05/01/2024
Budget to be held on 6 March 2024
The Chancellor of the Exchequer has announced that the next UK Budget – Spring Budget 2024 – will be held on Wednesday 6 March 2024. The Spring Budget will be accompanied by the latest forecasts from the Office for Budget Responsibility for the UK’s economy.
National Insurance Contributions (Reduction in Rates) Act 2023 – Royal Assent
The National Insurance Contributions (Reduction in Rates) Act 2023 received Royal Assent on 18 December 2023. The Act implements the Autumn Statement’s key national insurance announcements, including the reduction in the Class 1 employee NIC rate from 12% to 10%, which takes effect from tomorrow (6 January 2024), and reductions to self-employed individuals’ NICs from 6 April 2024.
Government announces introduction of a UK Carbon Border Adjustment Mechanism by 2027
In March 2023, the government launched a consultation on potential policy measures to mitigate carbon leakage risk to support decarbonisation in the UK. On 18 December 2023, the government published its response and announced its intention to implement a ‘carbon border adjustment mechanism’ (CBAM) by 2027. This new UK levy will target imports of carbon-intensive products such as iron, steel, aluminium, fertiliser, hydrogen, ceramics, glass and cement. The government has published a factsheet on the key elements of the UK CBAM, and its design and delivery will be subject to further consultation in 2024. The government also announced that the UK Emissions Trading Scheme (ETS) will be extended to run until at least 2050 and has launched further consultations on its future operation.
Scottish and Welsh Budget announcements
On 19 December 2023, the Scottish government presented its proposed Budget for the 2024-25 tax year. On the rates of income tax applicable to the non-savings, non-dividend income of Scottish-resident taxpayers, a new ‘Advanced’ rate of 45% for incomes between £75,000 and £125,140 is proposed, as well as increasing the Top rate on income above £125,140 from 47% to 48%. An income tax factsheet summarising the rates and bands proposed has been published. No changes are proposed to land and buildings transaction tax (LBTT) rates or bands.
On the same day, the Welsh government published its draft Budget for 2024-25. As in previous years, the Welsh government proposes to keep the devolved rates of income tax aligned with England and Northern Ireland. No changes to land transaction tax (LTT) were proposed.
OECD publishes further Pillar Two global minimum tax rules guidance
On 18 December 2023, the G20/OECD Inclusive Framework published a third set of administrative guidance on the implementation of the Pillar Two global minimum tax rules to further clarify their interpretation and operation. The rules are intended to ensure that large multinational groups pay corporate income taxes at a minimum level of 15% in every country in which they operate. For further details, please see our alert.
HMRC announce cessation of liquidation tax clearances
HMRC have announced a change of policy on clearances for companies undergoing a members’ voluntary liquidation (MVL). The new insolvency guidance notes that, historically, HMRC have provided practitioners with written assurances that the tax liabilities of a company in MVL, including tax liabilities arising during the MVL, had been dealt with. HMRC have now ceased this practice, and will instead expect insolvency practitioners to rely on their professional judgement when establishing an accurate tax position. Requests for tax clearances already received will not be responded to, and future requests will not be actioned.
Replacement ‘DT Company’ treaty tax relief claim form published by HMRC
HMRC’s Form DT Company (‘United Kingdom income tax relief at source and repayment’) is used by overseas-resident companies to apply to receive payments of UK-sourced interest or royalties at reduced treaty withholding tax rates and/or to obtain repayment of UK tax previously withheld above treaty rates. On 19 December 2023, HMRC updated the relevant GOV.UK guidance page, replacing the previous static PDF form with a new interactive version. The new version generates relevant questions based on initial responses, before populating a completed form containing the required information. For a small number of treaty partner jurisdictions (e.g. the Netherlands, Japan and the United States), HMRC previously published a collection of country-specific variations of Form DT Company with additional questions relevant to the particular double tax treaty. Most of these country-specific PDF forms were removed from GOV.UK in December, with the former HMRC webpages now redirecting to the overarching interactive form.
Court of Appeal dismisses HMRC’s and taxpayers’ partner incentivisation plan appeals
The Court of Appeal has dismissed the appeals of HMRC and the taxpayers in BlueCrest Capital Management LP and others. The judgment focuses on the income tax treatment of payments made by partnerships to individual partners via a ‘partner incentivisation plan’ (PIP). The PIP involved an initial allocation of partnership profits to a new corporate partner, followed later by awards of special capital by the corporate to individual partners. The Court dismissed HMRC’s arguments that the profits initially allocated to the corporate partner should be immediately chargeable to income tax as profit shares of the individual partners. However, the Court also dismissed the taxpayers’ arguments that the later awards of special capital were not subject to income tax, holding that they were in scope of the ‘miscellaneous income’ rules of the Income Tax (Trading and Other Income) Act 2005.
Government publishes annual summary of progress on tax simplification
During a parliamentary debate in June 2023 on the closure of the Office of Tax Simplification, the government committed to writing to the House of Commons Treasury Committee annually to provide an overarching summary of its progress on tax simplification matters. The first such letter was sent on 12 December 2023. It summarises simplification measures announced in recent months, for example making capital allowance full expensing relief permanent. The government also re-confirmed its intention to develop a suite of metrics to measure its progress on tax simplification and improving the taxpayer experience.
Bolt Services UK: application of VAT Tour Operators’ Margin Scheme to ride-hailing services
The First-tier Tribunal (FTT) has held that Bolt Services UK Limited should account for VAT under the Tour Operators’ Margin Scheme (TOMS) on the supply to passengers of private hire vehicle ride-hailing services (‘the supply’). The FTT considered that for the supply to fall within TOMS, it had to be of a service commonly provided by travel agents/tour operators, and the main focus at the hearing was on this issue. Bolt argued that the services commonly provided by travel agents/tour operators were evolving as the travel industry and technology evolved. Bolt contended that, looking at the development of CJEU case law, it would be a natural next step for the courts to include the supply as one commonly provided by travel agents/tour operators. Conversely, HMRC argued that Bolt is not a tour operator/travel agent and that its supplies are not commonly provided by tour operators/travel agents.
The FTT held that the correct approach, when assessing whether Bolt’s services are those commonly provided by tour operators/travel agents, is to take a high-level or general view when considering whether services are of a kind commonly provided by tour operators/travel agents. The approach of the CJEU “suggests that it is not necessary for the tribunal to descend into the detail of the services”. The FTT found that the supply is a service commonly provided by tour operators/travel agents, therefore allowing Bolt’s appeal. (Contact: Donna Huggard)