Tax

Happy New Year, and welcome to the latest edition of the UK Tax Digest! January has been a relatively quiet month as far as tax developments are concerned, but we may be in the midst of the calm before the storm as we await Chancellor Jeremy Hunt’s Spring Budget, which is set for 6 March, and the general election looming on the horizon.

The OECD’s global minimum tax, or “Pillar 2”, initiative is full steam ahead for 2024, as the end of 2023 witnessed the UK implementation for in-scope entities with accounting periods beginning on or after 31 December 2023. In broad terms, a UK entity in a multinational group (with annual group revenue exceeding EUR 750 million) may be subject to a “top up tax” if any non-UK entity in the group has an effective tax rate of less than 15%.

The last quarter of 2023 was also notable for the Chancellor’s Autumn Statement, which was delivered on 22 November. Despite some speculation to the contrary, there were no major surprises and the headline items were generally limited to the announcement that the full expensing policy for businesses would be made permanent, as well as various changes to National Insurance contributions, including a reduction of the main rate. You can read more about the key measures here.

Other developments of note in the UK and EU include:

• a number of significant cases pertaining to tax structuring and reliefs familiar to many of our clients, including rollover relief (Euromoney and Wilkinson v HMRC) and the substantial shareholding exemption (M Group Holdings Limited v HMRC), and the tax treatment of share options granted to employees and directors (HMRC v Vermilion) (you can hear more about these cases and others in our recent Chambers podcast, and read more about the practical impacts of the Euromoney and Wilkinson decisions in our recently published Tax Journal article, “On purpose: developments in the main purpose test”, available here)
• updates to the EU list of non-cooperative jurisdictions for tax purposes, which were published on 17 October
• the UK government’s welcome confirmation, announced on 14 September and effective from 1 January 2024, that it would remove the 1.5% charge to UK stamp duty and stamp duty reserve tax on the issuance and certain transfers of UK securities into a clearance service (such as the Depositary Trust Company) or depositary receipt service (for example, American Depositary Receipts issued by US depositary banks) and
• the launch, on 31 July, of the UK government’s call for evidence into the long-term fiscal regime for oil and gas and the publication of the government’s response in conjunction with the Autumn Statement

In addition to the foregoing, anyone who is considering structures involving UK Qualifying Asset Holding Companies (“QAHCs”) who missed it the first time around may be interested to read our update on regulatory registration requirements for QAHCs and credit funds, which we posted on our blog in September.

Shifting gears into 2024, on 16 January the UK government published a summary of responses to the consultation on reforms to UK transfer pricing, permanent establishments and diverted profits tax rules. And separately, we continue to monitor tax policy developments as we head towards the Spring Budget and prepare for a possible change of government later this year. Labour have been vocal about their intention to close various perceived tax “loopholes”, with the tax treatment of carried interest, scrapping of “non-dom” rules and imposition of VAT on private school fees being subjects of persistent speculation. In addition to these headline grabbers, we are also expecting another run of significant cases in the courts this year, dealing with matters including intra-group loan relationships and UK withholding tax on interest.

Please speak to your usual Weil Tax contact if you would like to discuss any of the above topics, and stay tuned to our UK Tax Outlook for further updates.