Weekly Tax Update 15 June 2021

The Finance Bill received Royal Assent on 10 June 2021, becoming Finance Act 2021.

Several announcements made at the 2021 Budget have now come into effect. Businesses can, in particular, claim the extended three-year carry back loss relief, and the super deduction is now available for qualifying expenditure incurred since 1 April 2021. The increase in the main rate of CT to 25% in 2023 is now substantively enacted for US GAAP purposes

https://bills.parliament.uk/bills/2835

A taxpayer’s bid to have a tax avoidance scheme voided under contract law has failed. The CA found that the shares issued under the scheme were not issued at a discount. The scheme could not therefore be set aside as a mistake, and HMRC can pursue its case in the tax tribunals.

The taxpayer argued that the arrangements contravened the provisions of the Companies Acts as shares were unlawfully issued at a discount. It therefore sought to have the scheme set aside in this case on the ground of mistake, and HMRC would be prevented from treating the payments as taxable remuneration. The case directly affects other cases where the scheme has been used. The tax effects of the scheme are being tested by the tax tribunals and form no part of this appeal.

The CA upheld the HC’s decision that the shares were not issued at a discount. The directors remained liable up to the limit represented by the nominal value of a share when called upon, and could do so from any funds they held. They did not have to use the money paid to them by the company. Those payments were not made out of the company’s capital; they were made out of trading income. The CA dismissed the taxpayer’s appeal on this basis without the need to consider the question of mistake.

Chalcot Training Ltd v Ralph & Anor [2021] EWCA Civ 795

The latest Employer Bulletin from HMRC covers information and updates on COVID-19 support measures as well as taxable benefits for employees.

It includes information on:

• how to put in a claim for working at home relief, which must be resubmitted for this tax year;
• the VAT deferral new payment scheme;
• the job retention and self-employment income support schemes;
• office equipment, and how taxable benefit charges apply or not if it is lent out for homeworking, permanently transferred, or an employee is reimbursed for a purchase;
• general information on taxable employee benefits and how to report them; and
• a reminder about and guidance on the off-payroll working rules.

www.gov.uk/government/publications/employer-bulletin-june-2021/employer-bulletin-june-2021

The UT has upheld an FTT decision that a project manager for a building society, who had contracted with them through an intermediary personal service company, was subject to the off-payroll working rules referred to as the IR35 legislation. He was therefore subject to IT and NICs as an employee.

The taxpayer was engaged by Nationwide as a project manager on a contractual basis through an intermediary company. He worked almost continuously for Nationwide for seven years under a series of contracts with similar terms. The UT agreed with the FTT in upholding HMRC’s decision that the taxpayer was caught by the IR35 legislation and should have been taxed as an employee. The FTT had looked at the actual relationship between Nationwide and the taxpayer. It found that, if a contract had existed between them reflecting this, it would have been one of employment.

The taxpayer appealed, claiming that the terms of the contract constructed by the FTT were erroneous. He argued that Nationwide had a lower level of control than stated, stating that he could not be moved between projects, that the ability to provide a substitute was not hypothetical, that there was less mutuality of obligation than claimed, and there was no obligation to continue the contract after the project. Each ground was rejected by the UT, which agreed with the FTT’s interpretation of the relationship, and dismissed the appeal.

Northern Light Solutions Limited v HMRC [2021] UKUT 134 (TCC)

www.bailii.org/uk/cases/UKUT/TCC/2021/134.html