Tax Matters Digest

Moving down the judicial hierarchy, the Court of Appeal has published its decision in the case of HMRC v Burlington Loan Management DAC. The case, which was decided in favour of the taxpayer, considered the principal purpose test in the UK-Ireland double tax treaty. The judgment will provide some clarity on the application of purpose tests in the UK’s tax treaty network and when use of the treaty may cross the line and be considered to take advantage of it.

Finally in our tax case update, the First-tier Tribunal has issued its decision in a case involving ring fence taxation in the oil and gas sector. The case considered the tax treatment of income arising to a UK company on the provision of services to a group company with ring fence activities, and whether those services were ‘oil extraction activities’ and therefore subject to the ring fence and the associated tax consequences.

A team of KPMG international tax specialists recently penned an article for Tax Notes International on the updated OECD manual on Mutual Agreement Procedures (MAPs) which was published in February of this year. The manual provides comprehensive guidance on MAP and gives useful template documents all of which will help taxpayers and tax authorities navigate MAP. The manual runs to over 150 pages. Our article, which is not behind a paywall (and is nowhere near 150 pages long!), explains why this update was needed and gives a brief download of key aspects of the manual.

Turning to employment taxes, we have two articles included in this edition. The first looks at PAYE Settlement Agreements (PSAs) and reminds readers that the annual review of PSAs gives an opportunity, not only to ensure compliance, but to unlock value and reduce costs. The second article focusses on Employers of Record (EOR). Some companies engage a third-party EOR to employ workers overseas. The company directs the work but the EOR is the legal employer responsible for payroll compliance and other legal and tax matters. This article summarises some of the UK tax and reporting considerations that can arise where participation in the company’s share plans extends to EOR employees.

The media is full of speculation about what will happen in the elections on 7 May which will see voters in Scotland and Wales elect representatives to their national parliaments, while local council and mayoral polls will take place in England. Our article compares and contrasts the manifesto tax policies of the major parties in the Scottish election, most of which offer tax giveaways with scant detail on how they will be funded.

Our next two articles both have an international feel. Our first one concentrates on how US estate tax can apply to US assets of non-US individuals, the compliance obligations that can arise and how US estate tax exposures can be managed. Our second article links to Tim Sarson’s regular international tax review published in Tax Journal which includes commentary on the US IEEPA tariff decision, Singapore’s most recent Budget and two CJEU rulings on Belgian CFC rules and withholding tax under the EU Interest and Royalties Directive.

Tim Sarson takes up the pen again in our next item which is his latest City AM article which asks how tax policy may be able to help in the current energy crisis.

Other News in Brief for this edition includes announced changes to the Electricity Generator Levy, changes to the way HMRC will carry out business risk reviews for large businesses, how the Government intends to counter an unintended SDLT burden for private renters that arises from the Renters Rights Act, updates to HMRC’s intangible assets manual to reflect the most recent Finance Act changes as well as publication of synthesised text of the Multilateral Instrument and certain Double Tax Conventions. We also include a link to KPMG’s Global Mobility Services third instalment of ‘See it Differently’, a three-part series exploring mobility trends, challenges and innovative approaches in the field of internationally mobile employment.

Finally, our Indirect Tax Weekly Talking Points has resumed service and so we include links to the latest editions as well as our usual Week in Tax newsletter covering key tax developments from around the world.