Turbulence ahead – quarterly tax update

In my March blog, ‘Budgeting for Uncertainty’ I outlined some areas, both in specific technical areas and the wider environment, in which clarity was sought. Hard to imagine then the surprise general election (generating another period of HMRC ‘purdah’) and the perhaps greater surprise of the outcome. Clarity and stability, therefore, still command a premium.

We wait to see the impending ‘Brexit Bills’, required to transpose EU law into UK law more directly. With EU negotiations now underway, there are still some rather mixed messages from various parts of the government on its approach to Single Market access and transitional periods, so it is not surprising that some insurers are moving beyond reviewing the contingency plans put in place, and taking the first steps to implement them.

It would therefore be a relief to turn to the detail of Indirect Tax and report that industry bodies and government had managed to make progress with some of the outstanding issues, but for various reasons (including interruptions to normal government business) this has not yet proved to be true. To list a number of examples, Advocate-Generals in Europe have produced conflicting opinions regarding the applicability of the ‘Cost Sharing’ exemption available to related parties, and we await final judgments later in the year for clarity. The results of HMRC’s public consultation on VAT grouping are not now expected until after the party conference parliamentary recess, some months away. The position on exemption in some areas of fund management remains confused and HMRC agrees it requires further discussion. The outcome in the courts of such cases as United Biscuits, First State Investments and Wheels expected this year should bring some certainty on longstanding issues for many taxpayers.

There are some minor points of clarity. It is understood that HMRC will not be appealing in the (unrelated) Wheels Private Hire case, nor in the Unicom case, which HMRC believes to be specific to its facts. We understand that as far as changes to the Specified Supplies Order, governing VAT recovery for overseas supplies, are concerned no decision has yet been taken on input tax recovery for insurance supplies to the EU.

At the time of writing the ‘Making Tax Digital’ programme remains in prospect, and while there have been conciliatory noises from HMRC on implementation much remains to be clarified, with VAT filing a particular concern. The Office of Tax Simplification has concluded its public call for evidence for its Review of the VAT system (and thanked the ABI for its focused and constructive response), which no doubt provoked a list of long-held (and mostly legitimate) complaints as well as practical suggestions. Since the remit of the OTS includes the post-Brexit landscape in its consideration, there may yet be scope for some bold thinking on both sides.

It is clear that this period of unprecedented turbulence will continue for some time, at least until the UK leaves the EU and perhaps for some time beyond that (depending on any transitional measures which may be agreed). Meanwhile new regulatory demands continue to flow from HMRC. As always, the ABI and its members will strive to adapt to new circumstances. 

ABI Insurance Tax Convention 2017

The ABI is holding its Insurance Tax Convention on 2-3 October 2017 at the Hilton Metropole Hotel in Brighton.The event will start with a pre-convention reception and dinner on the evening of 2 October followed by a full day event on 3 October.

Find out more and book your place now.

Last updated 26/07/2017