8 March 2024
Spring Budget
The Chancellor of the Exchequer Jeremy Hunt MP delivered his Spring Budget on 6 March 2024. Analysis of the tax announcements can be found on our dedicated Budget website here, including our commentary on individual measures. A recording of our Dbriefs webcast on the Budget is available to watch on demand here.
HMRC’s overview of the tax legislation and rates (OOTLAR), which lists the tax policy measures announced, generally shows how and when they will be legislated and includes links to relevant tax information and impact notes is here. Tax measures announced included:
The Spring Finance Bill (formally named Finance (No. 2) Bill 2023-24) to enact many of the measures announced will be published next week.
The Budget’s NIC rate cut measures will be enacted separately through the National Insurance Contributions (Reduction In Rates) (No. 2) Bill. The text of the bill and its explanatory notes were published on 7 March 2024. The Bill had its first reading in the House of Commons on 7 March 2024, and is scheduled to have its remaining Commons stages next week on 13 March 2024.
The government has also confirmed that there will be a ‘Tax Administration and Maintenance Day’ on 18 April 2024 when there will be a further set of tax-related announcements.
Welsh income tax rates for 2024/25 agreed
On 5 March 2024, the Senedd agreed a resolution setting the rates of income tax applicable to the non-savings non-dividend income of Welsh resident individuals for the tax year 2024/25 (6 April 2024 – 5 April 2025). In line with the proposals put forward by the Welsh government in its draft Budget of 19 December 2023, the resolution keeps the overall income tax rates applicable in Wales aligned with the rates applicable to taxpayers resident in England and Northern Ireland.
Haworth and others: treaty residence, trusts, and unpublished decisions – Upper Tribunal
The Upper Tribunal has dismissed the taxpayers’ appeal in the capital gains tax case Haworth and others v HMRC. The case involved the use of a “round the world” scheme, involving overseas family trusts. The parties agreed that the scheme could only have had its intended effect if the ‘place of effective management’ (POEM) of the trusts used was Mauritius. The First-tier Tribunal (FTT) held that the POEM at the material time was the UK. On appeal, taxpayers’ counsel argued that the FTT had applied the wrong test for POEM to the facts, and that it ought to have applied a test derived from the Court of Appeal’s judgment on corporate tax residence in Wood v Holden. The Upper Tribunal judges disagreed, finding that the FTT had applied the test for POEM, first set out by the Special Commissioners and subsequently endorsed by the Court of Appeal, from the similar double tax treaty / trust residence case of Smallwood.
In an annex to their decision, the Upper Tribunal separately considered whether it could have had regard to a different decision of the First-tier Tribunal included in HMRC’s arguments that had not been published at the time of the hearing. While stressing that there is no rule of law that prohibits reliance on an unpublished decision, after weighing the factors, the judges considered that fairness and justice required it to refuse permission for HMRC to rely on the decision in its unpublished state.
Research and development expenditure credit – commencement regulations made
Schedule 1 of Finance Act 2024 contains amendments to the research and development (R&D) legislation in Corporation Tax Act 2009 and includes the changes to introduce the new ‘merged’ R&D expenditure credit scheme. HM Treasury has now made the required commencement regulations which, in line with previous announcements, provide that the merged scheme generally takes effect for accounting periods beginning on or after the appointed day of 1 April 2024.
NHS Northumbria: VAT and hospital car parking – Court of Appeal
NHS hospitals which operate their own hospital car parks should ensure that users can park “as safely, conveniently and economically as possible”, according to guidelines issued by the Department of Health in 2015. Although these ‘2015 Parking Principles’ are guidance, hospitals are legally required to comply with them unless they have a good reason not to. In the Court of Appeal’s judgment in Northumbria Healthcare NHS Foundation Trust, this meant that the NHS car parks operated under a different legal framework to private car parks (which the court saw as being operated with a view to profitability). Consequently, NHS Northumbria was operating under a special legal regime, and (as a public authority) should not charge VAT on car parking unless this would lead to a significant distortion of competition with the private sector. In the court’s judgment, HMRC had not provided sufficient evidence at tribunal that such a distortion would arise. Distortion of competition could not be assumed based simply on participation in the car parking market. NHS Northumbria’s appeal was allowed. (Contact: David Walters).
EMEA Dbriefs webcasts
The next EMEA Dbriefs Tax webcast is on Thursday 14 March 2024 at 12.00 GMT/13.00 CET. Mandatory Payrolling All Benefits In Kind – The End Of P11Ds is from our Global Mobility Employment Taxes series and will be hosted by Michael Nicolaides. During this webcast our panel will discuss HMRC’s recent announcement that employers will have to process all benefits in kind through the payroll from April 2026, and how organisations should be preparing for this major change.