Monthly Tax Update

A monthly round-up of corporate, employment and indirect tax issues

12/11/2021

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Autumn Budget and Spending Review 2021

The Chancellor delivered his Autumn Budget on 26 October 2021. The overview of tax legislation and rates (OOTLAR), which lists the tax policy measures announced, shows when they will be legislated and includes links to the tax information and impact notes, the rates tables and a table of upcoming tax consultations is here. HMRC and HM Treasury have updated their consultation tracker to take account of the Budget announcements.

Analysis of the Budget announcements can be found on our dedicated Budget website here. This includes our press releases and commentary on individual measures. A recording of our Dbriefs webcast on the Budget is available for you to watch here.

The Budget on 3 March 2021 was followed by a separate ‘Tax Policy Day’ on 23 March, when additional tax policy announcements, new consultations and consultation responses were released. The Budget Red Book confirms that there will be another Tax Policy Day ‘later in the autumn’ when there will be a further set of tax announcements. The date has not yet been announced.

National minimum wage, national living wage rates from 1 April 2022

HM Treasury has announced the national minimum wage and the national living wage rates for 2022/23. The announcement states, inter alia, that the national living wage will increase from £8.91 to £9.50 an hour from 1 April 2022.

Finance (No 2) Bill published

The Finance (No 2) Bill was published on 4 November 2021, together with explanatory notes, and a press release from HM Treasury. An accompanying Written Ministerial Statement draws attention to clause 10, which will increase the normal minimum pension age from age 55 to age 57 from 6 April 2028, and in particular to the window of time during which people could either join or transfer into a scheme which can offer a protected pension age. The increase in the normal minimum pension age was announced in 2014 in the response to the consultation on ‘Freedom and Choice in Pensions’ and the draft clause was published in July 2021. A Tax Information and Impact Note has been published on this change.

Schedule 1 of the Bill includes the revised legislation for implementing the basis period reforms. The government has also published its response document following the consultation on the basis period changes launched on 20 July 2021.

The second reading of the Finance (No 2) Bill will be on Tuesday 16 November 2021.

Corporate re-domiciliation: consultation

The Department for Business, Energy and Industrial Strategy (BEIS), HMRC and HM Treasury have jointly published a consultation document on corporate re-domiciliation. Re-domiciliation would enable a foreign-incorporated company to change its place of incorporation to the UK while maintaining its legal identity as a corporate body. Its corporate history, management structure, assets, intellectual and other property rights, contracts and regulatory approvals would therefore remain intact. Currently, alternative routes must be taken, involving the creation of a new UK entity. Chapter 5 of the document covers tax issues. Responses are invited by 7 January 2022.

Social Security (Up-rating of Benefits) Bill: Lords

The Social Security (Up-rating of Benefits) Bill had its report stage in the Lords on 2 November 2021. The Bill's purpose is to implement the government's decision to set aside the state pension triple lock earnings link for the purposes of calculating the next increase. An amendment was made which would see the earnings link in the triple lock retained. The amendment does not specify the figure to be used for calculating the next increase, but provides that the Secretary of State should use existing powers to set another earnings figure for the uprating next April. The amended Bill is here. The amendment may be reversed when the Bill return to the Commons on Monday 15 November.

Health and Social Care Levy Act: Royal Assent

The Health and Social Care Levy Act received Royal Assent on 20 October 2021. It provides for a new Health and Social Care levy based on a 1.25% increase in the main classes of national insurance contributions (NICs) to be introduced in the 2023/24 tax year, after temporary transitional arrangements to increase NICs rates by the same amount in 2022/23 to allow time for systems to be updated.

Five European countries and the US agree transitional approach to DSTs re Pillar One

On 21 October 2021, the governments of the United Kingdom, Austria, France, Italy, Spain and the United States published a new joint statement announcing a compromise agreement on a transitional approach to phasing out the five European countries’ existing Digital Services Tax (DST) regimes. This follows on from the agreement in early October between 136 (now 137) countries of the OECD/G20 Inclusive Framework on the two-pillar solution to address the tax challenges arising from digitalisation. Pillar One of the solutions would reallocate taxing rights in favour of market countries coordinated with the removal of all DSTs. The five European countries will continue to collect their DSTs during the interim period prior to the commencement of Pillar One. However, for the largest and most profitable multinationals (i.e. those in the scope of Pillar One’s ‘Amount A’ rules), the countries will subsequently allow a credit for 'excess' DST over their Amount A tax in the first year. This credit will be set against the Amount A tax liability in the same country. As part of the agreement, the US will terminate the trade tariffs in relation to the European countries imposed (but currently suspended) in response to their DSTs. Other multinationals will continue to pay DSTs in the interim period. Once Pillar One is implemented, these multinationals will no longer be subject to DSTs and neither will they be in scope of Amount A.

Plastic Packaging Tax: draft regulations and guidance

The government is consulting on draft regulations concerning the introduction of Plastic Packaging Tax (PPT) from 1 April 2022. The regulations set out how PPT will be administered and provide details on registration, returns and record keeping. The regulations also address methods for weighing plastic packaging components and calculating recycled material in plastic, and the definition of ‘substantial modification’, which determines when a plastic packaging component is finished and becomes chargeable for the tax. HMRC have published new guidance on PPT, including how to work out what packaging is subject to PPT; whether, when, and how to register companies or groups for PPT; and how to claim a credit or defer PPT if packaging is to be exported.

Deloitte/IfG event: Reaching net zero – is the tax system ready?

On Monday 22 November, from 1pm to 2pm, Deloitte is participating in a live webcast by the Institute for Government (IfG) titled Reaching new zero - is the tax system ready?. The event will ask how the government should adapt the tax system to reach net zero, look at the steps being taken in other countries, and consider how best to overcome barriers – political and otherwise – to reform. Dr Gemma Tetlow, Chief Economist at the IfG, will be joined by Amanda Tickel, Deloitte UK’s head of tax and trade policy, David Gauke (former Financial Secretary to the Treasury), James Murray MP (Shadow Financial Secretary); and Chris Stark (Chief Executive of the Committee on Climate Change). For more details, and to register for the webcast, see here.

OECD report: Carbon Pricing in G20 economies

The OECD has published a report 'Carbon Pricing in Times of COVID-19: What has changed in G20 economies?'. It concludes that almost half of all energy-related CO2 emissions in G20 economies are now covered by a carbon price. Recent progress has been driven by 'explicit' carbon pricing, which uses carbon taxes and emissions trading systems to raise the cost of carbon-intensive fuels, thus encouraging businesses and households to make more climate-friendly choices. G20 economies account for around 80% of global greenhouse gas emissions.

Forthcoming Dbriefs webcasts

We have a number of Dbriefs webcasts over the next few weeks covering: Notification Of Uncertain Tax Treatments: How Can Businesses Prepare?Transfer Pricing Diverted Profits Tax And HMRC’s Profit Diversion Compliance Facility (PDCF)Developing Your Transfer Pricing Controversy – Competent Authority (MAP And APA); and US Tax Policy Outlook. For more information and to view past webcasts on demand visit our website.