Tax Matters Digest

To go straight to the articles in the latest edition please scroll down and expand the section/s below that are of interest to you. For a preview of these articles, read the introduction to the latest edition from Sharon Baynham here:

This week our eyes are busy swivelling between Davos and Washington. In Davos there is a contingent of government ministers ‘banging the drum’ for Britain as they pitch the UK as an investment location to business chiefs. At the same time, to the west, the US has inaugurated its 47^th President, Donald Trump.

Many suspected that President Trump would waste no time in getting down to government business and that business includes tax. In the flurry of day one activity, President Trump signed an executive order withdrawing US support for the “OECD global tax deal”. The order also tasked the US Treasury with drawing up a list of protective measures or other actions in response to countries which are not in compliance with any tax treaty with the US or have (or are likely to put in place) rules that are exterritorial or disproportionately affect US companies. For those readers close to the OECD BEPS initiative this direction of travel won’t be wholly unexpected and seems to target Pillar Two’s imminent undertaxed payments rule and digital services taxes, although other taxes could also be in scope. With the US Treasury having 60 days to produce its list of potential responses, it may be some time until we have much insight into what might happen next. We will keep you up to date with developments in future editions, but it certainly seems that the story of the two-pillars may still have a few chapters to run. 

In the meantime, the OECD has been pushing ahead with its own agenda on both Pillars One and Two. Our spotlight article this week covers the publication by the OECD’s Inclusive Framework of a tranche of documents in relation to Pillar Two. The full set of documents runs to 330 pages with a focus on compliance and reporting obligations, as well as some limited additional Administrative Guidance. Our article gives a brief overview and provides links to a more detailed commentary from KPMG International as well as links to the underlying documents for the more brave-hearted reader. In the meantime, the OECD has also issued a Pillar One update, which we cover in Other News in Brief.

Closer to home, in our case law updates we focus on two recent decisions:

• In the first case, The Mersey Docks and Harbour Company Ltd v HMRC, the First-tier Tribunal decided that expenditure incurred on a quay wall qualified as a distinct asset that functioned as ‘plant’ and was not part of the premises in which the business was carried on; and
• The second case law article covers another Court of Appeal decision in Bluecrest Capital Management LLP v HMRC which raised issues about the correct interpretation and application of, in particular, condition B in the ‘salaried members’ legislation. This taxpayer loss overturns previous decisions by the First-tier and Upper Tribunals and provides insight into what should be considered in assessing condition B. 

With a more HR focus, our People Services team take a deep dive into new HMRC guidance on managing Labour Supply Chain risk. Risk isn’t everybody’s cup of tea but this guidance, which highlights common issues uncovered during enforcement, as well as setting out a framework of principles and practices for compliance, effectively represents the minimum compliance standards HMRC expect. As such it is recommended reading for all with responsibility for employment tax compliance

Tim Sarson, our head of Tax Policy in the UK, pens a blog for City AM on the impact that tax policy decisions have on taxpayer behaviour, while Shashi Prashad and Craig Rowlands set out their thoughts on how the recent Autumn Budget has changed the landscape for those seeking a business exit.

We also include our regular round-ups:

• In other news in brief we set out a number of developments including an OECD update on Pillar One, an update on the Finance Bill, a map of the Freeport customs site for Firth of Forth Green and an HMRC consultation seeking information on how published tax statistics are used;
• Our collection of weekly indirect tax case developments in our Indirect Tax Talking Points; and
• Week in Tax which covers developments from KPMG member firms around the world.

Sharon Baynham
Director, Tax Policy
KPMG in the UK