15 March 2024
Finance Bill published
The text of Spring Finance Bill 2024 was published on 14 March 2024, alongside Explanatory Notes and a press release from HM Treasury. The Bill’s dedicated pages on Parliament’s website are here.
The Bill had its First Reading in the House of Commons on 12 March 2024 following the conclusion of MPs’ four-day debate on the Spring Budget and their approval of the Budget Ways and Means Resolutions.
National Insurance Contributions Bill completes Commons stages
The Bill to enact the Spring Budget’s employee and self-employed NIC rate cut announcements from 6 April 2024 – the National Insurance Contributions (Reduction in Rates) (No. 2) Bill – completed its Commons stages on 13 March 2024. No changes were made to the Bill. The Bill has now moved to the House of Lords. The Bill’s remaining Lords stages are scheduled for 18 and 19 March 2024, after which the Bill will await Royal Assent.
Pensions authorised surplus payments charge reduction to 25%
Section 207 Finance Act 2004 provides for a free-standing income tax charge (an ‘authorised surplus payments charge’) when an occupational pension scheme with surplus funds pays back certain authorised amounts to its sponsoring employer. The government announced in Autumn Statement 2023 its intention to reduce the applicable tax rate from 35% to 25%. HM Treasury has now issued the required secondary legislation to change the rate – the Authorised Surplus Payments Charge (Variation of Rate) Order 2024 (SI 2024/335) – which comes into force on 6 April 2024.
Creative Industries (Additional Information) Regulations 2024
Finance Act 2024 introduces a new requirement for companies that claim creative industries tax reliefs to provide additional information in support of their claims. Following the publication of guidance and a supporting evidence form last month, HMRC have now published the Relief for Creative Industries (Additional Information Requirements and Miscellaneous Amendments) Regulations 2024 (SI 2024/320) that come into effect from 1 April 2024. The regulations include a table listing all supporting evidence required (including disclosure of transactions with connected parties; and VAT, PAYE, and Foreign Entertainers Unit reference numbers), and provide details on the time by which information must be provided, the manner in which it must be provided, and the consequences of failure.
HMRC publish new salary advance and IR35 PAYE regulations and further consultation
Two sets of regulations relating to Pay As Your Earn (PAYE) were made by HMRC earlier this week. The Income Tax (Pay As You Earn) (Amendment) Regulations 2024 (SI 2024/305) are intended to simplify the Real Time Information (RTI) reporting process where employees receive advances of salary. From 6 April 2024, the reporting of salary advances to HMRC via RTI by employers will be delayed until the payment of the remainder of that salary instalment. These regulations follow on from a consultation in September 2023.
The Income Tax (Pay As You Earn) (Amendment) (No. 2) Regulations 2024 (SI 2024/355) relate to the off-payroll working rules (IR35). Further to a consultation in January 2024, the regulations provide for a mechanism by which HMRC, when recovering tax from a deemed employer following non-compliance with the IR35 rules, would be able to account for taxes already paid by the relevant individuals or intermediaries.
HMRC have also launched a technical consultation on draft PAYE regulations following changes made by Finance Act 2024 regarding data HMRC collects from taxpayers. These regulations would, from April 2025, require employers’ RTI returns to include details of each employee’s working hours within the relevant pay period. The consultation also covers draft income tax regulations that would, from April 2025, require additional information to be included in self-assessment tax returns on dividend income from any ‘close’ companies in which the taxpayer is a director and, for self-employed individuals, the self-employment start and end dates. The consultation is open until 9 May 2024.
Treasury provides update on implementation of OECD guidance on Pillar Two safe harbour
On 14 March 2024, HM Treasury published a brief written statement confirming that the UK will be introducing anti-abuse rules for the Pillar Two transitional country-by-country (CbC) reporting safe harbour, in line with the latest administrative guidance published by the OECD/G20 Inclusive Framework in December 2023. This guidance included measures that cover certain transaction-based potential tax avoidance mechanisms. The government intends to apply these rules from 14 March 2024. The statement confirms that the government will consult on how the rules are implemented and will include the required legislation in a future Finance Bill.
Colchester Institute Corporation (No. 2): VAT and further education business activities
Colchester College reclaimed VAT of approximately £2 million on its 2008 campus redevelopment project, applying the Lennartz mechanism that at the time allowed VAT recovery on costs relating to non-business activities, subject to a balancing output tax charge over the next ten years. In 2014, the College decided that the provision of fully-funded further education was actually an exempt business activity, and it submitted a claim for repayment of the balancing charge. At the Upper Tribunal (UT) in 2020, it was held that the College’s supplies were exempt, and it should never have applied Lennartz. However, the UT ruled that the College’s claim should be reduced to nil, applying rules on set-off. Nonetheless, the decision on exemption potentially justified the College’s decision (in 2015) to stop paying any more output tax. HMRC disagreed, and assessed the College for underdeclared output tax that they saw as properly due. The College appealed, and the First-tier Tribunal (FTT) has allowed its appeal. HMRC recognised that this was a foregone conclusion, as the FTT was bound by the UT’s decision in Colchester No. 1. However, the fact that HMRC pursued the appeal anyway means that it is likely that they will apply for permission to appeal to the UT. If so, any decision ultimately in favour of the College may adversely affect the further education sector’s ability to access VAT reliefs, such as the zero rate on the construction of relevant charitable buildings and the reduced rate on supplies of fuel and power. (Contact: Kate Connolly)
EMEA Dbriefs webcasts
The next EMEA Dbriefs Tax webcast is on Monday 18 March 2024 at 14.00 GMT/15.00 CET. Reforms To The Taxation Of Non-UK Domiciled Individuals is from our Global Mobility Employment Taxes series and will be hosted by James Macpherson. Our panel will discuss the government’s plans to replace current rules for non-UK domiciled individuals with residence-based rules from 6 April 2025, and how the changes could affect employees and employers’ global mobility programmes.
On Wednesday 20 March 2024, at 12.00 GMT/13.00 CET, the latest webcast in our Climate and Sustainability series – Leveraging Global Incentives To Drive Decarbonisation – will take place. Hosted by Kylie Gregge, our panel will look at the incentives that are available globally to support decarbonisation, and how organisations can make the best use of them.
Finally, on Thursday 21 March 2024, at 12.00 GMT/13.00 CET, Carve Outs – Getting Tax And Legal Right is the first in a new M&A webcast series looking at key tax and legal aspects of the transaction lifecycle. This first webcast, hosted by Mike Thorne, will cover some of the main tax and legal considerations, for both remaining businesses and separated businesses, when preparing for and executing carve-out transactions.