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In brief: ESCs; buildings; discrimination; fraud; guidance

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Legislative effect for two ESCs

The Enactment of Extra-Statutory Concessions Order, SI 2014/211, gives legislative effect to two extra-statutory concessions – ESC A4 (travelling expenses of directors and certain employees) and ESC A10 (lump sums paid under overseas pension schemes) – with effect from 5 February 2014.

VAT zero rate on buildings

VAT Information Sheet 2/2014 provides new guidance on the application of the zero rate for VAT on buildings that are designed as a dwelling or dwellings and/or intended to be used for a relevant residential purpose (RRP). The information sheet confirms that a building can qualify as both a dwelling and a building used for a RRP. If this is the case, the developer is free to rely on either provisions to claim the zero rate exemption.

The information sheet also contains extensive guidance on the design test for dwellings and the use test for buildings intended to be used for a RRP. Finally, it covers additional facilities, use change charges, care packages and subcontractors.

CJEU on tax discrimination

Following its decision in Hervis Sport- és Divatkereskedelmi (C-385/12), the CJEU has confirmed that ‘taxation which disadvantages undertakings linked, within a group, to companies established in another member state constitutes indirect discrimination’ (CJEU press release no. 14/14).

In that case, under Hungarian legislation, as a result of being linked to companies established in Austria, a Hungarian company operating a store retail trade suffered a higher tax bill. This was because Hungarian law required that the turnover of all companies linked within a group be aggregated for the purpose of establishing the applicable tax rate – which was ‘steeply progressive’.

The CJEU ruled that, although the provisions did not entail any direct discrimination–since the tax is the same for all companies engaged in store retail trade – the legislation has ‘the effect of disadvantaging linked undertakings compared to undertakings which are not part of a group’.

Tackling tax fraud

The EC has begun the process to start negotiations with Russia and Norway on administrative cooperation agreements in the area of VAT. The purpose of the agreements is to establish a framework of mutual assistance to combat cross-border VAT fraud and help each country recover the VAT it is due (see EC press release IP/14/121)

Algirdas Šemeta, commissioner for taxation, said: ‘The supply chain has evolved dramatically since VAT was first implemented in the EU. Globalisation and e-commerce open up new windows of opportunity, but also create new risks. Fraudsters play on cross-border differences and information gaps between countries. The EU needs to work hand in hand with its international partners if it is to successfully combat VAT fraud. That is what the Commission is proposing today, with a request for negotiating mandates to formalise this cooperation.’

HMRC guidance

HMRC has issued the following publications, which are available from its website:

  • VAT Notice 701/14: Food;
  • Notice 452: Machine games duty;
  • Notice 235: Outward processing relief;
  • Notice 237: Processing under customs control;
  • Three notices on climate change levy: Notice CCL1/1: Registering for climate change levy; Notice CCL1/5: Penalties and interest; and Notice CCL1/6: A guide to the carbon price floor;
  • Employment allowance: guidance on eligibility, claiming, record keeping and penalties (legislation on the employment allowance for NIC, due to be introduced on 6 April 2014, is contained in the National Insurance Contributions Bill currently before Parliament);
  • Employment-related shares & securities Bulletin no. 13;
  • Issue briefing on tax credit overpayments; and
  • Guidance for ISA managers.
Issue: 1204
Categories: News