Monthly Tax Update

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:

• Echoing similar announcements made in the Autumn Statement, the government intends to cut the main rate of Class 1 employee National Insurance Contributions (NICs) by a further 2 percentage points, reducing from 10% to 8% from 6 April 2024. The main rate of self-employed class 4 NICs will also be cut further to 6% from 6 April 2024. Read more.
• Non-domicile status is to be abolished with effect from April 2025. It will be replaced with a residence-based system, which will mean that new arrivers to the UK will not pay tax on their foreign income and gains during their first four tax years of UK residency, provided they have been non-UK resident for the previous ten tax years. Read more.
• The government will consult on extending the new capital allowances ‘full expensing’ rules to plant and machinery assets provided for leasing. Any legislative change will proceed only “when fiscal conditions allow”. Read more.
• The Energy Profits Levy (EPL) will be extended by an additional year until March 2029. However, to reiterate that the EPL is a temporary measure introduced in response to energy price rises, the government will include legislation in the Spring Finance Bill (see below) to automatically terminate it sooner if oil and gas prices were to return to historically normal levels. Read more.
• The VAT registration threshold will increase from £85,000 to £90,000 from 1 April 2024, and the deregistration threshold will increase from £83,000 to £88,000. These thresholds had been frozen since 2017. Read more.

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.

Finance Act 2024 – Royal Assent

The Finance Bill introduced following Autumn Statement 2023 completed its House of Lords stages on 21 February 2024 and received Royal Assent on 22 February 2024, becoming Finance Act 2024. The PDF version of the Act is available here, and the HTML version of the Act is available here.

Scottish and Welsh income tax rates for 2024/25 agreed

The Scottish parliament passed a statutory resolution on 20 February 2024 to set the rates of income tax applicable to the non-savings non-dividend income of Scottish resident individuals for the tax year 2024/25 (6 April 2024 – 5 April 2025). The rates and bands approved by MSPs were those originally proposed by the Scottish government in its Budget of December 2023, and therefore include the new ‘Advanced rate’ of 45% for income between £75,000 and £125,140, and the increase in the ‘Top rate’, applicable to income above £125,140, from 47% to 48%.

Earlier this week, the Senedd agreed a resolution setting the rates applicable to the non-savings non-dividend income of Welsh resident individuals for 2024/25. In line with the Welsh draft Budget of December 2023, overall income tax rates applicable in Wales will remain aligned with the rates applicable to taxpayers resident in England and Northern Ireland.

OECD publishes report on transfer pricing approach for marketing and distribution activities

On 19 February 2024, the OECD/G20 Inclusive Framework published a transfer pricing report on Amount B of Pillar One. The report outlines a new process for pricing baseline marketing and distribution activities under the arm’s length principle in countries that opt to apply Amount B. All businesses that sell goods, regardless of size, are potentially in the scope of Amount B if they carry out suitable distribution activities. For further details, please see our alert.

Australia publishes revised exposure draft on public country-by-country reporting

On 12 February 2024, the Australian government released for consultation draft legislation on public country-by-country (CbC) reporting for large multinationals that operate in Australia. The legislation would require the public release of certain tax and other information on a jurisdiction-by-jurisdiction basis for reporting periods starting on or after 1 July 2024. Under the revised draft, it is no longer proposed that separate country-by-country information will be published for all countries globally. Instead, data for Australia and a specified list of 41 other countries will be reported individually, with data for the rest of the world aggregated and reported together. Please see Deloitte Australia’s alert for further details.

Company car advisory fuel rates from 1 March 2024

HMRC have announced the new advisory fuel rates for company cars applicable from 1 March 2024. The previous mileage rates, effective from 1 December 2023, can be used for up to one month from the date the new rates apply. Compared to the previous rates, the advisory fuel rates for all sizes of diesel engines have each decreased by 1p. The advisory fuel rates for petrol engines sized up to 2000cc have decreased by 1p each, and the petrol rate for larger engines has decreased by 2p. Rates for liquefied petroleum gas (LPG) have increased by 1p each for engine sizes up to 2000cc, and by 3p for larger engines. The advisory rate for fully-electric cars is unchanged at 9p per mile.

Northern Ireland: registration for the Import One Stop Shop

The Import One Stop Shop (IOSS) is an optional simplified VAT accounting scheme that can be used by Northern Ireland businesses to account for VAT on distance sales transactions. The scheme came into effect on 1 July 2021. A Northern Irish business can choose to register for the IOSS scheme to report and pay VAT on goods valued at £135 or less (low value goods) that are imported into the EU or Northern Ireland, and sold to consumers in the EU and/or Northern Ireland. Previously, Northern Irish businesses were only able to register for the IOSS in an EU member state. However, with effect from 1 March 2024, Northern Irish businesses are now able to register with HMRC for the Northern Ireland IOSS. (Businesses from outside the EU and Northern Ireland will in future be able to register through an intermediary, but the Northern Ireland IOSS is not yet available for intermediary registrations.)

HMRC have published a collection of guidance on the IOSS, including guidance on registration, returns, and payment. A business can only register for one IOSS scheme; if a business is already registered for the IOSS scheme in an EU member state, it must cancel that registration before registering for the Northern Ireland scheme. VAT on sales of low value goods located in Great Britain must be accounted for on the normal UK VAT return, and VAT on goods sold by an online marketplace will be accounted for by the marketplace.

EMEA Dbriefs webcasts

We have a number of Dbriefs webcasts over the next month including: Mandatory Payrolling All Benefits In Kind – The End Of P11Ds (14 March), Leveraging Global Incentives To Drive Decarbonisation (20 March), and Carve Outs – Getting Tax And Legal Right (21 March). For more information, and to view recent webcasts on demand, please visit our Dbriefs website.