Business Tax Briefing

Date of Autumn Budget confirmed and tax policy announcements

As part of a speech given to Parliament on 29 July 2024, the Chancellor of the Exchequer, Rachel Reeves MP, announced that the Autumn Budget will take place on Wednesday 30 October 2024. The first Budget of the new government will be presented on that day alongside the latest economic and fiscal forecasts commissioned from the Office for Budget Responsibility (OBR). HM Treasury is inviting Budget representations from interested stakeholders until 10 September 2024.

Later on 29 July 2024, the Exchequer Secretary to the Treasury, James Murray MP, published a written ministerial statement setting out the government’s next steps on a number of “priority tax commitments”. Announcements and documents released by HM Treasury relating to business taxation policy included:

• Pillar Two country-by-country reporting safe harbour: Draft legislation was published to amend the UK’s implementation of the Pillar Two transitional country-by-country reporting (CbC) safe harbour to include the OECD’s ‘anti-arbitrage’ rules. Model anti-arbitrage rules, to counter certain transaction-based potential tax avoidance mechanisms, were published by the OECD/G20 Inclusive Framework last December, and HM Treasury issued a statement in March 2024 announcing that that the UK would legislate for them in a future Finance Bill. Comments on the draft legislation are invited by 15 September 2024.
• Carried interest: A call for evidence has been launched, inviting views on the government’s plans to reform the tax treatment of carried interest. The call for evidence is open until 30 August 2024.
• Private schools – VAT on fees and business rates: The government announced that, from 1 January 2025, education services and vocational training supplied by a private school or a “connected person” for consideration will be subject to VAT at the standard rate of 20%. The standard rate will also apply to boarding services that are “closely related” to such supplies. Fees paid on or after 29 July 2024 for education provided after 1 January 2025 will also be subject to VAT at the standard rate. Schools required to VAT register will be able to do so from 30 October 2024, and HMRC will be providing further guidance. Changes to remove the eligibility of private schools in England to business rates charitable rates relief will take effect in April 2025, subject to parliamentary processes. Submissions on the technical note, which includes a number of questions for consultation, and the published draft VAT legislation are invited by 15 September 2024.
• Energy Profits Levy: The government intends to increase the rate of the Energy (Oil and Gas) Profits Levy by three percentage points to 38% from 1 November 2024 (bringing the headline rate of corporate tax on upstream oil and gas activities to 78%) and will extend the default lifetime of the Levy by one year to 31 March 2030. The government’s update also discusses planned changes to the Levy’s investment allowance rules.

Please see Deloitte TaxScape’s article for further details on the Treasury’s announcements, including updates on the replacement of the tax regime for non-UK domiciled individuals and the planned abolition of furnished holiday letting tax regime.

HMRC publish updated Corporate Criminal Offences statistics

The Corporate Criminal Offences (CCO) for the failure to prevent the facilitation of tax evasion were introduced by the Criminal Finances Act 2017. HMRC have this week updated their statistics on compliance activities in relation to CCO investigations. As at 30 June 2024, HMRC had 11 live CCO investigations, with no charging decisions yet made, and a further 28 identified cases were under review as to whether they should proceed to an investigation. The cases identified span 11 business sectors, including software providers, labour provision and transport. To date, HMRC have reviewed and rejected an additional 101 cases, however HMRC note that some of these previous investigations have led to satisfactory explanations that have caused CCO investigations to be dropped but have instead led to other tax and regulatory offences being pursued.

HMRC publish new Creative Industries Expenditure Credit Manual

Following the introduction of Audio-Visual Expenditure Credit (AVEC) and Video Games Expenditure Credit (VGEC) by Finance Act 2024, HMRC have published a guidance manual: the Creative Industries Expenditure Credit Manual. The new manual currently includes four initial chapters of AVEC and VGEC guidance on: expenditure credit calculations; expenditure credit redemption; claims and corporation tax administration; and commencement and transitional rules.

Changes to HMRC interest rates following Bank of England rate change

Yesterday, the Bank of England’s Monetary Policy Committee announced a decrease in the Bank Rate by 0.25 percentage points from 5.25% to 5%. HMRC will shortly update their interest rate tables to reflect the automatic 0.25 point decrease to interest rates for late tax payments and tax repayments as a result. According to HMRC, changes will generally come into effect from 12 August 2024 for quarterly instalment payments of corporation tax, and from 20 August 2024 for most other tax payments.

HMRC publish annual report and accounts for 2023/24

On 30 July 2024, HMRC published their Annual Report and Accounts for the year to 31 March 2024. The section of the report on performance notes that HMRC exceeded their £40.5 billion target for ‘compliance yield’ for 2023/24 – collecting or protecting £41.8 billion of tax revenues that would otherwise have been lost through error, fraud and other forms of non-compliance. The section also acknowledges challenges in delivering customer services, and HMRC have published a separate report on their performance in 2023/24 and how they are working to meet their customer service charter standards.

The Annual Report also includes updates on HMRC’s recent focus on reducing levels of error and non-compliance in relation to corporation tax research and development (R&D) tax relief schemes, stating that recently implemented R&D policy and operational measures are estimated to have reduced overall error and fraud levels to 7.8% of total relevant expenditure in 2023/24, compared to 17.6% in 2021/22.

Other reports published by HMRC along with their Annual Report, included a statistical note looking at the results of HMRC’s Large Business Directorate in 2023/24. This note breaks down key compliance yield and ‘tax under consideration’ statistics for large business taxpayers between different taxes, areas of inaccuracy, countries of groups’ ultimate parents, and economic sectors.

EMEA Dbriefs webcasts

The EMEA Dbriefs programme is taking a break over the summer. Why not take this time to catch up on demand on some of our more recent webcasts that you may have missed. These include: Mandatory payrolling all benefits in kind – the end of P11Ds; US 2024 Election forecast – What to expect?; Update on latest OECD developments: Pillar One and Pillar Two; Worker rights – What next following the general election? and Navigating the global talent landscape – the payroll perspective. You can also subscribe here to hear about our upcoming webcasts in the autumn.