation of ‘tax simplification’”. The OTS has now published a scoping document for a review of its approach to simplification and its aims, approach and priorities. The review will: (i) articulate the OTS’s interpretation of and approach to ‘tax simplification’; (ii) develop a framework of principles and approaches to inform the Government’s work on tax simplification and guide the work of the OTS; (iii) explore the ways in which tax complexity is experienced and the impacts it can have; and (iv) evaluate the benefits of simplification and ways in which it could practically be achieved. The OTS plans to publish its report on its approach to simplification in Spring 2022, following consultation with a range of stakeholders.

The OTS has also published a scoping document for its newly announced ‘Property Income Review’. The primary focus of the review will be to identify opportunities for simplification of the tax and administrative treatment of individuals, partnerships and micro companies deriving income from residential property. The review will consider the current regimes for the taxation of residential property, including Capital Gains Tax (CGT) aspects, and develop recommendations for simplification and ways of addressing distortions. According to the scoping document, some of the topics to be considered will include: (i) the way that the taxation of property income fits into the overall scheme of income tax; (ii) the differences between the rules for residential lettings generally and those applying to Furnished Holiday Lettings (FHLs);  (iii) reliefs and exemptions, including CGT aspects, and whether the way they operate meets the policy intent; (iv) income received from property in the UK (including by individuals living abroad); and (v) income from property overseas (including definition of qualifying EEA property in relation to FHL). The announcement adds that the OTS will publish an associated call for evidence and online survey in the near future.

The OTS has published an evaluation paper on the PAYE aspects of two of its recent reports – the simplifying everyday tax for smaller businesses report and the taxation of life events report. The OTS considers that the key priority for HMRC and the Government is to ensure that there is the commitment and funding in place to: (i) sustain continuous improvement and development of the PAYE system; and (ii) enable the effective operation of the Single Customer Account in relation to PAYE as well as other areas of tax.

Mandatory gender pay gap (GPG) reporting was introduced in 2017 with the aim of narrowing and eventually eliminating the pay differential between men and women. At first glance the reporting regime appears to have had a limited but positive impact, with the GPG among full-time employees dropping from 9.1 percent in 2017 to 7.9 percent in 2021, and from 18.4 percent to 15.4 percent for all employees over the same period. Donna Sharp, Partner, KPMG Law in the UK comments on how much gender pay reporting has changed in the last five years and asks where we go from here.

The EU’s Capital Requirements Directive IV (CRD IV) established a complex regulatory regime and covers remuneration policies and practices for all members of staff. This includes staff members whose professional activities have a material impact on the credit institutions’ risk profile and who are called Identified Staff or Material Risk Takers. The rules around remuneration aim to drive positive behaviour that aligns individual reward with sound and effective risk management and the long-term growth of the firm, discouraging risk-taking that exceeds tolerated risk levels. Eloise Knapton, Head of Employer Reward Services at KPMG in the UK discusses changes to the rules on variable remuneration in a recent blog post.