On 15 March 2023, Chancellor Jeremy Hunt delivered his Spring Budget, declaring that this would be a budget focussed on growth. In keeping with predictions, there were no major tax cuts announced in today’s Budget. However, there are still some significant changes for business, including immediate deductions for certain capital expenditure, and in relation to international tax. In the investment funds space, changes will be made to the recently introduced Qualifying Asset Holding Company regime, as expected, and a new elective basis for the UK taxation of carried interest will be introduced.

Below is a summary of noteworthy tax-related measures arising from today’s Budget relevant to our clients. Please contact a member of the Weil London Tax team if you would like to discuss anything in greater detail.

Business and International Tax

Tax rates: The previously announced increase in the headline rate of corporation tax (from 19% to 25%) will proceed as planned on 1 April 2023. There are no significant changes to the taxation of energy companies, following the introduction of the Energy Profits Levy and Electricity Generator Levy.

Full expensing: While the temporary 130% “super deduction” will come to an end, companies will be able to claim a 100% capital allowance for expenditure on certain plant and machinery between 1 April 2023 and 31 March 2026. Due to the concurrent increase in the corporation tax rate from 19% to 25%, the effective cash tax saving from full expensing will be similar to the current 130% super deduction. Only brand new plant and machinery will qualify, and cars will be excluded, as well as plant and machinery specifically for leasing.

Pillar 2 developments: As announced at the Autumn Statement 2022, the government will implement the global minimum 15% tax agreed as part of the OECD Pillar 2 framework, through:

  • a Multinational top-up tax: multinational groups with global revenues above €750,000,000, and which have foreign operations with an effective tax rate of less than 15% of profits, will be required to pay a “top up tax” in the UK. The UK measures will affect groups which are either headquartered in the UK, or which include UK entities and are not headquartered in a jurisdiction implementing the Pillar 2 measures; and
  • a Domestic top-up tax: a related measure will apply to large groups operating exclusively in the UK. Where the group’s profits arising in the UK are taxed below 15%, an additional UK top-up tax will be payable for the shortfall.

Sovereign immunity consultation outcome: Following responses to the government’s consultation on sovereign immunity from direct UK taxation, launched on 4 July 2022 and covered on the Weil Tax Blog, the government has now determined that no changes will be made and that the current exemption for sovereign investors will continue to operate in its present form.

Investment Zones: 12 sites across the UK will be selected to receive five years of grants and tax concessions, to encourage investment and development. The tax benefits will follow the concessions available to Freeports, which include relief from employer’s National Insurance contributions (for employees who spend 60% of their working time in the tax site), stamp duty land tax and business rates.

Investment Funds

Carried interest accruals basis: Legislation will be introduced in Spring Finance Bill 2023 to permit UK resident individuals to make a voluntary and irrevocable election for their carried interest to be taxed in the UK on an accruals basis. The measure will permit UK resident investment managers to accelerate their UK tax liabilities on their carried interest to align the timing with the position in other jurisdictions, including the US, where they may obtain double tax relief. This has been a “live” issue following a withdrawal of certain HMRC guidance that has led to concerns around timing mismatches, given that the US and certain other jurisdictions tax carry on an accruals basis, whereas the UK currently taxes on a receipts basis; today’s announcement therefore seems to be a proposed solution to this difference in treatment.

Amendments to Qualifying Asset Holding Company (“QAHC”) rules: As anticipated, the government has confirmed that it will implement a number of targeted changes to the QAHC regime, including changes to the GDO condition as described in the next paragraph, so as to render it more accessible to investment fund structures within its intended scope and so that the rules better achieve their intended effect. The various amendments will, amongst other things, amend the definition of collective investment scheme and the rules for whether a fund is close, extend the existing anti-fragmentation rule and clarify that a securitisation company cannot also be a QAHC. These changes will have effect, respectively, from 1 April 2022, 20 July 2022 and 15 March 2023. All other changes will take effect upon Royal Assent of the Spring Finance Bill 2023. The QAHC regime has been gaining traction particularly with investment managers and funds that have little operational substance outside the UK, and can be an efficient alternative to Luxembourg and other widely used non-UK investment holding structures.

Amendments to Genuine Diversity of Ownership (“GDO”) rules: The government will make changes to the GDO condition in the QAHC, Real Estate Investment Trust (REIT) and Non-Resident Capital Gains (NRCGT) rules. In summary, the GDO condition is designed to prevent investment funds that are limited to a small number of predetermined investors or that are not widely marketed from benefitting from those regimes or from certain beneficial elements within those regimes, for example the ability to make an exemption election to avoid multiple NRCGT charges in a fund structure with UK real estate investments. In the QAHC regime context, these changes are expected to benefit, for example, fund structures that utilise aggregator partnerships to aggregate the interests of various fund entities and fund structures with parallel partnerships. Broadly, under certain of the proposed changes, where an entity (for example, an aggregator) forms part of multi-vehicle arrangements, one of the conditions that needs to be satisfied to access the QAHC regime can be treated as satisfied by the entity if it is met in relation to the multi-vehicle arrangements. The amendments, the detail of which is awaited, and which will take effect upon Royal Assent of the Spring Finance Bill 2023, will provide that an individual investment entity forming part of a wider fund arrangement can satisfy the GDO condition by reference to the arrangements as a whole.

Amendments to Real Estate Investment Trust (“REIT”) regime: Amendments will be made to the UK REIT regime to enhance its competitiveness. In particular, the changes will remove the requirement for a REIT to hold a minimum of 3 properties where it holds a single commercial property worth at least £20 million; amend the rule that deems a disposal of property within 3 years of being significantly developed as being outside the property rental business; and amend the rules for deduction of tax from property income distributions paid to partnerships. The changes will variously apply from 1 April 2023 and Royal Assent of the Spring Finance Bill 2023.

Employee Share Incentives

Changes have been announced to two types of tax-advantaged employee share schemes, Enterprise Management Incentive schemes and Company Share Option Plans:

  • Enterprise Management Incentives: the deadline for notifying HMRC of the grant of EMI options will be extended from 92 days after grant to 6 July following the end of the tax year. The grant of EMI options will no longer require a summary of restrictions on the underlying shares or a specific declaration regarding working time, both common errors that may lead to the disqualification of EMI options. Options granted but not exercised before 6 April 2023 will also benefit from these changes.
  • Company Share Option Plans: as announced in the Autumn 2022 mini budget, the current per-employee options limit of £30,000 will be increased to £60,000. The limit is measured by the value of the shares over which options can be granted, as at the date of grant. Certain “worth having” requirements, which limit CSOP eligibility to companies with a single class of ordinary shares, shares held by persons other than employees, or shares which give employees control of the company, will be removed.

In addition, the government will launch a call for evidence on the Share Incentive Plan (SIP) and Save As You Earn (SAYE) share schemes, with a view to simplifying those schemes.

Tax Avoidance

The government intends to consider further measures to combat tax avoidance, and will launch a consultation on the introduction of a new criminal offence for promoters of tax avoidance who fail to comply with a legal notice from HMRC to stop promoting a tax avoidance scheme, as well as on expediting the disqualification of directors of companies involved in promoting tax avoidance. The maximum sentence of imprisonment for certain tax fraud offences will also be increased from 7 years to 14 years.


Tax rates: There were no changes to rates of income tax or National Insurance for individuals. As previously announced, the Annual Exempt Amount for CGT will reduce from £12,300 to £6,000 from the 2023 tax year (to be reduced further to £3,000 from 2023).

Pensions: The lifetime allowance, which limits the total value of pension benefits which can be accumulated with tax relief, has been abolished. The lifetime allowance is currently £1,073,100 (after being reduced from £1.5m in April 2014 and £1.25m in April 2016), and was widely expected to remain but be increased as part of the budget. The maximum annual allowance, which limits the amount of pension contributions that can be made with tax relief, will also be increased from £40,000 to £60,000, with a minimum of £10,000 (currently £4,000) which will now apply progressively to individuals with an adjusted income above £260,000 (currently £240,000).

Share exchanges into non-UK companies: As announced in the Autumn Statement 2022, where individuals exchange shares in a closely-held UK company for shares in a non-UK company, the non-UK shares will remain subject to UK tax. This will mostly impact individuals who are UK resident but non-UK domiciled.