Legislation Day 2023
The government published various draft clauses for Finance Bill 2023-24 on 18 July 2023. These primarily cover proposals that have already been announced in outline, and allow stakeholders the opportunity to review these from a technical point of view before they are formally bought before Parliament. Comments can be made on these draft clauses before 12 September 2023.
The key areas covered by the draft legislation are as follows:
EMI option notifications
This proposal will extend the time limit for notifying HMRC of the grant of EMI options. Currently these need to be notified within 92 days from the date of grant, but for options granted on or after 6 April 2024 the deadline will be 6 July following the end of the tax year. This measure is to be welcomed and will remove a potential stumbling block for companies operating EMI schemes.
Abolition of the pensions lifetime allowance
Following the removal of the lifetime allowance charge from 6 April 2023, the lifetime allowance itself will be formally removed from the statute book from 6 April 2024.
R&D tax reliefs
Following a consultation earlier in 2023, the government has now published draft legislation on a proposed single R&D scheme, to replace the existing RDEC and SME schemes. The government is still to make a final decision on whether to adopt this approach, but the draft legislation is being published for consultation to ease its introduction should it decide to do so. As anticipated, the proposed scheme is based on the existing RDEC scheme. The government has also published legislation to bring in an enhanced payable credit rate for loss-making “R&D intensive” SMEs; this measure was previously announced and is intended to be effective from 1 April 2023, although claims will only be possible once this legislation has become law, which is expected to be next summer.
Creative industry tax reliefs
Various changes are proposed in respect of the creative sector tax reliefs. Alongside several administrative changes and technical clarifications, the most significant proposal relates to the introduction of an Audio-Visual Expenditure Credit (to replace Film Tax Relief, High-End TV Tax Relief, Animation Tax Relief, and Children’s TV Tax Relief) and a Video Games Expenditure Credit (to replace Video Games Tax Relief). These new schemes will provide above-the-line credits based on qualifying expenditure, with the qualifying criteria and other rules mostly being carried across from the existing schemes. The credit rate for films, high-end TV and video games will be 34% of qualifying expenditure, and the credit rate for animations and children’s TV will be 39%. Claims under the new schemes will be possible from 1 January 2024, with the existing schemes ceasing on 1 April 2027.
Pillar two undertaxed profits rule
Following the introduction of the Multinational Top-up Tax and the Domestic Top-up Tax in Finance (No. 2) Act 2023, the government is now planning to adopt the undertaxed profits rules from the OECD Pillar Two project. These rules will operate as a back-stop provision to ensure that any top-up amounts (required to ensure profits at taxed at a minimum rate of 15%) not paid under the other rules are still brought into charge in the UK.
UK real estate investment trusts (REITs)
Several changes are being proposed to the UK REIT regime to increase its attractiveness and ensure that it operates as intended; changes include clarifying the calculation of the financing cost ratio and amending the definition of “institutional investor”. These changes form part of various streams of work designed to make the UK a more attractive proposition for international investment.
Tonnage tax
A number of draft clauses were published in respect of Tonnage Tax regime. These will firstly increase the capital allowance limits for leasing from £40 million to £100 million, and secondly extend the scope of the regime to third party ship managers.
Post Office compensation schemes
The government is proposing an exemption from corporation tax for compensation received under both the Group Litigation Order Scheme and the Horizon Shortfall Scheme. It is also looking to ensure that where compensation received by a company is paid onto an individual by way of a dividend or other payment, it is treated as if it had been received directly by the individual.
Agricultural property relief and woodlands relief
The geographical scope of both agricultural property relief and woodlands relief for inheritance tax purposes will be restricted to the UK from 6 April 2024.
HMRC data collection
The government is proposing a number of changes to increase the amount of data it can gather through various tax reporting processes. It is intended that employers will be required to provide details of the hours worked by employees through PAYE Real Time Information (RTI) reporting. In addition, shareholders in owner managed companies will be required – through their self-assessment tax returns – to specify the amount of dividends received from their own companies and the percentage of share capital they hold
Promoters of tax avoidance
As part of ongoing attempts to crack down on tax evasion, the government intends to increase the maximum prison term for tax fraud from 7 to 14 years. It also intends to introduce a new criminal offence for promotors of tax avoidance schemes who fail to comply with a Stop Notice, and to provide HMRC with greater powers to seek the disqualification of directors of companies involved in promoting tax avoidance.
To find out more about any of the topics above, contact one of our tax experts.