2020 was the year when HMRC unexpectedly became the nice people who give money to taxpayers. 2021 was supposed to be the year when the economy boomed, and they got to take it back. Some optimistic idiots thought there might also be progress on an international minimum corporate tax. Were they right? (Spoilers: yes)
The UK left the EU on 31 January 2020, but this was Opposite Day, and so we pretended the UK was still in the EU until 11pm on 31 December 2020, but that was New Year’s Eve, and the authors were out (covid-compliant) clubbing, so as far as we’re concerned, Brexit happened on 1 January 2021. Brexit did have some tax implications, but they were not very interesting and so we are not going to write about them.
All the (covid-compliant) partying meant that the authors didn’t realise that the UK had announced it wasn’t going to implement DAC 6 after all until January. This was a Good Thing for people who’d ignored the whole mess anyway, an Average Thing for people who’d spent months preparing, and a Bad Thing for people who would now have to comply with 57 varieties of EU DAC 6 instead.
HMRC celebrated the new year by publishing a ‘call for input’ in respect of its review of the UK funds regime. This was widely heralded as a much more complicated way to say ‘consultation’.
The OECD held a public consultation on the ‘two pillar solution’. This sensationally revealed that most people thought that Other People should pay more tax.
HM Treasury launched a consultation on the future of State Aid, and the UK’s new subsidy regime. The government’s firmly held view was that this should be absolutely nothing like EU state Aid (which is terrible), except in its content and substance, which should be exactly like EU state Aid (but using different words which are more English, and therefore better). The authors’ firmly held view is that the CJEU tax State Aid jurisprudence clearly shows that everything is state Aid and that nothing is State Aid. The authors’ even more firmly held view is that it is fun to annoy those who insist that ‘State aid’ must always be spelt with a capital ‘S’ but lower case ‘a’.
HM Treasury briefed that an online sales tax was a terrible idea which wouldn’t be happening, because the incidence of the tax would mostly fall on consumers. It would also be State Aid.
To the surprise of everyone involved, a taxpayer won at the FTT even thought it had been a teensy bit motivated by tax avoidance Euromoney Institutional Investor plc v HMRC [2021] UK FTT 61. The authors will eat their Yellow Books if this survives appeal (or at least ask a trainee to eat their Yellow Books).
The Budget had been in March, but was then moved to October, and so of course we now had a Budget in March. It was widely anticipated the government would restore the health of the public finances by increasing capital gains tax or reducing pensions tax relief, so naturally neither of these things happened.
The rate of corporate tax had been 20%, but was then reduced to 19% falling to 17%, but then didn’t fall to 17% and now went back up to 25% but in two years’ time, except that it probably won’t. The entire tax profession spent the next month pretending that it knew the rate of corporation tax, whilst frantically googling out of sight of the webcam.
The sunlit uplands of Brexit turned out to contain a surprise repeal of the UK implementation of the Interest and Royalties Directive (2003/49/EC), which was a Bad Thing for tax advisers who hadn’t memorised all the UK’s tax treaties.
After 20 years of tax evasion through digital platforms, the European Council suddenly noticed and adopted DAC 7. This is one number higher than DAC 6 and therefore much stronger. Somewhere in a parallel universe where reality is more important than public relations, the Commission pledged to coordinate the implementation of DAC 7 to avoid the inconsistencies that had plagued DAC 6.
The High Court rejected the Danish tax authority’s ‘cum-ex’ claim against more than 100 financial institutions because it was Dicey (Skatteforvaltningen (Danish Customs and Tax Administration) v Solo Capital Partners LLP (in special administration) and others [2021] EWHC 974). This is widely expected to be appealed again and again until we can all spell ‘Skatteforvaltningen’.
The Court of Appeal helpfully clarified that the substance of a transaction is more important than the form, except if that might help a taxpayer, in which case it isn’t (B Khan v HMRC [2021] EWCA Civ 624). The Court helpfully added that none of this would have happened if the taxpayer had paid lots of money to a professional adviser. The authors consider this to be state aid.
Half of Europe still hadn’t implemented ATAD 2, the rest of Europe barely understood ATAD 1, and so the European Commission announced ATAD 3, attacking ‘shell entities’. For those pedants worrying about definitions, please be reassured that all of the transactions Clifford Chance works on involve funds, holding companies, securitisation SPVs, investment vehicles and joint venture vehicles, which are a Good Thing. By contrast, some of our rivals establish shell entities, which are completely different and a Bad Thing.
Tax lawyers celebrated yet another court decision finely interpreting the tax provisions in a share purchase agreement, as this meant that for at least a minute other people might be minded to read them (Dodika Ltd and others v United Luck Group Holdings Ltd [2021] EWCA Civ 638).
The G7 announced agreement on the ‘two-pillar solution’. This involved countries around the world taxing US companies more, which the US strongly supported, subject only to the US collecting all the tax, and with the caveat that it would probably not actually agree to any of this.
HMRC finally caught up with the technological revolution of the 19th century and retired its stamp duty press machines. There was a deep sense of sadness that future trainees would now forever be denied the fun of hotfooting it to the Birmingham stamp office for a ‘same day’ stamping. The authors consider this to be reverse State Aid. The authors are also secretly each holding out for the Christmas gift of a retired stamp duty press machine (which would obviously not be State Aid because we can spell Veronsaajien oikeudenvalvontayksikkö).
The EU Commission responded to the failure of the common consolidated corporate tax base by re-announcing it for the fifth time, with a different and much more pronounceable acronym, but otherwise completely unchanged. This will be a Big Success.
‘L-day’ was on 20 July, but the authors never worked out what that meant (except that whatever it was almost certainly was state aid).
Draft legislation was published for Finance Bill 2022, including the taxation of asset holding companies and amendments to the REIT rules. This was definitely State Aid.
The plastic packaging tax received royal assent, but we can think of nothing interesting to say about it, other than that it was possibly State aid.
The G20 announced agreement on the ‘two pillar solution’. For those wondering how the proposal would interact with GILTI, the authors believe it is clear that
The tax profession was shocked by a court decision that a tax avoidance scheme didn’t work (Kwik-Fit Group Ltd and others v HMRC [2021] UKFTT 283 (TC)).
The Office of Tax Simplification announced it was reviewing changing the 6 April tax year to something less bonkers. A survey of medium-sized firms showed 91% were in favour, which means that only 9% realised they’d be the ones bearing the cost.
The Budget used to be in March, but was then moved to October, and so of course there was a Budget in September. On balance, that was not State Aid. The challenge for the government was raising £14bn to pay for health and social care whilst only taxing Other People (who apparently don’t mind being taxed). It was widely anticipated they’d do this by increasing capital gains tax or reducing pensions tax relief, so naturally neither of these things happened. Instead, the government brilliantly increased national insurance which obviously isn’t a tax (which would be a Bad Thing) but is insurance which is national (and therefore a Good Thing). Fortunately nobody noticed, except the voters.
The EU Commission published the forty-third review of the VAT financial services exemption.
The Budget used to be in March, but was then moved to October, and as this year there was a Budget in March and September, of course there was a Budget in October.
The ‘Pandora Papers’ revealed that, to the shock of everybody, it’s common practice to buy and sell UK real estate using property-holding SPVs, so that no SDLT is due. Campaign groups responded with a flurry of outraged press releases, but no proposals to change the law, and so it remains common practice to buy and sell UK real estate in property-holding SPVs, so no SDLT is due. This is probably State Aid.
The OECD announced that 136 countries had now agreed to the ‘two pillar solution’. To ensure a ‘level playing field’ between pillar two and GILTI, we would all pretend that the two sets of rules were the same.
The Office of Tax Simplification took 71 pages to conclude that the current 6 April tax year is irrational and confusing, but changing it would be even more irrational and confusing. Tax advisers frantically googled why the tax year starts 6 April, and then promptly forgot.
The 26th United Nations Climate Change Conference (‘COP 26’) ended in November, and was a complete failure, a staggering success, and both and neither. It is widely agreed that a critical part of the solution is a carbon tax, and therefore this was not discussed at all. Climate campaigners had never liked the carbon tax anyway, because it doesn’t rhyme with anything.
A taxpayer tried to persuade the FTT that, if you closed your eyes and thought hard enough, interest withholding tax didn’t exist at all (Hargreaves Property Holdings Ltd v HMRC [2021] UK FTT 290). This did not go well.
In the journalistic scoop of the year, The Telegraph exclusively revealed that Elon Musk had deviously avoided capital gains tax by tanking the value of Tesla shares before he sold them, and therefore losing a pile of money. The authors feel it is only responsible to warn the reader that losing money is tax avoidance, and something we cannot condone.
HM Treasury briefed that an online sales tax was an excellent idea which would now be happening, because tax incidence was a neoliberal construct.
After months of complaints that HMRC was taking months to respond to even simple enquiries, HMRC decided to be helpful by closing its helplines for three days.
The government announced a review of multiple dwellings SDLT relief, to the annoyance of one of the authors, who has been climbing out of their study window for months in the hope that would cause it to be classified as an annex.
And after a year of supply chain problems, the government decided now was the ideal time to Take Back Control of our borders by introducing full customs declarations for all imports and exports from 1 January. This is expected to be a Big Success. As a result, the authors fully expect to end 2021 exactly where they started it – hoarding toilet paper (and partaking in covid-compliant clubbing).
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