The government has published proposed tax legislation and feedback on various consultations, as a step towards its preparation of Finance Bill 2023. A lot more will undoubtedly find its way into this Finance Bill before it is brought before parliament, but some of the key issues that have featured in these publications are as follows:
The government has published draft legislation to reflect various changes that will be made to research and development tax relief with effect from 1 April 2023. These changes have all been trailed previously and include (a) extending the scope of qualifying expenditure to include expenditure on datasets, cloud computing and R&D underpinned by pure mathematics, (b) limiting relief for certain categories of expenditure to activity taking place in the UK, subject to some targeted exemptions, and (c) requiring all future claims to be made digitally and requiring companies to give notice to HMRC of their intention to make a claim within six months of the end of the period (unless they have made a claim in one of the three preceding periods). Following comments made earlier in the year, we expect that further changes to the reliefs – for example increasing the level of reliefs, and further tackling perceived abuse – may be announced in due course.
The UK does not currently have specific requirements as to the documentation that businesses need to keep to support their approach to transfer pricing. For accounting periods beginning on or after 1 April 2023, however, large multinational businesses (being those that are currently within the country-by-country reporting regime) with UK operations will be required to maintain a ‘master file’ and a ‘local file’ in accordance with the OECD guidelines, and to provide these to HMRC when requested.
The government has published draft legislation for a new ‘multinational top-up tax’. This tax represents part of the UK’s implementation of the OECD’s ‘Pillar 2’ rules, which aim to ensure that large multinational enterprises pay a minimum level of tax in the jurisdictions in which they operate. This new tax will apply from 31 December 2023 to parent companies of multinational groups with annual global revenues in excess of €750 million, and will be charged when a subsidiary is located in a non-UK jurisdiction, and where the group’s profits arising in that jurisdiction are taxed at below the minimum rate of 15%.
Under the current rules, assets are transferred between spouses and civil partners on a nil gain/nil loss basis for capital gains tax purposes while they are living together, or until the end of the tax year in which they cease living together. These current rules mean that capital gains often arise on transfers made in connection with divorce or separation. In what will be a welcome simplification for some, the government is now proposing that the nil gain/nil loss treatment will continue for three years after the individuals cease living together, and for longer where assets are transferred as part of a formal divorce agreement. There will also be a few changes relating to transfers of the family home.
As announced previously, the government will ensure that the £350 month payments made by local authorities to sponsors under the Homes for Ukraine scheme will not be subject to either income tax or corporation tax. This measure will apply retrospectively, with effect from when the scheme was launched. Additional measures will also ensure that certain annual tax on enveloped dwellings and stamp duty land tax reliefs will not be lost as a result of dwellings being made available to Ukrainian refugees.
The government carried out a call for evidence on income tax registration earlier this year, particularly looking at bringing forward the obligation to register from the current deadline of six months after the end of a tax year. It has now analysed the submissions it received (including those from Moore Kingston Smith). Ultimately, it has decided not to move ahead with any changes to the notification obligation for now (although it does warn that “as our strategic transformation programmes develop, the justification for earlier registration may strengthen”).
The government has opened a consultation on improving the range of data that HMRC collects, uses and shares across government. It is considering six specific areas, including business sectors and occupations of individual taxpayers, dividends paid to shareholders in owner-managed businesses, and the start and end dates of self-employment. Having reflected on what government could and could not do during the pandemic, it believes that having this data will mean that they will be better able to target communications, interventions and support.
In 2021, the government carried out consultations on both how to help taxpayers “get offshore tax right” and preventing and collecting international tax debt. The government has now published its summaries and comments on the responses to these consultations. It has not yet developed any detailed proposals in light of these, but it is continuing its deliberations and will no doubt make further announcements in this area in due course.