COVID-19 UK: Corporate – UK Summer Statement 2020 - Key Tax Points

Orrick, Herrington & Sutcliffe LLP

Orrick, Herrington & Sutcliffe LLP

Highlighting key tax points coming out of the recent economic update (8 July) delivered by the UK Government:

  • Temporary reduction in stamp duty land tax (“SDLT”) on residential property purchases in England and Northern Ireland. From 8 July 2020 to 31 March 2021, for residential property purchases the threshold at which SDLT is payable has increased from £125,000 (or £300,000 for first time buyers) to £500,000. The 3% higher rate for purchases of additional dwellings continues to apply.
  • VAT reduction to 5% for hospitality and tourism sectors. From 15 July 2020 to 12 January 2021, a reduced rate of 5% VAT (rather than the usual 20% standard rate) will be applied to supplies of food from restaurants, cafés and pubs, and supplies of accommodation and admission to attractions.

These measures are intended to support the housing market, and hospitality/tourism sectors, respectively.

HMRC Guidance

In addition, while these are not new developments announced as part of the economic update, it is worth highlighting a couple of recent changes in HMRC's guidance which continue to be relevant to our practice:

  • Corporate tax residence. Helpfully, HMRC has recently issued updated guidance in which HMRC indicates that it will take a sympathetic view in circumstances where the company's central management and control is intended to be in a jurisdiction outside the UK but the COVID-19 travel restrictions mean that directors are unable to travel out of the UK to attend board meetings or make decisions in such jurisdiction. The guidance states that HMRC does not consider that a company will necessarily become resident in the UK because a few board meetings are held in the UK, or because some decisions are taken in the UK over a short period of time. However, it is important to take a holistic view of the facts and circumstances in each case.
  • Stamp duty practice. HMRC are continuing to operate their "temporary" stamp duty measures in light of COVID-19, whereby HMRC are not currently physically stamping documents and instead documents should be submitted electronically. There has been no indication as to when these measures are expected to end. (These measures have, in any event, arisen against a wider backdrop of calls for reform of stamp duty to bring it more into line with other stamp-related taxes that are dealt with electronically (e.g. SDLT / SDRT).)

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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