Tax

In her address to Parliament on Monday, 29th July, Rachel Reeves, the new Chancellor of the Exchequer, has announced that she will deliver her first Budget on Wednesday, 30th October. Reiterating her commitment not to increase “tax for working people”, the Chancellor has said that her October Budget is intended to “fix the foundations of our economy”.

In conjunction with the Chancellor’s speech, the Government has also published various pieces of draft legislation and technical documents. These publications include a call for evidence on the tax treatment of carried interest and a policy paper on changes to the Energy (Oil and Gas) Profits Levy, as well as draft legislation for VAT on private school fees and for a previously announced Pillar 2 anti-avoidance measure in connection with existing safe harbour provisions.

Carried Interest: The Government’s call for evidence invites views from stakeholders on its plans to reform the tax treatment of carried interest. The document does not set forth any specific proposals, but instead includes a specific request for feedback on: (i) how the tax treatment of carried interest can most appropriately reflect its economic characteristics; (ii) different structures and market practices with respect to carried interest; and (iii) lessons that can be learned from approaches taken in other countries. The deadline for representations is 30th August, and the Government notes that it also intends to meet with a range of “expert stakeholders”, from across the industry, “other relevant professions” and academia, over the coming weeks.

Energy (Oil and Gas) Profits Levy: The rate of the energy profits levy (EPL), which currently applies to profits of oil and gas companies at 35%, will increase to 38% from 1 November 2024. The “sunset” provisions under which the EPL ends will be extended from 31st March 2029 to 31st March 2030. The energy security investment mechanism, which provides for an earlier end date for the EPL if oil prices fall below a certain threshold, will be retained. The EPL’s main investment allowance (29%) for qualifying expenditure incurred will be removed from 1st November 2024, although the EPL’s decarbonisation investment allowance will remain. These were all changes that had been anticipated. One proposal that had not been anticipated is the Government’s announcement that the extent to which capital allowances (including first year allowances) can be taken into account when calculating EPL profits will be reduced, but further details will only be announced in the October Budget, leaving uncertainty for investors.

VAT on Private School Fees: As expected, the Government will legislate to ensure that all private school education services are subject to VAT at the standard 20% rate. This measure will take effect from 1st January 2025, but also applies to any private school fees paid from 29th July 2024 in relation to terms starting in January 2025 or later.

Pillar 2: The draft legislation provides an anti-arbitrage rule to counter arrangements that are intended to exploit differences between tax and accounting rules so as to enable certain Multinational Enterprises to qualify for the transitional country-by-country safe harbour when they would not otherwise do so.

Further information on the above measures can be found here, together with additional publications regarding the abolition of the furnished holiday lettings tax regime and further details on the changes to the taxation of non-UK domiciled individuals.

The Chancellor’s October Budget, and accompanying publications, should offer further clarity on detail and next steps in relation to the various tax-related measures included in Labour’s election manifesto, which we covered in a previous blog entitled Tax and the General Election 2024: The Manifestos.

Keep an eye on the Weil Tax Blog for a summary of key tax announcements on Budget Day, and please speak to your usual Weil Tax contact if you have any questions in the meantime.