Midweek Tax News

Following the publication of the Finance Bill on 7 November, its second reading in the House of Commons is now scheduled to take place on Wednesday, 27 November. It is not yet possible to predict when the Bill will be enacted.

On 13 November 2024, the Government published the National Insurance Contributions (Secondary Class 1 Contributions) Bill and a tax information and impact note on the employer National Insurance changes announced in the Autumn Budget. The Bill had its first reading on 13 November, and the date of second reading has not yet been confirmed.

Also on 13 November, the Government published the Non-Domestic Rating (Multipliers and Private Schools) Bill. In line with proposed reforms set out in the discussion paper Transforming Business Rates published at Autumn Budget, the Bill amends the Local Government Finance Act 1988 to enable the Government to introduce lower non-domestic rating multipliers for retail, hospitality and leisure properties, and higher multiplier for properties with ratable values of £500,000 and above. These changes would have effect from 1 April 2026.

The Bill also provides for the removal of charitable relief from non-domestic rates for private schools in England with effect from 1 April 2025.

In Refinitiv Ltd & Ors, the Court of Appeal has unanimously upheld the decision of the Upper Tribunal (UT) to dismiss a judicial review claim against diverted profits tax (DPT) notices. The UK claimant companies (‘Refinitiv’) argued that DPT notices issued to them were unlawful because they conflicted with an earlier advance pricing agreement (APA) between them and HMRC.

Refinitiv provided services to a Swiss group entity which enhanced the value of intellectual property (IP) that the Swiss entity owned. In 2013, Refinitiv entered into a five-year APA with HMRC covering 2010-2014 (with a roll-back to 2008). This used a ‘cost-plus’ transfer pricing method to calculate arm's length compensation for services provided by the claimants to the Swiss entity. In 2018, the Swiss entity disposed of the IP at a profit. HMRC issued DPT notices to the claimants for 2018, using a ‘profit-split’ method to apportion the Swiss entity’s annual profit and its profit on the disposal in 2018 to Refinitiv – on the basis that the services that Refinitiv had provided had contributed to the profits generated by the IP assets and the profits on its disposal.

The claimants argued the UT had erred in law when it decided that the DPT notices were lawful as the APA only applied up to the accounting period ending 31 December 2014. They contended that the UT had failed to recognise and give proper effect to the APA in its relevant statutory context.

However, the Court disagreed. It found that the APA’s terms, including the agreed transfer pricing methodology, were limited to the specified periods and did not bind HMRC for future accounting periods. It rejected Refinitiv’s argument that the APA was drafted to apply to the “covered transactions” (which were still in place after the end of the APA), stating “I can find nothing in the language of the APA to support the notion that the agreed treatment should enjoy a potentially indefinite afterlife in future accounting periods once the term of the APA had come to an end”.

Accordingly, the Court found that the 2018 accounting period was not covered by the APA, and HMRC was entitled to issue DPT notices based on a different transfer pricing methodology. The appeal was unanimously dismissed.

The Aggregates Tax and Devolved Taxes Administration (Scotland) Act 2024 was enacted on 12 November 2024. The Act creates a new devolved aggregates tax which will be administered by Revenue Scotland. The Act sets out details of the scope, calculation and administration of the tax, and gives Scottish Ministers the power to make regulations setting the rate at which it is to be charged. The new tax is expected to replace the UK aggregates levy in Scotland with effect from 1 April 2026.

A new double tax convention between the UK and Romania was signed on 13 November 2024. The new treaty will come into force when the procedures required by the law of both countries for the bringing into force of the treaty are completed. Businesses with operations in Romania may wish to review the new treaty in detail, as its includes a number of changes to withholding tax rates compared to the current treaty.

The Energy (Oil and Gas) Profits Levy (Energy Security Investment Mechanism) Regulations 2024 were laid on 19 November and come into force on 10 December 2024. These regulations specify how the average price of oil and the average price of gas over a reference period are to be calculated for the purposes of section 17A(1) of the Energy (Oil and Gas) Profits Levy Act 2022 (which provides for the circumstances in which the energy (oil and gas) profits levy will end early under the energy security investment mechanism).

Following their meeting held in Brazil on 18 and 19 November, the G20 Leaders published a declaration in which they welcomed the progress made on BEPS 2.0 and reiterated their commitment “to the swift implementation of the Two-Pillar Solution by all interested jurisdictions, including expeditious negotiations on the final package of Pillar One”.

In advance of the meeting, the OECD issued a tax report to the G20 leaders, providing an update on recent developments in international tax reform, including BEPS 2.0. With regard to Pillar One Amount A, the report states that “the text of the MLC is stable and has secured near full consensus across the membership of the Inclusive Framework. The focus of the remaining work is refining the consensus on Amount B beyond the elective approach”.

The OECD has published the 2024 edition of its Pricing Greenhouse Gas Emissions report. This report looks at how explicit carbon pricing instruments as well as specific taxes and subsidies on energy use have evolved between 2021 and 2023 across 79 countries, covering approximately 82% of global greenhouse gas emissions. The report focuses on emissions trading systems, carbon taxes and fuel and electricity excise taxes, as well as subsidies that lower prices on emissions or energy products.

We have included links to a selection of our tax alerts below. Additional articles are available in our global tax alert library.

Switzerland: The Swiss Federal Supreme Court has ruled that a Danish credit institution was the beneficial owner of interest from Swiss bonds, and eligible in principle for withholding tax relief. However, it has remitted the case for further review on potential treaty abuse under the Switzerland-Denmark tax treaty.

Canada: On 12 August 2024, the Canadian Department of Finance released draft legislative proposals to expand and amend the clean technology and clean hydrogen investment tax credits. This global tax alert highlights specific updates contained in the latest round of draft legislative proposals with respect to these incentives.

New Zealand: Under New Zealand’s implementation of the OECD Model Rules for Reporting by Platform Operators with respect to Sellers in the Sharing and Gig Economy, New Zealand digital platform operators must report seller information for 2024 by 7 February 2025.

The November edition of PE Watch, EY’s summary of the latest international developments regarding permanent establishments, is available. This edition highlights a significant ruling from Denmark, whereby the Danish Tax Board ruled that installation work conducted by employees of a foreign entity created an immediate PE under Danish tax law.