18 October 2024
A reminder that the Chancellor of the Exchequer, Rachel Reeves, will present her first Budget on Wednesday 30 October 2024 following the summer's general election, which saw the Labour party win a landslide majority. The Budget will bring to life the new Labour government’s key manifesto pledges and there will also be an update from the Office for Budget Responsibility on the latest state of the country’s finances. For insights on the Budget announcements, visit our Autumn Budget 2024 page. There will be an EMEA Dbriefs webcast on Thursday 31 October 2024 at 12.00 GMT/13.00 CET, during which our panel of experts will provide an update on the Budget’s tax announcements.
On 23 September, the Chancellor announced a package of measures aimed at improving the UK’s tax system. In addition to the proposed consultation on e-invoicing (see below), tax-related announcements include the appointment of Exchequer Secretary to the Treasury, James Murray, as Chair of the HMRC Board. Murray will oversee the implementation of his strategic priorities for HMRC, which include closing the tax gap and improving HMRC service. The Chancellor also announced a new Digital Transformation Roadmap to be published in spring 2025, outlining HMRC’s vision to be a digital first organisation underpinned by customer insight, and further steps to recruit additional compliance staff to HMRC.
The Chancellor’s HMRC package of measures included an announcement that HMRC will soon launch a consultation on electronic invoicing (e-invoicing) “to promote its wider use across UK businesses and government departments”. The Chancellor believes that e-invoicing could reduce administrative tasks, improve cash flow, boost productivity, introduce automation, and reduce errors in tax returns helping to close the tax gap. The consultation will seek input from businesses on how HMRC can support investment in, and uptake of e-invoicing. E-invoicing is a long-accepted form of commercial data exchange between counterparties, however it is also developing into an important mechanism for regulatory authorities to drive improved compliance, efficiency, and broader commercial and economic forecasting. Further details of the UK consultation are yet to be announced and no timeline has been set, but this initiative demonstrates the growing global trend towards e-invoicing and HMRC’s objective to drive digital transformation.
On 24 September 2024, the government announced a new growth and skills levy, which will replace the existing apprenticeship levy. The new levy will allow funding for shorter apprenticeships and include new foundation apprenticeships. Under the new regime, employers will be required to provide more funding outside the levy for their level 7 apprenticeships, which are equivalent to a master’s degree. The Department for Education will set out further details on the scope of the levy and how it will be accessed in due course.
The EU Deforestation Regulation (EUDR) aims to ensure that key goods placed on the EU market will not contribute to deforestation. The EUDR will prohibit seven key commodities (cattle, cocoa, coffee, palm oil, rubber, soya, and wood) and products derived from those key commodities (such as beef, chocolate, and furniture) from being placed on, or exported from the EU market unless certain deforestation-free requirements are met. The EUDR, which includes new compliance filing requirements, was due to come into effect for large businesses on 30 December 2024. However, the European Commission has proposed a delay of 12 months to the implementation, to allow authorities and businesses more time to prepare. If approved by the European Council and European Parliament, the requirements will instead come into effect for large businesses on 30 December 2025, and for micro- and small enterprises from 30 June 2026. The Commission also published further guidance documents and an international cooperation framework.
The Chartered Institute of Taxation (CIOT) has published recent correspondence with HMRC in relation to a statutory definition of ordinary share capital (contained in the Income Tax Act 2007, but mirrored in similar definitions) that excludes certain shares with rights to dividends only at a fixed rate. In particular, the CIOT requested clarification as to whether, in HMRC’s view, dividends being cumulative or non-cumulative could affect the position. HMRC’s response acknowledges that an example within their manual page CTM00514 is out of date and will be updated shortly to reflect the outcome of the Upper Tribunal’s January 2021 decision HMRC v Warshaw. The update will also reflect HMRC’s position, stated in their response, that “whether a dividend is cumulative or not has no bearing on whether a share carries a right to a dividend at a fixed rate”.
As of 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%. On 29 July 2024, a technical note and draft legislation were published covering this change. HMRC have now issued guidance for education providers: Check if you must register for VAT if you receive private school fees and Charging and reclaiming VAT on goods and services related to private school fees. The guidance states that it is based on the draft legislation, and will be updated if there are any changes announced in the Budget on 30 October 2024. Education providers will be able to register for VAT from 30 October 2024. The registration date will be determined by reference to whether the VAT registration threshold (£90,000 per annum) has been exceeded in the previous 12 months, or the expectation is that it will be in the next 30 days, which will depend on the value of fees received for terms starting on or after 1 January 2025 and the date payments are received. The guidance sets out HMRC’s policy on the VAT treatment of payments received before 1 January 2025, with a number of examples provided for reference. The guidance also provides high-level commentary on the supply of education services with other goods/services (such as school meals, transport, and welfare services), grant/bursary payments, supplies provided in the classroom, and board and lodging, among other issues, as well as advice on reclaiming VAT, including on capital expenditure.
On 10 October 2024, the government announced significant reforms to employment law, with the publication of the Employments Rights Bill and ‘next steps’ document. Key changes include abolishing the two-year qualifying period for unfair dismissal, ending most zero-hour contracts, strengthening employee rights in relation to flexible working and simplifying trade union recognition processes. A new Fair Work Agency will be established to oversee the changes. For more information on the announcements and their possible implications, see Deloitte Legal blog post.
We have a number of Dbriefs webcasts over the next month, including: Unleashing the value of employee benefits (22 October 2024); UK Autumn Budget 2024 (31 October 2024); Sustainability reporting: defining the role of tax (5 November 2024); UK Tax Update (12 November 2024); and Unlocking talent in a boundaryless world: navigating global opportunities (26 November 2024). For more information, and to view recent webcasts on demand, please visit our Dbriefs website.