Tax

Welcome to the latest edition of the UK Tax Digest, a round-up of tax news from the past few months and a look at what’s to come in the corporate tax world for 2025.  

The big event of 2024 for UK tax practitioners was the delivery of the highly anticipated Autumn Budget by Chancellor Rachel Reeves, the first Labour Budget in 14 years. We summarised the key tax announcements relevant to our clients, which shed some light on how the tax landscape at large will take shape under the new government. We expect progress on these measures to continue throughout 2025, and some of the resulting developments include:

• Carried interest: following the call for evidence launched in July 2024, on Budget day the government published a summary of responses and its proposals for fundamental reform of the UK tax treatment of carried interest. It has also consulted on exploring the case for further conditions for carried interest to be treated as “qualifying” (i.e. entitled to a multiplier reducing the amount taxed as trading profits, therefore resulting in a lower effective tax rate) under the proposed new regime to be introduced. Draft legislation for the new carried interest regime, intended to take effect from 6 April 2026, is expected during 2025 for technical consultation. Our blog summarised the anticipated changes to the carried interest regime.

• Corporate Tax Roadmap: consultations on reforms to UK transfer pricing rules (including the removal of UK-to-UK transfer pricing) and lowering the thresholds for exemption from transfer pricing are due in Spring. To (potentially) add to the administrative burden for larger multinationals, the government will also consult on introducing a requirement for multinationals to report cross-border related party transactions to HMRC.

• Oil & gas taxation:  the government is planning to launch a consultation in early 2025 on the energy profits levy and how the taxation of the oil & gas industry will respond to future price shocks.

In the courts, a series of stand-out cases on avoidance and abuse, and in particular the “unallowable purpose” rule for loan relationships, were finally decided by the Court of Appeal in 2024, having all been refused permission to appeal by the Supreme Court. We covered the decisions in JTI Acquisition Company (2011) Limited v HMRC and Kwik-Fit Group Ltd and others v HMRC in our blog. In the latest “unallowable purpose” case decided in November 2024, the First-tier Tribunal held in Syngenta Holdings Ltd v HMRC that, based on the facts and applying the case law from the Court of Appeal decisions, interest deductions arising from a loan created in an intra-group reorganisation had an unallowable purpose. It remains to be seen whether the taxpayer will appeal the decision, but it seems unlikely that this is the last we will hear about the loan relationship unallowable purpose rule.

Outside the tax sphere, but undoubtedly of interest to tax structuring, are developments on corporate re-domiciliation. With support from a UK independent expert panel, the government intends to consult on a proposed corporate re-domiciliation regime “in due course”. Our October blog summarised the Panel’s report.

As we look forward, the Chancellor will present her Spring Statement on 26 March 2025. As noted in the Corporate Tax Roadmap, a key focus of this government is to provide a stable and predictable tax environment for businesses. Whether the Chancellor can deliver on her promise to provide certainty and stability remains to be seen as changes such as the increase to the rate of employer NICs take effect from 6 April 2025. And as multinational groups continue to grapple with the UK and international implementation of the Pillar 2 rules (the “multinational top-up tax”), the effect of President Trump’s withdrawal of the US from global tax agreement negotiations will be something else to keep an eye on.

Finally, in collaboration with Loyens & Loeff, we have published a new “Tax in Distressed Situations” microsite, here. This comprises seven jurisdictional guides which provide a high-level overview of important tax considerations for debt restructurings, enforcement, acquisitions of debt and insolvency proceedings for both debtors and creditors from UK, US, French, Luxembourg, Swiss, Belgian and Dutch tax perspectives.

Stay tuned in to the Weil Tax Blog for all our latest thinking.