Other news in brief

A round up of other news this week.

A round up of other news this week.

The annual Measuring Tax Gaps publication estimates the difference between the total amount of tax expected to be paid and the total amount of tax actually paid during the financial year. HMRC’s latest report on the tax gap was published on 23 June 2022 and reveals the estimated tax gap for the 2020 to 2021 tax year is 5.1 percent (the second lowest recorded percentage). In monetary terms, the tax gap for the 2020 to 2021 tax year is estimated to be £32 billion. At 5.1 percent, there has been no change in the percentage tax gap compared to the previous year, although the monetary value has fallen by £2 billion from £34 billion in the 2019 to 2020 tax year. HMRC note that the estimates for 2020 to 2021 are subject to more uncertainty than usual due to COVID-19.

On 16 June 2022 the Bank of England Monetary Policy Committee voted to increase the Bank of England base rate to 1.25 percent from 1 percent. As a result, HMRC interest rates for late payment will increase. Late payment interest is set at the Bank of England base rate plus 2.5 percent so the late payment interest rate will increase from 3.5 percent to 3.75 percent. These changes will come into effect on 27 June 2022 for quarterly instalment payments and 5 July 2022 for non-quarterly instalment payments. The repayment interest rate will remain at 0.5 percent, as it is set at Bank Rate minus 1 percent, with a 0.5 percent lower limit.

On 17 June 2022, the final scheduled meeting of the Economic and Financial Affairs Council of the EU (ECOFIN Council) under the French Presidency of the Council took place. During the meeting, the ECOFIN Council approved a report to the European Council which provides an overview of the progress achieved in the Council on a range of tax measures, including the status of the Unshell Directive proposal, the launch of the European Commission's Debt-Equity Bias Reduction Allowance proposal and political negotiations on the adoption of the Minimum Tax Directive implementing the OECD ‘Pillar Two’ plan. At the meeting Finance Ministers discussed a revised compromise text for the EU Minimum Tax Directive, which seeks to address the concerns raised by Poland. As a result, Poland was able to lift its reservations. However, Member States were unable to reach political agreement on the Minimum Tax Directive proposal due to a change in position by Hungary, which decided to veto the proposal despite having agreed to support the initiative at previous ECOFIN meetings. For further details, please refer to the Euro Tax Flash prepared by KPMG’s EU Tax Centre.

HMRC have updated their Digital Services Tax (DST) Manual to remove Malaysia from the list of countries that they consider have a similar tax to UK DST for the purposes of cross-border relief. Claims for cross-border tax relief relating to Malaysian Service Tax on Digital Services made before 14 June 2022 will still be honoured by HMRC, however no new claims will be accepted from this date.