L-Day 2022

In line with the UK government’s framework for tax policy making, Wednesday 20 July 2022 was ‘L-Day’ (or ‘Legislation Day’) – the day on which HMRC publish pieces of draft legislation, for consultation, with a view to their inclusion in the next Finance Bill to be introduced shortly after the next Budget, expected in the autumn.

Draft legislation

The focus of L-Day is on draft legislation for pre-announced policy changes (for example tax policies announced at the last Budget in October 2021). Draft clauses, explanatory notes, and tax information and impact notes were published in respect of measures including:

• Introduction of the new multinational top-up tax (Pillar Two) – a new top-up tax will be charged on UK parent companies when the group’s profits arising overseas are taxed at below 15%, for fiscal years beginning on or after 31 December 2023. This is in accordance with the original agreement to reform the international tax framework made by the G20/OECD Inclusive Framework on BEPS on 8 October 2021. Our special alert on the measure is available here.
• Research and Development tax relief changes – expanding the categories of qualifying expenditure to include data licences and cloud computing, focussing the reliefs more effectively on UK expenditure, requiring claimants to submit a pre-notification of their claim in certain circumstances and to provide additional information to support claims, and making changes to address unintended consequences in the existing legislation.
• New transfer pricing documentation requirements for UK businesses – the largest UK businesses will be required to retain, and produce on request, a master file, local file and summary audit trail, with effect from 1 April 2023. The legislation will update the penalty regime that will apply for failure to meet documentation requirements.
• Amendments to the Qualifying Asset Holding Companies (QAHC) regime – to ensure the conditions to be a QAHC better align with the intended scope of this corporation tax regime.
• Air Passenger Duty (APD): banding reforms from April 2023 – a new domestic band for APD for flights within the UK and a new ultra-long-haul band covering destinations with capitals located more than 5,500 miles from London.

All other measures for which draft legislation has been published are available here. The consultation window to send in comments on the draft clauses closes on 14 September 2022.

New consultations

In addition, two new tax policy consultations were published on L-Day:

• Improving the data HMRC collects from its customers – the government is consulting on a number of options (focussing on employees and self-employed taxpayers) for additional data for HMRC to collect, use, and safely share across government, and how this can be done in a way that minimises any extra burden for customers. Closing date: 12 October.
• Digitalising Business Rates (DBR): connecting business rates and tax data – DBR aims to join together business rates data held across different parts of government (e.g. billing authorities, the Valuation Office Agency and HMRC) with tax data, to be better able to design and apply reliefs to support businesses that are most in need. The government seeks views on options for the policy and IT design. Closing date: 30 September.

In addition, the Department for Environment, Food and Rural Affairs (Defra) published a tax-related call for evidence on 21 July 2022:

• Landfill tax grant scheme – seeking views on a proposed scheme that would refund landfill tax in order to encourage the redevelopment of brownfield sites and contaminated land. Closing date: 18 August 2022.

Consultation outcomes

The government also published summaries of responses in relation to the following:

• Two connected discussion documents: Preventing and collecting international tax debt and Helping Taxpayers Get Offshore Tax Right – when considering ideas within these documents, HMRC will take into account whether they support HMRC’s offshore compliance strategy (No Safe Havens 2019) and the direction of development set out in HMRC’s 10-year strategy (Building a trusted, modern tax administration system). Where appropriate, ideas will be subject to future formal consultation.
• Corporation tax: response to accounting changes for insurance contracts – HMRC will continue to engage with the insurance sector, particularly on the complexities around the interaction of the IFRS 17 tax transitional rules with existing transfer of business rules. Draft regulations will be published and consulted on over summer 2022, and laid during autumn 2022, to apply to accounting periods beginning on or after 1 January 2023.
• Income Tax Self Assessment (ITSA) registration for the self-employed and landlords – the government will not move forward at this time with ideas to change the timing of the current obligation for ITSA taxpayers to notify HMRC of income tax liability. The government will further explore the alternative options shared by respondents and will continue to work closely with taxpayers, their representatives and intermediaries on developing policy.
• Reporting rules for digital platforms - draft regulations to implement new reporting rules, based on the OECD’s Model Reporting Rules for Digital Platforms, will be published for an eight-week technical consultation in September 2022. The new rules will apply from 1 January 2024 which means in-scope platforms will be expected to collect information from 1 January 2024, with the first reports due by 31 January 2025.

There was also an update on alcohol duty reform at the end of the L-Day Written Ministerial Statement: the government is considering the feedback received to the alcohol duty consultation which closed on 30 January 2022, and will respond in the autumn.

Related content

• You may also be interested in our article on the UK Pillar Two draft legislation, available on Deloitte tax@hand.
• View our further insights on the day's announcements in our article: Behind "L--Day" - The expected, the unexpected and a few missing pieces...