7 February 2025
On 4 February 2025, HMRC updated their pages on GOV.UK covering the UK’s double taxation conventions with Russia and Belarus with additional notes. The notes state that, following treaty article suspensions announced by Russia and Belarus in August 2023 and March 2024 respectively, the UK government has notified both countries of its intention to suspend the UK’s double tax conventions with them. The double tax conventions will cease to have effect in UK law with effect from 1 April 2025 for corporation tax and similar taxes, and from 6 April 2025 for income tax and capital gains tax and similar taxes. The terms of the treaties will continue to apply in the UK for earlier periods. Two draft statutory instruments – the draft Double Taxation Relief (Russian Federation) (Revocation) Order 2025 and the draft Double Taxation Relief and International Tax Enforcement (Belarus) (Revocation) Order 2025 – have been laid before the House of Commons for its approval.
Further to the completion of the Finance Bill’s Public Bill Committee proceedings last week, an updated version of the Bill has been published on Parliament’s website. The updated Bill reflects the 65 amendments, and one new clause, tabled by the government and approved during the Bill’s Committee stages. No dates have been announced yet for the Bill’s remaining Commons stages – Report Stage and Third Reading.
The Treasury has published new investment zone regulations to designate three areas, located within the East Midlands Investment Zone, as special tax sites with effect from 26 February 2025. The designation will allow for special rates of structures and buildings allowances, plant and machinery capital allowances, stamp duty land tax, and Class 1 employer NICs to apply to qualifying activities in these sites. This is the second tranche of investment zone tax sites to be designated, following sites in the Liverpool City Region, North East and West Midlands Investments Zones all designated in April 2024. Maps of all investment zone tax sites designated to date have been published by HMRC here.
On 6 February 2025, the Bank of England’s Monetary Policy Committee announced a decrease in the official Bank Rate by 0.25 percentage points from 4.75% to 4.50%. HMRC have issued a press release setting out the automatic 0.25 point decrease to interest rates for late tax payments and tax repayments as a result. The new rates take effect from 17 February 2025 for quarterly instalment payments of corporation tax, and from 25 February 2025 for most other tax payments. HMRC will shortly update their interest rate tables accordingly.
Although not referred to in HMRC’s press release, the late payment interest rate charged by HMRC on unpaid tax liabilities is expected to change again from 6 April 2025, in line with the government’s Autumn Budget announcement to increase the rate by a further 1.5 percentage points.
The government has laid the draft National Minimum Wage (Amendment) Regulations 2025 before Parliament for its approval. In line with the announcements at Autumn Budget 2024, the regulations will implement the Low Pay Commission’s recommendations to increase national minimum wage rates with effect from 1 April 2025, including a new National Living Wage of £12.21 per hour (up from £11.44 per hour).
Sarabande is a charity which provides emerging artists with studio and exhibition space and other support. Sarabande claimed input tax on the acquisition and refurbishment of a property, which HMRC disallowed, on the basis that Sarabande was making exempt supplies of land. The First-tier Tribunal (FTT) has upheld Sarabande’s appeal against HMRC’s decision and subsequent assessment. (The FTT noted HMRC’s difficulties in establishing the fact pattern so as to determine the VAT treatment, given inconsistencies in the information provided by Sarabande, a lack of clear records, and inconsistences in the preparation of its accounts and tax returns.)
HMRC argued that there was an exempt supply of land by Sarabande to its subsidiary, Suture Inc Limited (SIL), which then made a supply to the artists. Sarabande argued that it was making supplies directly to the artists, which were not supplies of land, but rather a wider programme of support. Given the lack of written documentation (which meant that there could be no transfer of a proprietary interest), the issue was whether there was a licence to occupy the land. As SIL was only established after Sarabande had started entering into the leases, the FTT concluded that SIL did not acquire from Sarabande a contractual right to occupy the building. Accordingly, there was no exempt supply made by Sarabande to SIL, and HMRC’s disallowance of Sarabande’s input tax claim on the acquisition and refurbishment of the property was not valid, as this was based on a supply that was not made. The FTT went on to conclude that there was a supply by Sarabande to the artists, and that this was not an exempt supply of land, as the supply was of the support programme, of which the studio rental was only one (albeit central) element. (Contact: Ben Tennant)
On Wednesday 12 February 2025 at 12.00 GMT/13.00 CET, there will be a webcast from our international tax series titled Cost-out: the role tax and legal can play in optimising supply chains. Hosted by Gareth Pritchard, our panel will discuss how businesses’ tax and legal departments can help with the adoption of agile, adaptable and resilient supply chain strategies; themes and trends in this area in the evolving global landscape; and practical insights and examples.