Weekly VAT News

The December issue of Tax Adviser magazine features an article written by Richard Norman, Tax Director at EY, in which he considers the VAT liability of voluntary carbon credits

A voluntary carbon credit (VCC) is a tradeable unit issued by an independent verified carbon-crediting programme which guarantees the reduction or removal of one metric tonne of carbon dioxide (or equivalent greenhouse gases) from the atmosphere. VCCs are used by businesses and individuals who choose to offset emissions outside the formal emissions trading schemes.

HMRC has changed its guidance on the UK VAT liability, with VCCs changing from being treated as outside the scope of VAT to being subject to the standard rate of UK VAT from 1 September 2024.

Richard’s article considers the consequences for businesses supplying or purchasing VCCs and discusses examples where the VAT position becomes more complicated.

Welcome to Issue 3 of TradeWatch, the EY organisation’s global trade magazine. In this final issue of the year, we look at some key trends and themes that are impacting trade now, including trade protection measures, trade technology and trade controversy. We also focus on the life sciences sector and briefly look ahead to identify themes that are likely to continue to dominate the trade agenda in 2025.

Trade Talking Points is our fortnightly newsletter on the latest insights from EY's Trade Strategy team.

In this edition we provide updates on the new EU Commission, the EU-MERCOSUR partnership agreement, the application of the EU’s General Product Safety Regulation, the US-Taiwan Initiative on 21st Century Trade, US Export Controls and Chinese Export Restrictions, and conclude with US and UK trade remedies.

We have also published an Alert outlining what the UK’s accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) coming into force means for businesses trading between the UK and CPTPP countries.

For further information please contact Marc Bunch, George Riddell or Margarethe Taucher.

Topics – Refusal of the right to deduct – intra-group supplies

C-527/23 Weatherford Atlas Gip

On 12 December 2024 the Court of Justice of the European Union (CJEU) released its decision in this Romanian referral asking whether Article 168 of the VAT Directive, read in the light of the principle of fiscal neutrality, must be interpreted as precluding the tax authority from refusing a taxable person the right to deduct the VAT paid in respect of administrative services acquired, where it is established that all the costs recorded for the services purchased have been included in the taxable person’s general costs and that the taxable person carries out only taxable transactions, that the supply of services is expressly confirmed by the tax authority and that the tax treatment applied is that of the reverse charge procedure (which precludes a loss to the Treasury)?

Weatherford Atlas Gip (WAG) is part of the Weatherford group of companies, which specialises in oilfield services. In June 2016, WAG acquired, by way of merger by acquisition, Foserco SA,(Foserco) a Romanian company, including its rights and obligations. Foserco's business was to provide ancillary services for the extraction of oil and natural gas.

In 2015 and 2016, Foserco provided drilling services in Romania to two customers, namely OMV Petrom and Petrofarc. To provide those services, Foserco acquired general administrative services from companies in the Weatherford group, including information technology, human resources, marketing, accounting and consultancy services. Those ‘general administrative services’ were provided by entities established outside Romania and the reverse charge was used to calculate the VAT due. Other companies in this group also benefited from the same services.

Following the merger, the tax authorities conducted an audit of WAG which resulted in an assessment, refusing the right to deduct input VAT in respect of the administrative services purchased. It was asserted that no act or document had been produced to demonstrate a link between the services acquired and the activity of the taxable person being audited and, secondly, that the documents produced did not show the nature of the services provided, the identity of the persons who provided those services, or the period during which they were provided, nor the necessity of the said services.

The CJEU noted that it had essentially been asked to consider whether Article 168 of the VAT Directive must be interpreted as precluding national legislation or practice under which the tax authorities refuse to grant the right to deduct input VAT, paid by a taxable person on the acquisition of services from other taxable persons forming part of the same group of companies, on the grounds that those services were simultaneously supplied to other companies in that group and that their acquisition was not ‘necessary or appropriate’.

The CJEU recalled that the right of taxable persons to deduct VAT which they are liable to pay in respect of goods acquired and services received by them as inputs is a fundamental principle of the common system of VAT. The right of deduction provided for in Article 167 cannot, in principle, be limited. It is exercised immediately for all the VAT charged on input transactions. The deduction system is intended to relieve the taxable person entirely of the burden of the VAT due or paid in the course of all his economic activities.

The exercise of the right of deduction presupposes the existence of a transaction which is itself subject to VAT. In that regard, it should be borne in mind that a supply of services is effected for consideration, within the meaning of the VAT Directive, and is therefore subject to that tax, only if there is a legal relationship between the supplier and the recipient in the context of which reciprocal supplies are exchanged, the remuneration received by the supplier constituting the actual consideration for an individual service supplied to the recipient. That is the case if there is a direct link between the service provided and the consideration received.

The CJEU considered that it is for the referring Court to determine, in the first place, that the acquisitions of administrative services at issue in the immediate proceedings are transactions subject to VAT. To that end, the referring court will have to ascertain whether there is a direct link between those services and the consideration paid.

Also, pursuant to Article 168, to benefit from the right to deduct, it is necessary, first, that the person concerned be a 'taxable person' and, secondly, that the goods or services relied on as the basis for that right of deduction are used as output goods by the taxable person for the purposes of his own taxable transactions and that, as inputs, those goods or services are supplied by another taxable person. The referring Court must therefore ascertain that the recipient and the companies which provided the administrative services at issue in the immediate proceedings are taxable persons and that the services were used for the purposes of taxable transactions.

Considering the requirements of a ‘direct and immediate link’ the CJEU noted that if it were to be proven that that some of the services were used, not for the purposes of the taxable person's own transactions, but for the purposes of transactions carried out by third parties, the direct and immediate link between those services and the taxable person's taxable transactions would be partially broken, with the result that the latter is not entitled to deduct the VAT charged on that part of the expenditure.

To determine the extent of the taxable person's right to deduct, it is for the referring court to determine, in particular in the light of the contracts for the supply of services and the economic and commercial reality, to what extent the services concerned have actually been provided in order to enable the taxable person to carry out his taxable transactions. It is only to that extent that input VAT will be regarded as charged on services rendered to the taxable person. In this regard, the CJEU considered that the fact that the administrative services at issue in the immediate proceedings are provided simultaneously to several beneficiaries appears irrelevant. It is, however, for the referring court to ensure that the share of the costs relating to those services, borne by the taxable person, actually corresponds to the services which he has received for the purposes of his own taxable transactions.

The CJEU also considered the question whether the acquisition of the administrative services was ‘necessary or appropriate’ appears to be irrelevant, since the VAT Directive does not make the exercise of the right of deduction subject to a criterion of economic profitability of the input transaction.

In conclusion, Article 168 must be interpreted as precluding national legislation or practice under which the tax authorities refuse to grant the right to deduct input VAT paid by a taxable person on the acquisition of services from other taxable persons forming part of the same group of companies, on the grounds that those services were simultaneously supplied to other companies in that group and that their acquisition was not necessary or appropriate, where it is established that those services are used as outputs by that taxable person for the purposes of his own taxable transactions.

Comments: It is understood that Romania has a long practice of challenging deductions on intercompany services, both for corporate income tax and VAT. Romanian Courts have an inconsistent approach so it is hoped that this judgment will provide some clarity in this area. Any business challenged in similar circumstances, not just in Romania, should consider whether this judgment provides an opportunity to revisit their position.

Topics – Joint liability in cases of VAT fraud

C-331/23 Dranken Van Eetvelde

On 12 December 2024 the Court of Justice of the European Union (CJEU) released its decision in this Belgian referral concerning joint liability in a case of VAT fraud and asking whether domestic legislation infringes Article 205 of the VAT Directive, and the principle of proportionality, in so far as it provides for unconditional overall liability and does not allow the court to assess liability on the basis of each person’s contribution to a tax fraud? The referral also asks whether the cumulation of administrative and criminal penalties in the present case is compatible with the principle ne bis in idem (a person cannot be punished and be subject to several procedures for the same facts) enshrined in Article 50 of the Charter of Fundamental Rights of the European Union?

Dranken Van Eetvelde NV (DVE) is VAT registered and a drinks merchant. Following an audit, irregularities were identified where it was alleged that DVE had issued false invoices for the supply of drinks to private individuals. The drinks were allegedly supplied to business customers (hotel and restaurant operators) who resold them on the ‘black market’.

The tax authorities raised assessment for the collection of VAT and fines including:

• EUR173,512.56 resulting from joint and several liability and the refund of turnover tax on the basis of improperly issued credit notes
• A fine for false information on invoices
• A fine for non-payment of VAT

Two previous tax audits identified similar issues, and corresponding fines were confirmed by judgments in 2008. It was held that DVE had organised a system of falsified invoices under which the goods specified on an invoice were supplied not to the customer named on the invoice (a private individual) but to a business customer, the operator of a café/hotel/restaurant, whose identity it was no longer possible to trace. That system provided the option of conducting sales with the drinks purchased which were not entered into the accounts as revenue and therefore not subject to VAT and income tax.

Criminal proceedings were also initiated against DVE and its managers. The criminal proceedings relate to the years 2012, 2013 and 2014. By the judgment of Court of First Instance, DVE was ordered, inter alia, to pay a fine of EUR20,000. That ruling was concerned with tax evasion in relation to VAT and income tax, failure to declare income for the purposes of corporation tax and failure to declare the sales and the VAT due on them in accordance with the laws and regulations on VAT, all with fraudulent intent or with intent to cause damage. The evidence given of DVE’s intent was that it had made a significant contribution to a fraud scheme which enabled its business customers to sell the purchased goods on the ‘black market’.

In the immediate case DVE argues that, in accordance with the case-law of the Court of Justice, no one can be held unconditionally liable for someone else’s fraud. That strict liability, it argues, exceeds the limits of what is required to safeguard the rights of the public exchequer and combat tax evasion and is contrary to the principle of proportionality.

The CJEU recalled that pursuant to Article 205, in the situations referred to in Articles 193 to 200 and 202 to 204, Member States may provide that a person other than the person liable for payment is jointly and severally liable for payment of VAT.

Articles 193 to 200 and 202 to 204 form part of Section 1 of Chapter 1 of Title XI, entitled 'Persons liable to pay tax to the Treasury'. These articles determine who is liable for VAT. Although Article 193 provides, as a basic rule, that VAT is payable by a taxable person carrying out a taxable supply of goods or services, it states that other persons may or must be liable for that tax in the situations referred to in Articles 194 to 199b and 202.

The provisions of Section 1 of Chapter 1 of Title XI, which includes Article 205, aim to ensure that the Treasury collects VAT effectively from the most appropriate person.

Article 205 allows Member States to adopt, with a view to the effective collection of VAT, measures under which a person other than that who is normally liable for payment of that tax to be jointly and severally liable to pay that tax. The CJEU noted that it does not however, specify either the persons whom the Member States may designate as joint and several debtors or the situations in which such an appointment may be made, it is for the Member States to determine the conditions and detailed rules in this regard. Such conditions and measures must not go beyond what is necessary to safeguard the rights of the public treasury and must be justified by the factual and/or legal relationship between the two persons concerned in the light of the principles of legal certainty and proportionality. In this regard, the prevention of possible tax evasion, avoidance and abuse is an objective recognised and encouraged by EU legislation.

The CJEU noted that in the immediate case, domestic legislation provides that a taxable person is jointly and severally liable to pay the tax with the person liable for it if, at the time when he carried out a transaction, 'he knew or ought to have known that the non-payment of the tax, in the chain of operations, is committed or will be committed with the intention of evading the tax’. That provision does not impose 'no-fault' joint and several liability, which would be contrary to the principle of proportionality. The CJEU added that Article 205, read in the light of the principle of proportionality, requires that the presumption on which the domestic legislation is based may be rebuttable, in the sense that it is not practically impossible or excessively difficult for that taxable person to rebut that presumption by proof to the contrary. To rebut the ‘knew or ought to have known’ presumption, the taxable person concerned must be able to establish that he has taken all measures that may reasonably be required of him to ensure that the transactions which he carries out do not form part of a fraudulent system of false invoices.

In summary on this point, the CJEU held that Article 205, read in the light of the principle of proportionality, must be interpreted as not precluding a provision of national law which, in order to ensure the collection of VAT, provides for the joint and several liability of a taxable person other than that who would normally be liable for that tax, even if the court cannot consider the contributions of those involved in the evasion. The taxable person must however be given the opportunity to demonstrate that he took all measures that could reasonably be required of him to ensure that the transactions which he carried out did not form part of a fraud.

The CJEU also considered whether Article 205, read in the light of the principle of fiscal neutrality, must be interpreted as precluding a national provision which imposes a joint and several obligation to pay VAT on a taxable person other than the person who would normally be liable for that tax, without account being taken of the latter's right to deduct input VAT due or paid.

The CJEU recalled that the right of taxable persons to deduct from the VAT for which they are liable the VAT due or paid in respect of goods acquired and services received by them as inputs and used for the purposes of a taxable activity, is a fundamental principle of the common system of VAT, provided that the substantive and formal requirements or conditions to which that right is subject are complied with. The deduction system is intended to relieve the trader entirely of the burden of the VAT due or paid in the course of all his economic activities.

However, the prevention of possible tax evasion, avoidance and abuse is an objective recognised and encouraged by the VAT Directive, with the result that individuals cannot rely fraudulently or abusively on the rules of EU law. It is therefore for the national authorities and courts to refuse to grant the right of deduction if it is established, in the light of objective evidence, that that right is being relied on for fraudulent or abusive purposes.

In conclusion on this point, the CJEU held that Article 205, read in the light of the principle of fiscal neutrality, must be interpreted as not precluding a national provision which imposes a joint and several obligation to pay VAT on a taxable person other than the person who would normally be liable for that tax, without account being taken of the latter's right to deduct input VAT due or paid.

Finally, the CJEU considered whether Article 50 of the Charter of Rights of the European Union must be interpreted as precluding national legislation which permits the duplication of criminal penalties and administrative penalties.

The CJEU recalled that Article 50 provides that 'no one shall be liable to be prosecuted or punished in criminal proceedings for an offence for which he or she has already been finally acquitted or convicted’. Thus, the principle ne bis in idem prohibits the duplication of proceedings or penalties of a criminal nature.

The CJEU noted that the ne bis in idem principle is subject to a twofold condition, first, that there be a final prior decision (bis) and, second, that the same facts are covered by the previous decision and by the subsequent proceedings or decisions (idem).

The CJEU recalled that in the immediate proceedings, the criminal penalty imposed on DVE concerned VAT fraud committed in the 2012 to 2014 tax years. The referring court states that the administrative proceedings at issue in the immediate proceedings, even if they were to be regarded as criminal in nature, concern VAT fraud committed during the 2011 tax year. Thus, even if it were to be considered that, during all those tax years, that company participated in the establishment of the same VAT fraud scheme, the fact remains that the criminal proceedings and the administrative proceedings concern different tax periods. The facts relating to the administrative procedure at issue in the main proceedings and those which were the subject of the criminal proceedings are not identical, with the result that the 'idem' condition is not satisfied. Consequently, the principle ne bis in idem is not applicable in the present case.

In summary:

• Article 205 does not preclude a provision of national law which, in order to ensure the collection of VAT, provides for the joint and several liability of a taxable person other than the person who would normally be liable for that tax, even if the court cannot consider the contributions of those involved in the evasion. The taxable person must have the opportunity to establish that he took all measures that could reasonably be required of him to ensure that the transactions he carried out did not form part of a fraud
• Article 205 does not preclude a provision of national law which imposes a joint and several obligation to pay VAT on a taxable person other than the person who would normally be liable for that tax, without account being taken of the latter's right to deduct input VAT due or paid
• The principle ne bis in idem (Article 50 of the Charter of Fundamental Rights) is not applicable in the present case because the offences at issue are not one and the same

Thursday 19 December

Judgment – C-573/22 Foreningen C and Others

Topics – Whether a statutory media licence fee may be subject to VAT

A Danish referral asking whether Article 370, read in conjunction with point 2 of Annex X, Part A, of the VAT Directive, is to be interpreted as permitting the Member State concerned to impose VAT on a statutory media licence fee to finance the non-commercial activities of public radio and television bodies, notwithstanding the absence of a ‘supply of services for consideration’ within the meaning of Article 2(1). This referral concerns whether a statutory media licence fee, such as the Danish media licence fee, may be subject to VAT and, secondly, the interpretation of what constitutes an unacceptable amendment to a national derogation scheme covered by a standstill provision (Article 370).

For further information please contact Alex Hale.

Opinion – C-427/23 Határ Diszkont

Topics – VAT refunds to foreign travellers – a separate supply of services?

A Hungarian referral asking whether the administration of VAT refunds to foreign travellers is a separate supply of services distinct from the tax-exempt supply of goods, on which VAT must be charged and paid in accordance with the general rules pursuant to Articles 1(2), 1)(c), 78 and 146(1)(e) of the VAT Directive where the administration fee, which is a percentage of the VAT to be refunded, is received and invoiced simultaneously with the VAT refund, at a time different from the supply and invoicing of the goods and after the customer has paid the consideration for the goods and those goods have exited for a third country?

Opinion – C-794/23 Finanzamt Österreich (TVA facturée par erreur a es consommateurs finals II)

Topics – Requirement to pay VAT that was overcharged mostly to “end consumers”

An Austrian referral asking whether Article 203 of the VAT Directive is to be interpreted as meaning that a taxable person who has supplied a service and recorded in his invoice a VAT amount calculated on the basis of an incorrect tax rate is not liable, under that provision, for the part of the VAT invoiced incorrectly if the service was supplied to a non-taxable person, even if the taxable person has supplied similar services to other taxable persons? Is ‘final consumer who does not have a right to deduct input VAT’, within the meaning of the judgment C-378/21, to be understood as referring only to a non-taxable person or also to a taxable person using the specific service only for private purposes (or for other purposes not conferring the right to deduct input VAT) and therefore lacking the right to deduct input VAT? In the event of simplified invoicing in accordance with Article 238 of the VAT Directive, what criteria is to be used to assess (possibly by way of an estimate) for which invoices the taxable person is not liable for the incorrectly invoiced amount because there is no risk of loss of tax revenue?

Thursday 16 January

Hearing – C-726/23 Arcomet Towercranes

Topics – Transfer Pricing settlement invoices – supply of services?

A Romanian referral asking whether Article 2(1)(c) of the VAT Directive is to be interpreted as meaning that the amount invoiced by a company (the principal company) to an associated company (the operating company), equal to the amount necessary to align the operating company’s profit with the activities carried out and the risks assumed in accordance with the margin method of the OECD Transfer Pricing Guidelines, constitutes a payment for a service which therefore falls within the scope of VAT? If the answer to the first question is in the affirmative, with regard to the interpretation of Articles 168 and 178, are the tax authorities entitled to require, in addition to the invoice, documents (for example, activity reports, works progress reports) justifying the use of the services purchased for the purposes of the taxable person’s taxable transactions?

This Guidance explains how to pay Alcohol Duty if you are an approved alcoholic products producer, and how long it takes for your payment to reach HMRC. It has been published early and is for information only. It will apply from 1 February 2025.

Until then, you must follow the existing guidance for alcohol production, outlined in excise notices 39, 162, 163 and 226.

Please also refer to:

• Alcoholic products technical guide
• Upcoming changes to alcohol approvals, returns and payments
• Get access to the Alcohol Duty online service
• Submit your Alcohol Duty return
• Apply for an alcoholic products producer approval (APPA)

For further information regarding excise duty please contact Craig Clark.

This Guidance explains how to declare goods that have been imported or exported between Great Britain and the UK Continental Shelf. Information about eligible goods for imports has been updated to clarify the criteria the goods must meet to be eligible.

For further information regarding global trade please contact Gerard Koevoets.

If you are an education provider, this Guidance explains how to check if and when you need to register for VAT to prepare for VAT being chargeable on school and boarding fees. Further details have been added to the "How to register" section to help you work out what business entity your school is.

For further information please contact Mark Dyer or Carolyn Norfolk.

The Department for Environment, Food & Rural Affairs has reported that online marketplaces and vape producers will soon be paying towards the cost of recycling waste electricals. The changes aim to “help fund recycling services and kick-start the country on the road to a circular economy, which is a priority for the Government”.

Under the plans, online marketplaces will need to register with the Environment Agency and report data on UK sales of their overseas sellers. This data will be used to calculate the financial contribution the online marketplace will make towards the costs of collection and treatment of waste electricals that are collected by local authorities and returned to retailers. The cost of that annual registration will be subject to a consultation led by the Environment Agency.

A new category of electrical equipment for vapes will also be introduced.

The Government has formed a Circular Economy Taskforce, comprising of members from industry, academia and civil society across the UK. They will lead on the development of a Circular Economy Strategy for England, which will be published next year outlining how individual sectors can contribute to ambitions in this area. This is alongside plans to move forward with the implementation of the deposit return scheme for drinks containers and extended producer responsibility for packaging.

Please also refer to Electrical waste: reforming the producer responsibility system.

Canada

The deadline to register for Canada's digital services tax (DST) is approaching quickly. Even if tax is not payable under the Digital Services Tax Act (DSTA), registration under the DSTA may be required under certain conditions.

The DSTA affects large domestic and foreign businesses with a corporate group that has global consolidated revenues of at least €750m and earns Canadian digital services revenue exceeding CA$20m from providing online marketplace services, online advertising, social media services and the monetising of user data. If a taxpayer or its consolidated group meets the required conditions, the taxpayer(s) will be required to pay a tax equal to 3% on their taxable Canadian digital services revenue exceeding CA$20m in a calendar year. The DSTA entered into force on 28 June 2024, and it applies retroactively to 1 January 2022.

Businesses and consolidated groups that exceed the threshold for DST should review the DSTA requirements in close detail and take note of the following upcoming deadlines:

• Returns: Returns are due annually on or before 30 June of the following calendar year (i.e., for 2022, 2023 and 2024, the filing deadline is 30 June 2025).
• Designated entity election: If members of a consolidated group wish to designate a single entity to report DST on their collective behalf, the election must be filed by 30 June of the following calendar year.
• Payments: Payments must be made on or before 30 June of the following calendar year. Any payments that are CA$10,000 or more must be paid electronically unless the taxpayer cannot reasonably pay that amount electronically.

Please also refer to – Canada – Digital platform operators' first information return due by 31 January 2025.

Following the ECOFIN meeting on 10 December 2024, the Council of the European Union has reported that it has reached a political agreement on a new directive paving the way for the introduction of an electronic tax certificate for VAT exemptions.

The directive will provide for an electronic certificate to replace the existing paper certificate that is used when goods are to be exempt from VAT, for example because they are imported for embassies, international organisations or armed forces. The exact electronic format, including the necessary IT specifications, will be discussed in expert groups and determined in Commission implementing acts.

In a transitional period, member states will be able to use both electronic and paper versions.

The agreements will now go through technical and linguistic checks before being presented to the Council for formal adoption. The texts will then be published in the EU’s Official Journal and enter into force.

Please also refer to:

• Taxation: Council agrees on VAT in the digital age package
• Digital taxation
• Taxation

Following its meeting on 13 December 2024, the VAT Expert Group (VEG) has published the report VAT after ViDA – Reflections on the future of VAT.

This report was prepared on request of the EU Commission and examines long-term and immediate strategies for modernising the VAT system. It builds on past initiatives and aims to simplify, broaden, and ensure neutrality in VAT application across the EU, reducing burdens and supporting sustainable development goals. It is a strategic report which aims to provide ideas to the EU Commission and interested stakeholders to further explore and research.

The report is structured according to the following sections:

1. Executive Summary
2. Suggested deliverables for the EU Commission to consider
3. Main Report
   • Background
   • Purpose of the report
   • Working process
   • Taking stock of the EU VAT system in 2024
   • Doing business today and in the future: commercial and technological landscape where EU VAT fits in
   • The pressing demand of sustainability bringing new challenges for EU VAT
   • Future VAT system: New ways of thinking about the VAT system of the future
   • Design of the future VAT system
   • How to fit the future VAT system into the EU context
   • Current VAT system: Looking ahead from the current VAT system and ViDA
   • Qualification of transactions for VAT
   • Improvements on the right to deduct
   • Modernisation of VAT exemptions and special regimes
   • VAT measures that can benefit sustainability policies
   • Bridging the Gap from today to tomorrow
4. Annex on ViDA implementation

Please also refer to:

• Viva la ViDA! – European Commission – What does VAT in the Digital Age mean for business and Member States?
• VAT in the Digital Age
• VAT in the Digital Age (ViDA) – European Commission
• Taxation: Council agrees on VAT in the digital age package
• EY Global Tax Alert

For further information, please contact Chris Taylor (e-invoicing) or Gaurav Patney (platform economy and single registration).

The Draft Welsh Budget was announced on 10 December 2024 in a Written Statement from Mark Drakeford, the Minister for Finance.

Land Transaction Tax

The higher residential rates of Land Transaction Tax (LTT) are increasing by one percentage point across all bands in this Draft Budget. The Regulations came into force on 11 December. Taxpayers who have already exchanged contracts will pay the former rates so long as they comply with the relevant transitional rules. Further information is available here.

No other LTT changes are proposed in this Budget, however in the New Year, draft regulations will be laid to make changes to the multiple dwellings relief (MDR) available on the purchase of two or more dwellings in Wales. These changes will ensure MDR claims will not be allowed where the Subsidiary Dwelling Exemption (SDE) is applied, so taxpayers subject to the SDE would pay the main residential rates on the total consideration, without the benefit of MDR. Further work will be carried out to consider MDR relief within the LTT regime over the coming year.

Draft regulations have also been laid on 10 December to extend the new LTT special tax sites relief currently afforded to the Celtic Freeport, to the relevant designated areas of the Ynys Môn Freeport.

Landfill Disposals Tax

The standard rate of Landfill Disposals Tax (LDT) will increase to £6.30 per tonne from 1 April 2025 in line with the increase to the UK Government’s equivalent Landfill Tax. This will set the lower rate at 5% of the standard rate, just under double the existing rate. The summary of responses to the public consultation on the lower rate of LDT has also been published. The impact of this change will be monitored, and the rate could increase further if evidence does not show a decrease in volumes of lower-rated waste disposed of through landfill. The regulations required to put into effect these changes will be laid in the Senedd early in 2025.

The fourth annual Tax policy report was also published.

The CIOT and ICAEW have launched their report addressing HMRC’s customer service challenges. EY was one of the firms that participated in the study and provided feedback and insight.

The report can be accessed here, including 10 recommendations for improvements:

• Introduce an external tracking mechanism
• Review and improve internal tracking mechanisms
• Ensure there are appropriate routes to escalate complex cases
• Improve individual ownership of work
• Improve education and training of HMRC staff
• Invest in customer service staffing
• Maintain investment in legacy systems
• Identify and plug gaps in digital service
• Increase the use of secure email for agent communication
• Co-create and continually improve digital services