The European Commission has initiated infringement proceedings in respect of share loss relief and CGT relief for irrecoverable loans to traders, and has escalated proceedings on an aspect of the UK’s administration of the VAT mini one-stop-shop.
The Commission’s July infringement package sets out why, in the Commission’s view, the UK has failed to comply with its obligations under EU law (see https://bit.ly/2uySrqg).
VAT mini one-stop-shop: the Commission has sent a ‘reasoned opinion’ in respect of the UK’s failure to collect the bank account details of traders registered for the VAT mini one-stop-shop and share these details with other member states. This violates EU regulations on administrative cooperation and exchange of information and leads to delays, as member states making refunds to taxable persons in the UK must collect this information on a case-by-case basis. If the UK does not respond within two months, the Commission may refer the matter to the ECJ. The Commission issued a letter of formal notice to the UK in January.
Share loss relief (CTA 2010 s 68): the Commission has issued a letter of formal notice to the UK, as current UK rules only allow shares in companies which carry out their business activities wholly or mainly in the UK to qualify for the relief. This puts investors in companies based in other EU member states at a disadvantage and also imposes a restriction on the free movement of capital. If the UK does not respond within two months, the Commission may follow up with a reasoned opinion.
Relief for loans to traders (TCGA 1992 s 253): the Commission has issued a letter of formal notice to the UK, in respect of UK legislation providing for lenders to claim relief against CGT or corporation tax on chargeable gains where a ‘qualifying loan’ has become irrecoverable. However, the rules differentiate between the tax treatment of loans granted to UK residents and those granted to non-UK resident borrowers, which imposes an unjustified restriction on the free movement of capital. If the UK does not respond within two months, the Commission may follow up with a reasoned opinion.
Commenting on the commencement of infringement proceedings against the two UK tax reliefs, Andrew Parkes, tax director at Milestone International Tax Partners, said: ‘This is clearly a case of sour grapes from the EU. The provision regarding income tax breaks for investors has not been altered in over five years, while that for capital gains loss relief has not been for ten. Why then should the EU choose to raise them now? The real question is whether these announcements are connected to the Brexit negotiations or simply the Commission trying to get as much against the UK as it can before we leave.’
Separately, HM Treasury has also announced that the Commission has sent a reasoned opinion in respect of the UK’s zero-rating for certain commodity derivatives under the VAT (Terminal Markets) Order, SI 1973/193. This is a follow-up to the Commission’s letter of formal notice issued in March.
The European Commission has initiated infringement proceedings in respect of share loss relief and CGT relief for irrecoverable loans to traders, and has escalated proceedings on an aspect of the UK’s administration of the VAT mini one-stop-shop.
The Commission’s July infringement package sets out why, in the Commission’s view, the UK has failed to comply with its obligations under EU law (see https://bit.ly/2uySrqg).
VAT mini one-stop-shop: the Commission has sent a ‘reasoned opinion’ in respect of the UK’s failure to collect the bank account details of traders registered for the VAT mini one-stop-shop and share these details with other member states. This violates EU regulations on administrative cooperation and exchange of information and leads to delays, as member states making refunds to taxable persons in the UK must collect this information on a case-by-case basis. If the UK does not respond within two months, the Commission may refer the matter to the ECJ. The Commission issued a letter of formal notice to the UK in January.
Share loss relief (CTA 2010 s 68): the Commission has issued a letter of formal notice to the UK, as current UK rules only allow shares in companies which carry out their business activities wholly or mainly in the UK to qualify for the relief. This puts investors in companies based in other EU member states at a disadvantage and also imposes a restriction on the free movement of capital. If the UK does not respond within two months, the Commission may follow up with a reasoned opinion.
Relief for loans to traders (TCGA 1992 s 253): the Commission has issued a letter of formal notice to the UK, in respect of UK legislation providing for lenders to claim relief against CGT or corporation tax on chargeable gains where a ‘qualifying loan’ has become irrecoverable. However, the rules differentiate between the tax treatment of loans granted to UK residents and those granted to non-UK resident borrowers, which imposes an unjustified restriction on the free movement of capital. If the UK does not respond within two months, the Commission may follow up with a reasoned opinion.
Commenting on the commencement of infringement proceedings against the two UK tax reliefs, Andrew Parkes, tax director at Milestone International Tax Partners, said: ‘This is clearly a case of sour grapes from the EU. The provision regarding income tax breaks for investors has not been altered in over five years, while that for capital gains loss relief has not been for ten. Why then should the EU choose to raise them now? The real question is whether these announcements are connected to the Brexit negotiations or simply the Commission trying to get as much against the UK as it can before we leave.’
Separately, HM Treasury has also announced that the Commission has sent a reasoned opinion in respect of the UK’s zero-rating for certain commodity derivatives under the VAT (Terminal Markets) Order, SI 1973/193. This is a follow-up to the Commission’s letter of formal notice issued in March.
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