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Business Tax Briefing - 07/04/2017

Proposals to introduce transparency on overseas-owned UK property
The Department for Business, Energy & Industrial Strategy is seeking views on a new register that would show who owns and controls overseas companies and other legal entities which own UK property or participate in UK Government procurement. The UK introduced a register of UK company beneficial ownership last year. The new register will impose similar requirements on overseas entities which choose to invest in property in the UK or bid to provide central Government contracts here. After a transitional period, it would not be possible for property to be sold unless the identity of the ultimate beneficial owners was recorded, unless an appropriate privacy exemption applied, and property could not be registered to a buyer without such registration. The call for evidence is open until 15 May 2017. See

'Expenditure incurred on asset': taxpayer loses in Court of Appeal
The Court of Appeal has dismissed the taxpayer's appeal in Blackwell v HMRC. The taxpayer had owned shares in a family business, and his vote was necessary to secure any special resolution of the company and for other important decisions. He entered into a confidential agreement with a potential buyer in return for 1 million which bound him to vote his shares in favour of an offer from that buyer. In due course, two of the other directors of the company approached the taxpayer. He agreed to sign a confidentiality agreement with them, following which they told him that a US firm was prepared to make a much higher offer. The taxpayer could not agree to the proposed take-over without breaking his original agreement. Eventually, he paid 17.5 million to the first potential buyer, and he then became free to vote in favour of the takeover. The Court has agreed with the Upper Tribunal that the 17.5 million was not expenditure incurred 'on' the shares, nor expenditure reflected in the 'state or nature' of the shares at the time of the disposal.' Neither was it incurred by the taxpayer in 'establishing, preserving, or defending his title to, or to a right over' the shares. See

Criminal Finances Bill: tax evasion offences
The Criminal Finances Bill has had the second day of its Committee stage in the Lords. This included examination of those measures which will create new offences of failure to prevent facilitation of tax evasion. A proposed new clause was debated which would have ensured that the UK take steps to oblige the British Overseas Territories which have financial centres to allow public access to registers of beneficial ownership of companies registered in their jurisdictions if they do not do so voluntarily. Baroness Williams of Trafford, speaking for the Government, said the Government is fully committed to working with the overseas territories to achieve the ultimate end of public registers but does not want to impose on them but rather to work consensually with them. The new clause was withdrawn. The Bill as amended is at Report stage in the Lords is scheduled for 25 April 2017.

Double Taxation Treaty Passport scheme: updated terms and conditions
The Government published its response to the Double Taxation Treaty Passport scheme review on 20 March 2017. The scheme will now be made available to all UK borrowers that have an obligation to deduct withholding tax, including UK partnerships, individuals and charities. Transparent entities (including partnerships) will be admitted to the scheme as lenders where all of the constituent beneficial owners of the income are entitled to the same treaty benefits under the same treaty. Sovereign wealth funds and pension funds who are utilising withholding tax treaty rates will also be admitted as lenders. HMRC have now published the scheme’s Terms and Conditions and Guidance, which will apply to loans entered into on or after 6 April 2017. See

OECD's additional guidance on CbC reporting (BEPS Action 13)
The Inclusive Framework on BEPS has updated its additional guidance on implementation of Country-by-Country (CbC) reporting (part of BEPS Action 13). Five new CbC issues are addressed in relation to the definition of revenues; determining the existence of and membership in a group; the definition of total consolidated group revenue; the treatment of major shareholdings and the definition of related parties. See

OECD guidance: Automatic Exchange of Financial Account Information
To support the implementation of the Common Reporting Standard (CRS), the OECD has released:
•        a series of additional CRS-related Frequently Asked Questions; and
•        the second edition of the Standard for Automatic Exchange of Financial Account Information in Tax Matters. This expands the last part on the CRS XML Schema User Guide. It also sets out additional technical guidance on the handling of corrections and cancellations within the CRS XML Schema, as well as a revised and expanded set of correction examples.
OECD report on technological tools to address tax evasion
The OECD has published a report on technological tools implemented by tax authorities to address tax evasion and tax fraud in the form of electronic sales suppression and false invoicing. The report was prepared by the OECD's Task Force on Tax Crimes and Other Crimes. It includes a technical catalogue of technology solutions, with a view to encouraging other tax authorities that are facing the same types of risks to draw on that experience. It also discusses complementary work to address the cash economy and the sharing economy, both of which can facilitate tax evasion and fraud. See

HMRC guidance on sporting testimonials
HMRC have published new guidance on the changes in Finance Act 2016 on sporting testimonials. They say that income tax is due on income from all sporting testimonial and benefit match events. Corporation tax and VAT may also be due depending on the nature of the income or how payments from the income are made. However, there is a ‘one-off’ income tax exempt amount of 100,000 to set against income from a non-contractual or non-customary sporting testimonial event if certain conditions are met. The new rules cover income from events that take place on or after 6 April 2017, but only where the testimonial was announced on or after 25 November 2015. The new rules do not apply to NICs. Matching changes for NICs will apply from 6 April 2018. See

VAT: questions to the CJEU in HP partial exemption case
The Supreme Court has decided to refer questions to the CJEU in the HP partial exemption case of VW Financial Services Limited (‘VWFS’). See  Although the questions being referred have not been published yet, the Press Summary released by the Court suggests that they will focus on whether the fact that the cost of overheads was met from the VAT exempt finance charges (since the vehicles were sold on at cost price) meant that input tax on them was not recoverable, and if EU law permits the taxable sale of the vehicles to be ignored in the partial exemption calculation. HMRC’s secondary argument – that the Court of Appeal and Tribunals should have considered an alternative to the approaches advanced by the parties – was rejected by the Supreme Court. See  For further information about the case, please contact Oliver Jarratt on 0121 695 5722.

VAT: Advocate General suggests ‘cost sharing exemption’ should be available widely
Advocate General (AG) Wathelet has delivered his opinion in the ‘cost-sharing exemption’ infringement case brought by the European Commission against Germany.  The case concerns Germany's approach to the ‘cost sharing exemption’, which restricts the benefit of exemption to the supply of services by independent groups of persons whose members carry on activities or professions in the health sector.  AG Wathelet agreed with the Commission that the restriction imposed in German law had no basis in EU law and suggested that the exemption was available to a wide range of businesses.  His opinion differs in a number of respects from the views expressed recently by AG Kokott in the ‘cost sharing exemption’ cases of DNB Banka and Aviva, in which she proposed a narrower interpretation of the relevant EU law.  See The decisions of the CJEU in these cases, and in the case of Commission v Luxembourg, should clarify the scope of the EU law exemption for supplies by ‘cost sharing groups’.  For further information about the cases, please contact Richard Insole on 020 7303 0062.

This publication has been written in general terms and we recommend that you obtain professional advice before acting or refraining from action on any of the contents of this publication. Deloitte LLP accepts no liability for any loss occasioned to any person acting or refraining from action as a result of any material in this publication.

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