Other news in brief

On Monday 18 July 2022, the Office of Tax Simplification (OTS) published its annual report looking back at the work it performed during 2021-22. It also briefly summarised current and future work as follows: “At present we are conducting a review on the taxation of property income and looking in the near future to conduct research into the tax aspects of hybrid and distance working, and later to look at the personal tax return and third-sector taxation issues.” On the same day the OTS published a report titled “Review of simplification: Approach and interpretation” which: sets out an analysis of tax complexity and its impact; recommends principles for officials to use in tax policy development; and refreshes the OTS’s future aims and priorities, and measures of success. The report confirms that “the OTS will continue its strategy of reviewing existing elements of the tax system, as well as looking forward, focusing in particular on technology, data and digitisation, and work that will help to support individuals and small businesses.” This emphasis on simplifications that will support individuals and small businesses was supported in a subsequent letter to the OTS from the Financial Secretary to the Treasury. The same letter confirmed that simplification considerations are a fundamental part of tax policy making, but then went on to say “it is important to acknowledge that there are trade-offs Ministers and officials must make between simplification and other policy objectives”.

On Monday 18 July 2022, HMRC’s annual report and accounts were published, providing an overview of HMRC’s performance in financial year 2021-22. The report confirms that reduced economic activity created by COVID-19 continued to affect HMRC’s additional revenues secured through compliance activities, which remained at a similar level to the previous financial year at £30.8 billion. On the same day, HMRC’s Charter annual report was published. The HMRC Charter sets out the relationship between HMRC and taxpayers and the annual report reviews HMRC’s performance against it. This latest report acknowledges that choices HMRC made around prioritisation of work during the pandemic “meant that customer service levels fell below where we wanted them to be for most of the year”.

In the wake of Hungary’s opposition to the EU’s implementation of the OECD’s pillar two global minimum tax, the US Treasury Department has notified Hungary of termination of the income tax treaty (1979) between the two countries. According to the Treasury release, the treaty termination will be effective on 8 January 2023. With respect to taxes withheld at source, the treaty ceases to have effect on 1 January 2024. For other taxes, the treaty ceases to have effect for tax periods beginning on or after 1 January 2024.

Supreme Court rules on holiday entitlement and pay for certain workers

The Supreme Court has unanimously held that holiday pay calculations for a part–year worker under a permanent contract must not be pro–rated to be proportional to that of a full–time worker. This means that part-year workers are entitled to holiday pay calculated by the ‘Calendar Week Method’, which involves multiplying their average week's pay by 5.6 (as 5.6 weeks is the minimum statutory entitlement to annual leave under the Working Time Regulations), rather than to pro-rated holiday pay calculated by multiplying the pay for their hours worked by 12.07 percent. Employers with term-time, flexible or part-year workers should review how they calculate holiday entitlement, and therefore review their holiday pay calculation methodology and payroll processes to ensure they comply with the Supreme Court’s recent ruling and, if not, consider what steps might need to be taken to regularise the position of affected employees. Read more detail in the summary of the judgment.