HMRC estimate that the tax gap across Large Businesses – which is the difference between the amount of tax that should, in theory, be paid to HMRC, and what is actually paid by the UK’s largest businesses across all sectors – has continued to fall over the last five years and was under 1% for 2018-19 (reported by the NAO in ‘Tackling the Tax Gap’ in July 2020).

The UK has led international efforts to tackle avoidance by all multinationals through the OECD Base Erosion and Profit Shifting (“BEPS”) Project which looks at aggressive tax planning strategies that exploit tax rules to artificially shift profits to low tax jurisdictions where there is little or no economic activity.

This international collaboration has led to the introduction of:

• Hybrid mismatch rules that prevent multinationals exploiting differences in the tax systems of different countries;
• a requirement for UK-headed large businesses to provide HMRC with a country-by-country report, detailing their global profits, tax and assets to ensure they are paying the correct tax on all their UK activity; and
• a Corporate Interest Restriction that protects against companies using intra-group loans to shift profits overseas.

The introduction of robust UK domestic rules has reinforced these multilateral efforts.

In April 2015, the UK government introduced the Diverted Profits Tax (‘DPT’). DPT was designed to counter contrived arrangements used by multinational corporations to shift their profits offshore and avoid paying tax in the UK on their economic activities here. The UK secured £6 billion in the five years following its introduction.

In January 2019, HMRC launched a new Profit Diversion Compliance Facility (‘PDCF’) to encourage businesses to stop diverting profits and pay what is due. About two-thirds of the large businesses targeted so far have decided to use the facility to bring their tax affairs up to date quickly and efficiently, enabling HMRC to focus even more resources on investigating businesses which continue to divert profits.

My Lords, the UK has an established record of being at the forefront of initiating global action on international tax. It is no different here: during our G7 presidency, we are leading the way to ensure the delivery of G20 commitments that we secured in January 2019 for a comprehensive global solution based on two pillars. Pillar 1 would deliver on ensuring that businesses are taxed where they make their profits, and pillar 2 would deliver a global minimum tax.

A Continuous Payment Authority, or CPA, is defined as consent given by a customer for a payment service provider (for example, a customer’s bank) to make one or more payments from a customer’s payment account. They are often established to enable regular payments to be made for goods or services via a payment card - for example, for a magazine subscription - and are distinct from Direct Debits.

The Payment Services Regulations regulate how CPAs are established, and the rights and obligations of payers, payees and payment service providers. In its published guidance on the regulations, the Financial Conduct Authority (FCA) states that consumers have the right to cancel CPAs by contacting their payment service provider at any time before the end of the business day before a payment is due to be made, and to obtain an immediate refund from their payment service provider if any future payments are debited from their account after they have revoked their consent. The customer may raise a complaint with their payment service provider if unhappy with their response. If this does not rectify the issue, the customer is able to complain to the Financial Ombudsman Service.

Furthermore, the Department for Business, Energy and Industrial Strategy is considering what further action to take on subscription contracts to: prevent consumers being charged unexpectedly; to make it easier for consumers to cancel unwanted subscriptions (including free trials and auto-renewals); and to avoid them facing unreasonable charges.

The installation of many energy saving materials, including solar panels and micro combined heat and power units, is already subject to the reduced rate of VAT when certain conditions are met.

There are no current plans to extend the scope of the relief already in place. However, the Government keeps all taxes under review.

VAT MOSS is an EU simplification. The UK will lose access to this at the end of the transition period and will not be seeking an extension. There are approximately 2,000 UK businesses registered on the VAT MOSS system in the UK. Businesses can continue to use the VAT MOSS system if they register in an EU Member State after the transition period. HMRC have published guidance on this and will also be contacting all businesses registered on the VAT MOSS system in the UK to explain the options available to them.[1]

[1] The guidance can be found at https://www.gov.uk/guidance/pay-vat-when-you-sell-digital-services-to-eu-consumers-from-1-january-2021

Under current VAT rules, the installation of water and wind turbines is subject to the standard rate of VAT. However, the installation of other energy saving materials that generate domestic energy, such as solar panels and micro combined heat and power units, are subject to the reduced rate of VAT when certain conditions are met.

Although there are no current plans to extend the scope of the relief already in place, the Government keeps all taxes under review.

A key part of the government’s economic policy objective is to preserve and enhance the stability of the UK’s financial system. This is reflected in the remit of the Financial Policy Committee (FPC) at the Bank of England, which is responsible for identifying, monitoring and taking action to remove or reduce systemic risks.

There is little sign of dividend recapitalisations further increasing the leverage of borrowers in 2020 to levels above post-Global Financial Crisis average.

Dividend recapitalisations are a small part of the broader leveraged loan market. They’ve accounted for slightly under 25% of September 2020 issuances to date. All the dividend recapitalisation issuances from July to September 2020 have been from US corporates.

In addition, the Bank of England has ensured that the major UK banks hold enough capital to withstand losses on their leveraged loan portfolios commensurate with loss rates more severe than those experienced in the 2008 Global Financial Crisis.

Given the US-focussed nature of the market, the Bank is also active in international discussions related to banks and non-banks. The Bank remains a key contributor to the work of the Financial Stability Board, including their analysis of leveraged loans.

Corporation tax is charged on profits that businesses generate from the activities they undertake in the UK.

Significant measures have been put in place to counter arrangements designed to shift profits derived from UK activities overseas.

Furthermore, the UK is actively involved in continuing OECD discussions which aim to deliver a fairer and more sustainable approach to the taxation of highly digital businesses.

The Government is committed to ensuring that people are able to return to work in a manner that is sustainable and adjustable to the reopening of the economy.

The Government therefore introduced flexible furloughing from 1 July. Firms can now bring back employees that have been furloughed for any amount of time and any shift pattern, while still being able to claim Coronavirus Job Retention Scheme grants for the hours not worked, with no minimum furlough period.

It is right that state support is slowly reduced and the focus shifts to getting furloughed employees back to work. As such, from August 2020, the level of the grant will be slowly tapered to reflect that people will be returning to work. Employees will continue to receive 80% of wages up to a cap of £2,500 when furloughed.

While other countries have announced similar schemes, the UK response remains among the most comprehensive.

Statutory Sick Pay (SSP) has been extended to those told to self-isolate due to whole household quarantine, or due to the Test and Trace programme. The Government has taken additional measures to make SSP payable from day 1, not day 4 for these cases. SSP should only be paid to those unable to work, and those able to work from home should receive their normal wage. These changes apply in areas under local lockdown.

In addition to the changes to SSP, those living in areas of local lockdown can benefit from the unprecedented set of measures introduced by the Chancellor to help individuals affected by COVID-19. This includes the introduction of the Coronavirus Job Retention and Self-Employment Income Support Schemes, as well as the injection of an additional £9.3bn into the welfare system according to OBR estimates.

On accommodation, the Government recognises the challenges faced by many who are sleeping rough and it is committed to helping them. So far, over 90 per cent of those on the streets at the beginning of the crisis and known to local authorities have been offered safe accommodation.

The Government has provided £221m of additional funding for rough sleepers during the crisis, including £3.2m specifically to help those who need to self-isolate. This brings total support for rough sleepers in 2020/21 to over half a billion pounds. All local authorities in England will be able to benefit from these measures, including those under local lockdown.

The Government recognises that widespread access to cash is extremely important to the daily lives of millions of people across the UK. The Government is engaging with the financial regulators, including through the Joint Authorities Cash Strategy Group, to monitor the impact of COVID-19 on the UK’s cash infrastructure and remains committed to protecting access to cash for those who need it, while supporting digital payments.

At the March 2020 Budget, the Chancellor announced that the Government will bring forward legislation to protect access to cash. This will ensure that those who continue to rely on cash can continue to do so in the long-term.

The Financial Conduct Authority and Payment Systems Regulator are developing a comprehensive picture of cash access infrastructure across the UK in relation to social economic factors that reflect consumer needs, building upon their mapping work carried out during the COVID-19 crisis.

Her Majesty’s Government is deeply concerned about the impacts of the COVID-19 pandemic on low-income developing countries. It is vital that all creditors work together to ensure that countries especially vulnerable to the pandemic are able to protect their citizens and economies.

The Chancellor and his G20 counterparts called on commercial creditors to participate in the G20 Debt Service Suspension Initiative, which suspends payments due from the 77 poorest countries, on comparable terms to the official sector.

Her Majesty’s Government is working closely with the Paris Club of official creditors and Institute of International Finance (IIF) to facilitate private sector participation. On 28 May, the IIF published a Terms of Reference to guide its members’ responses to DSSI-eligible requests for commercial forbearance.

Schools are responsible for their school meals service and how and where they choose to buy their produce. The department does not hold the information on what percentage of food is organic and locally sourced. Schools may use the guidance launched alongside the government’s 'Plan for Public Procurement: Food and Catering Services'.

The guidance provides a methodology which helps contracting parties balance a range of criteria when procuring food and catering services. These include production standards, health and wellbeing, resource efficiency, socio-economic factors, quality of service and price.

The guidance has been attached and is available from:

https://www.gov.uk/government/publications/a-plan-for-public-procurement-food-and-catering.