Autumn Budget 2021

Following the theme of 'things we can do now we've left the EU', the rules permitting a UK group to claim group relief from its EU group companies is to be abolished.

The ability to claim group relief in this way was introduced by Finance Act 2006 following the UK Government losing at the European Court of Justice in the Marks & Spencer case. Those rules were, however, very restrictive, only permitting EU losses to be surrendered to UK group companies where the EU company had both 'exhausted the possibilities' of claiming tax relief for those losses in its home jurisdiction and where there were 'no possibilities' for those losses to be taken into account by the EU company in future periods.

It was always acknowledged that the rules were very restrictive and they had been challenged both domestically and in the European Court of Justice on this basis. This may explain why the abolition of these rules is only slated to raise £5 million of corporation tax per year.

This measure will have effect for company accounting periods ending on or after 27 October 2021.

READ POLICY PAPER

The government intends to press ahead with implementing rules requiring large businesses to notify uncertain tax positions to HMRC in Finance Bill 2021-22. However, in a welcome response to consultation, the notification triggers have been further narrowed for the time being, so that reporting will only be required where a provision has been made in the taxpayer's accounts to reflect the uncertainty or where the tax position taken is not in accordance with HMRC's known position. The government has said that it remains committed to further consideration of a third trigger (where there is a substantial possibility that a court or tribunal would find against the taxpayer) which may be introduced at a later date.

As announced earlier in the year, the government intends to legislate in Finance Bill 2021-22 to introduce a requirement for large businesses to notify HMRC where they take a position in their corporation tax, income tax (including PAYE) or VAT returns which is "uncertain". The aim of the legislation is to reduce the proportion of the tax gap attributable to taxpayers taking positions with which HMRC does not agree (estimated as £5.8bn in 2019-20) and to give HMRC notice of these positions, potentially allowing it to enquire into and challenge them in a more timely way.

The measures affect large businesses, with an annual turnover of more than £200 million or a balance sheet total of more than £2bn, and require those businesses to notify HMRC where they have adopted an uncertain tax treatment which has not been brought to HMRC's notice through the business's regular customer compliance relationship and where the potential tax advantage associated with the uncertain treatment exceeds a threshold of £5 million.

The proposals have been subject to consultation since they were first mooted in March 2020 (with a large number of advisers, including Travers Smith, and industry bodies providing responses) and unsurprisingly, the area of greatest focus has been in determining what makes a tax position "uncertain", and therefore notifiable. HMRC's original suggestion was that an uncertain position would be any position which HMRC was likely to challenge, but this was heavily criticised in the responses to the consultation as being highly subjective and difficult for taxpayers to judge. In response to this, HMRC extended the consultation and refined the test in a second consultation document published in March 2021 so that the requirement to notify depended on one of seven notification triggers applying. In response to further consultation, the draft legislation published on "L-Day" further reduced the number of triggers to three, being:

• The taxpayer adopting a position that differs from HMRC's known position;
  
  
• Where a provision has been recognised in the accounts of the taxpayer to reflect the probability that a different tax treatment will apply; or
  
  
• Where there is a substantial possibility that a court or tribunal will find the treatment adopted to be incorrect.
  
  

The reduction in the number of triggers provided a welcome narrowing and clarification of the rules, but the third of these triggers presents difficulty for taxpayers, as the question of whether there is a "substantial possibility" of a court or tribunal finding against a taxpayer is a difficult one to evaluate and would potentially require reporting of positions where it is more likely than not that the taxpayer would be successful in litigation, but there nevertheless remains a sufficiently material risk that a court will find against them. For this reason, today's announcement that HMRC is giving further consideration to this potentially problematic third trigger and will not include it in the legislation for the time being will be well received by many taxpayers and shows the value of the consultation process in helping to refine and improve legislation.

READ POLICY PAPER

The government has announced today that the rate of the bank Corporation Tax Surcharge (an charge on the profits of banking companies, payable in addition to corporation tax at the prevailing rate) will be reduced with effect from 1 April 2023 from 8% to 3%. In addition, the Surcharge allowance – the amount of profit that can be earned by a banking group before the Surcharge becomes payable – will increase from £25 million to £100 million.

The changes seek to maintain the level of  tax revenue raised from the banking sector (the Surcharge has raised around £8.2bn since its introduction in 2016), while addressing concerns from the industry that the combined effect of the Surcharge and the planned increase in the rate of corporation tax to 25% in April 2023 would result in banks paying tax at a level which would significantly reduce their competitiveness, and the attractiveness of the UK as a financial centre post-Brexit. The increase in the Surcharge threshold is designed to allow smaller challenger banks to remain below the threshold whilst in the early stages of growth, promoting competition in the market.

READ POLICY PAPER

Recognising that now is not the time to withdraw measures encouraging business investment, the chancellor announced that the temporary £1 million annual investment allowance, which was due to revert to the standard level of £200,000 at the end of this year, will be extended until 31 March 2023. This will allow businesses to claim upfront tax relief on up to £1 million of expenditure on qualifying plant and machinery.

READ POLICY PAPER

As part of a broader investment in R&D generally, and following a consultation in Spring this year, the government has announced some changes to the R&D tax relief regime.

The announcement confirms that the relief will be reformed to better support cutting-edge research methods by expanding the classes of qualifying R&D expenditure eligible for relief to include data and cloud computing costs.  This will, we are told, reinforce the UK's status as a 'science superpower'.   

The reforms will also 'refocus' the relief on R&D activity carried out in the UK.  We do not have the detail as yet as to how this will be achieved but, taking into account the Office of National Statistics' estimate that nearly half of expenditure on which R&D tax relief was claimed in 2019 took place overseas, this could have a significant impact on businesses.  While not quite within the 'things we can do now we are not in the EU' category this certainly fits with the theme of focussing on the UK.

As is to be expected with all tax changes these days, the reforms will also include measures to tackle abuse and improve compliance.

Further details of the planned reform are expected later this autumn and the changes are intended to be legislated in Finance Bill 2022-23 to take effect from April 2023.

The Government today confirmed its plans (originally proposed in the Summer) to change the way in which trading income is allocated to tax years, with effect from tax year 2024 to 2025.

At present, self-employed taxpayers allocate trading income to tax years using the 'basis period rules'. Under these rules, trading income for a tax year is usually based on the profits for a period of accounting ending in that tax year. This can lead to complexities for businesses that do not draw up their accounts to the end of the tax year.

The new proposals would remove the basis period rules and provide for the profits of a tax year to be the profits arising in that tax year, regardless of a business's accounting date. This reform should align trading income with other types of income for individuals and bring the payment of tax closer to the time profits are earned.

In a welcome development for taxpayers, the Government announced earlier in the Autumn that it would delay the introduction of these changes by twelve months, with the new rules now expected to be introduced with effect from tax year 2024 to 2025. On transition to the tax year basis in the tax year 2023 to 2024, all businesses' basis periods will be aligned to the tax year and all outstanding overlap relief given.

The Government has announced that legislation will be introduced in Finance Bill 2021-22 to make the UK's Diverted Profits Tax (DPT) one of the taxes which can be subject to the Mutual Agreement Procedure under the terms of the UK's applicable double tax treaties.

DPT – or the "Google Tax" as it is commonly referred to in the press – is a standalone tax which was introduced to deter and counteract artificial arrangements which divert profits overseas in order to avoid UK tax. The primary aim of the tax is to ensure that profits taxed in the UK fully reflect the economic activity here. DPT is set at a higher rate than corporation tax to encourage those businesses with arrangements within the scope of DPT to change those arrangements and pay UK corporation tax on their profits.

HMRC has always maintained that DPT is outside the scope of double tax treaties. HMRC's Manuals (INTM4893) explain the following:

"As a separate and distinct tax DPT is outside of double taxation treaties. Also, DPT is targeted at contrived tax avoidance arrangements which seek to abuse the provisions of the United Kingdom’s tax treaties, so there would be no obligation to give relief under a double taxation treaty for such arrangements."

We will need to wait to see the detail of the drafting when Finance Bill 2021-22 is published next week before fully assessing the impact of this change, but on the face of the Budget documents, this is a potentially significant change to the position set out in HMRC's published guidance (albeit many taxpayers and their advisers have always maintained that HMRC's position was contrary to the UK's international treaty obligations).

Finance Bill 2021-22 will introduce a power enabling the Treasury to make Stamp Duty and Stamp Duty Reserve Tax (SDRT) changes in relation to securitisation and insurance linked securities (ILS) arrangements by secondary legislation.

At the Budget in March 2021, the Government published a consultation on reforming the taxation of securitisation companies and insurance-linked securities. One of the areas discussed in the consultation paper was the uncertainty around the application of the exemption from stamp duty for transfers of 'loan capital' to instruments issued by securitisation vehicles (or insurance special purpose vehicles). The Government was concerned that this uncertainty was acting as a barrier to establishing securitisations in the UK.

The Government is due to publish its response to the March 2021 consultation in due course, but considers that in the meantime it is appropriate to have the power to make any suitable stamp duty.

Plans for a new online sales tax continue to be considered having first being mooted in the summer of 2020. While little detail is in contained in the Budget it has been confirmed that the Government is continuing to weigh-up the arguments for and against the new tax with a consultation to be published shortly.

Trailed as UK-wide tax on online sales of physical goods it will likely have further reach than the existing Digital Services Tax (DST) which is targeted at the largest online digital platforms. And at a proposed rate of 2% it is intended as a revenue raising measure the cost of which will likely fall directly on the consumer.

The tax is meant to help level the playing field between online and high street retailers because the Government intends to apply the revenue from the new tax to reduce business rates for 'bricks and mortar' retailers. Given the Budget announcements on the reform of business rates itself it could be suggested that the Government perceives there to be more pros than cons to this new tax. 

It will be interesting to see how any new online tax fits in with the government's agreement, as part of the BEPS pillar one reforms to global corporate tax, to remove DST and not impose any equivalent taxes. Read our briefing on the OECD's international tax reform plan.

Following a lengthy consultation, the Chancellor today announced a series of changes to business rates which he expects to equal £7 billion of support to businesses over the next 5 years, including:

1. Freezing the business rates multiplier;
   
   
2. A temporary relief for retail, hospitality and leisure businesses; and
   
   
3. A new business rates improvement relief to help businesses decarbonise and improve their properties.

To review the final report for the business rates review see here.

Interestingly, the final report on business rates does note that if an online sales tax were to be introduced (see the section on Online Sales Tax above for details on this consultation), the revenue from this "would be used to reduce business rates for retailers with properties in England", so keep an eye out for any developments on this front.

Freezing the business rates multiplier

Business rates are calculated by multiplying the rateable value of the property by either the small business multiplier (49.9p) or the standard multiplier (51.2p) and subtracting any relevant reliefs. Such multipliers usually rise with inflation, but they will now be frozen until 2022-23, resulting in an expected saving of 3% on bills.

Temporary relief for retail, hospitality and leisure businesses

Eligible properties in the retail, hospitality and leisure sector will receive up to 50% relief on their business rates (subject to a cap of £110,000 per business) until 2022-23. The government has not yet announced the criteria for eligibility for this temporary relief although it has said that it is expected to benefit around 90% of businesses across the sector.

Business rates improvement relief

The government has said that it will introduce a 100% improvement relief which will provide 12 months relief from higher bills where eligible improvements to an existing property increase its rateable value. The announcement is light on detail; we don't know, for example, what improvements will be 'eligible', but there will be a consultation with a view to the relief being implemented in 2023.

In an effort to support the road to Net-Zero, the government has also said that it will introduce an exemption for (i) eligible plant and machinery used in onsite renewable energy generation and storage (e.g. solar panels) and (ii) onsite storage used with electric vehicle charging points, from 2023 until 2025. Again, there is little in the way of detail but there will be a technical consultation later this year, with the changes being introduced in 2023.

Other changes

• Revaluations will now take place every 3 years, starting in 2023 (a technical valuation on how this is to be implemented will follow).
  
  
• Transitional relief (which limits how much business rates can change each year as a result of a revaluation) and the supporting small business scheme will be extended by one year, restricting bill increases to 15% for small properties and 25% for medium properties.
  
  
• The government will consult on the transitional relief scheme next year.

 

READ REPORT

UK resident individuals and trustees have until now had 30 days to file a capital gains tax return and make payments on account of capital gains tax when they dispose of an interest in UK residential property. However, following recommendations from the Office of Tax Simplification, this time limit is being extended to 60 days to allow taxpayers time to produce more accurate figures and engage with advisers in cases that are more complex.

This extension will also apply to non-UK resident individuals, who are required to make filings (and make payments on account of capital gains tax, where due) in respect of any direct or indirect disposals of UK land, irrespective of the type of property.

The changes to the legislation will also clarify that where a gain arises in respect of a mixed-use property, only the proportion of the gain that relates to the residential property is to be reported and tax thereon paid. This change only applies to UK-residents.

These measures have effect for disposals that complete on or after 27 October 2021.

RPDT is part of a package of measures to help pay for the remediation works as a result of the cladding crisis, following the Grenfell Tower tragedy.  The idea is to raise at least £2bn over a decade. The tax will come into force from 1 April 2022.  

A technical consultation on the design of the tax closed on 15 October 2021, and responses have been published today. As widely trailed, these confirm (among other things) that the government considers that build to rent (BTR) activity should not be within the scope of the tax "at this point in time".  The legislation published on 8 October already reflected this position since only land held as trading stock was in scope.

No further revisions to this legislation have been published today. However, the key announcement was on the rate of the tax and the annual allowance: these are to be set at 4% and £25 million respectively.

The effect of the allowance is that the tax will only be payable to the extent the group’s aggregate profits from in-scope activity exceed £25 million per year. HMRC have confirmed that where this allowance is not exceeded, there will be no need to report residential property development profits.

Now that we have these crucial missing pieces of information, businesses within the scope of the RPDT should now be better placed to make projections about the impact of the tax and plan accordingly.

READ REPORT

Although there are currently lots of significant developments taking place in relation to the UK funds landscape, such as the FCA's recent publication of its final rules and guidance for the long-term asset fund, today's Budget was a quiet one in relation to new tax measures that specifically relate to asset management.

No new tax policies were announced following on from the government's wide-ranging Call for Input relating to the UK funds regime, and the review of the VAT treatment of fund management fees promised last March is still yet to materialise, although the government confirmed that it is still on its agenda. However, we were given some hints of what to expect in next week's Finance Bill in relation to the new tax privileged regime for qualifying asset holding companies (QAHCs). Also, as expected, the government announced that it will consult on changes to the regulatory charge cap for defined contribution pension schemes to accommodate "well-designed" performance fees. In addition, the government proposal to permit non-UK incorporated companies to re-domicile to the UK may ultimately make it easier for investors to access the new regime in relation to currently non-resident holding vehicles. For further information, see the Corporate re-domiciliation proposal section below. 

In addition, asset managers, along with other entities regulated for anti-money laundering purposes will be interested in the economic crime levy coming into force for the financial year from 1 April 2022 to 31 March 2023 (with payments due in the next financial year). See the Economic Crime Levy section below for further details. 

At Budget 2020 the Government announced its intention to introduce an Economic Crime (Anti-Money Laundering) Levy. The purpose of the levy is to raise approximately £100 million per year from entities regulated for Anti-Money Laundering (AML) purposes to pay for enhanced Government action to tackle money laundering.

As expected, the Government today confirmed its plans to introduce the levy, which will first be charged on entities that are regulated for AML purposes during the financial year from 1 April 2022 to 31 March 2023. The levy will be paid as a fixed fee based on the 'size band' the relevant entity falls into, calculated by reference to their UK revenue. Small entities – those with UK revenues of under £10.2m - will be exempt from the levy.

The Government expects that medium entities (UK revenues of £10.2m - £36m) will pay a fixed fee in the region of £5k to £15k; large entities (UK revenues of £36m to £1bn) will pay a fixed fee in the region of £30k to £50k; and very large entities (UK revenues of over £1bn) will pay a fixed fee in the region of £150k to £250k.

The levy will be collected by HMRC, the FCA and the Gambling Commission (depending on the sector of the AML regulated entity), with HMRC acting as levy collector for entities currently regulated by any legal and accountancy professional body. As amounts are only payable following the end of the financial year, first payments will be made from 1 April 2023.

In July the government published partial draft legislation for a new tax privileged regime for QAHCs to come into effect from next April (2022), which we discussed in our L Day briefing. Since then the government has been working on the final design of the regime, with input from an industry working group which has included the Travers Smith tax team.

A final (or near final) version of the legislation is expected to be contained in the Finance Bill due to be published next Thursday (4^th November).  The announcement in today's Budget does not shed much light on what changes we can expect from the July version of the rules, but there are bits of extra information. For example, we now know that certain amounts paid to qualifying remittance basis users by a QAHC will be allowed to be treated as non-UK source, reflecting the underlying mix of UK and overseas income and gains, and that the transfer pricing exemption for small and medium-sized enterprises will be switched off.  In addition, it seems that payments of interest by QAHCs may benefit from a complete exemption from UK withholding tax, rather than one limited to payments of interest to investors.

However, there is still a lot we do not know about the final design of the regime. Many in the asset management sector are therefore keenly awaiting Thursday's publication of the Finance Bill and hoping that the new regime will be simple to use and provide generous tax benefits, giving the UK a vehicle that can successfully compete with Luxembourg holding companies.

Following the well-publicised announcement of the new Health and Social Care Levy, it was not a great surprise to see that there were very few measures relating to personal taxes and employment in the Autumn Budget. 

Rates, bands and allowances

There are no changes to the headline rates and bands for personal income tax or savings for the next tax year and the income tax personal allowance will remain at £12,570.  Indeed, the higher rate income tax band and personal allowance thresholds are expected to be frozen for some time, given previous announcements that they would stay at current levels until April 2026. Next year's capital gains tax rates and allowances for individuals are also unchanged. 

However, the increase in dividend rates by 1.25 percentage points announced in September has been confirmed and from 6 April 2022 the ordinary, upper and additional dividend rates will be 8.75%, 33.75% and 39.35% respectively.  As we anticipated, at the same time the trust dividend rate will increase to 39.35% and the charge on close companies for loans they make to participators will rise to 33.75%.

Health and Social Care Levy

Although the Health and Social Care Levy won't take the form of a separate charge until April 2023 (for the 2022/23 tax year it will take effect as an increase in National Insurance contributions) there are still some unanswered questions as to how it will operate.  For example, we don't yet know if the employers' liability can be transferred to employees or whether it will be covered by the UK's agreement with the EU on social security co-ordination.  Hopefully these important questions will be clarified over the coming months and in the meantime, companies should check the indemnities in their incentives arrangements to ensure they are wide enough to cover the new levy when it is charged in its own right.

Enterprise Management Incentives

In the spring, Travers Smith responded to an HMRC call for evidence on the tax-advantaged share plan known as Enterprise Management Incentives (EMI) in which we made suggestions as to how the scheme could be made accessible to more companies.  The Autumn Budget did not mention EMI so we will have to wait a little longer to find out whether any changes will be made to this important incentive arrangement.

Off-Payroll Working Rules

There were no Budget announcements on the Off-Payroll Working Rules (OPWR) or employment-status generally.  However, although HMRC said they would take a gentler compliance approach for the current tax year as companies adjust to the new OPWR, we understand that they have set up a new task force to look into unpaid tax more proactively.  It is therefore important that companies are aware of their obligations under the rules and have robust procedures in place when engaging workers.

The government has announced its plans for addressing an issue for low earners whose pension schemes use the 'net pay' system rather than the 'relief at source' system to give tax relief to workers on their contributions.

"Relief at source" vs "net pay"

'Relief at source' is the system generally used for contributions to personal pensions, including group personal pension plans, and also some master trusts. The employer passes on workers' contributions to a pension provider after deducting income tax under PAYE on the worker's full pay (including the part contributed). The pension provider claims basic rate (20%) tax relief from HMRC and adds it to the worker's pension pot. The worker has to claim any higher (40%) or additional (45%) rate relief via self-assessment.

'Net pay' is the system generally used for contributions to occupational pension schemes including some, but not all, master trusts. The worker's contribution is deducted from their wages before applying PAYE income tax to them. That part of the wages is never subjected to income tax, so the individual automatically benefits immediately from tax relief at their marginal rate and no claims to HMRC are needed.

Low earners in net pay schemes

An issue for low earners in net pay schemes arises because HMRC pays the 20% tax relief payment to pension providers for relief at source scheme members even if they do not pay income tax (i.e. because they earn less than the personal allowance). They therefore benefit from a 'tax relief' payment even though they have not paid the tax. Workers who earn less than the personal allowance are therefore better off in a relief at source scheme than in a net pay scheme. The government has estimated that there are about 1.2 million people affected by this issue. More women than men are low earners, so they are disproportionately affected.

For contributions from April 2024, affected individuals in net pay schemes will be able to claim a 20% 'top-up' payment, though not until after the end of the 2024/25 tax year.  The position in Scotland will need separate consideration because of its devolved status and its starting rate of income tax of 19%.

The Chancellor announced that the Spending Review 2021 provides HMRC with the resources that the government says it needs to continue bearing down on tax avoidance and evasion.

The intention is that this funding will enable HMRC to combat non-compliance of taxpayers by:

• allocating an additional £292 million across three years for more resources to tackle the tax gap and ensure that those who should pay actually do pay; and
  
  
• providing £55 million next year for the Taxpayer Protection Taskforce, expanding HMRC’s compliance work whilst continuing to pursue those who have abused the government’s COVID-19 support schemes.

 

This investment in HMRC highlights the government's continued focus on countering tax avoidance and evasion. The extra cash will provide HMRC with further resources for staffing and funding tax investigations going forward, with, it seems, the government expecting to see a healthy return on that investment.

The Government has announced that further rules aimed at promoters and enablers of tax avoidance will be included in Finance Bill 2021-22. The new rules will comprise:

• A new power for HMRC to seek freezing orders that would prevent promoters from dissipating or hiding their assets before paying the penalties that are charged as a result of them breaching their obligations under certain anti-avoidance regimes (being POTAS, DOTAS and DASVOIT).
  
  
• New rules that would enable HMRC to make a UK entity, which facilitates the promotion of tax avoidance by offshore promoters, subject to a significant additional penalty (up to an amount equal to the total fees earned by all those involved in the development and sale of that tax avoidance scheme).
  
  
• A new power to enable HMRC to present winding-up petitions to the court for companies or partnerships that are operating against the public interest. The final decision on whether to wind up the company or partnership would remain in the hands of the courts.
  
  
• New legislation that would enable HMRC to name promoters, details of the way they promote tax avoidance, and the schemes they promote, at the earliest possible stage. This is to warn taxpayers of the risks and help those already involved to leave avoidance arrangements.

 

These new rules form part of the Government's broader strategy for tackling promoters of tax avoidance schemes, which was published in March 2020. The rules will be the latest in a series of legislative amendments that have been introduced as part of this strategy (for commentary on the previous set of amendments, included in the Finance Act 2021, see this recent British Tax Review article by Simon Skinner (Tax Partner) and Hugh Brooks (Tax Senior Associate)).

While we will need to wait to see the detailed drafting of the Finance Bill 2021-22, these new rules have the potential to be broadly drafted and far-reaching. Draft legislation was published in July 2020, though this may of course change as it makes its way into the Finance Bill 2021-22.

One of the more eye-catching announcements is the proposal to permit non-UK incorporated companies to 'shift' (or re-domicile) their place of incorporation to the UK. 

The proposal

This is not currently possible under English law, so an incorporated business looking to fully migrate to the UK would need to take more complex action, such as transferring its assets to a newly-incorporated UK company. Such an approach will often give rise to administrative, regulatory and tax issues, with attendant cost implications. It is currently possible to migrate the tax residence of a non-UK company to the UK by moving the place of its "central management and control" there. However, the company's place of incorporation would be unaffected, so the company would still need to comply with local corporate and other law, which may not be desirable.

It is suggested that the proposal will "increase the attractiveness and availability of the UK as a destination to locate a business and in which to invest", including by bringing increased investment and skilled jobs, new business for the UK's professional services sector and, potentially, R&D functions and increased demand for the "UK's world-leading capital markets". The consultation also notes that around 50 jurisdictions, including a number of common law ones such as Canada, Australia and New Zealand, already permit re-domiciliation. So the implication is that the Government thinks the UK has missed a trick and is looking to put that right.

The consultation questions

The consultation asks for views on a range of issues, including the extent of the potential benefits, entry criteria, and discretionary powers for the Registrar of Companies. Views are also sought on whether outward re-domiciliation should be permitted too. It is noted that countries which have recently permitted inward re-domiciliation have not allowed outward ones – perhaps an indication that the Government is inclined not to go that far.

On the tax side, the document is light on detail, but considers (among other things):

• Company residence: should a company be treated as UK tax resident by virtue of the re-domiciliation? That certainly seems logical to us;
  
  
• Loss importation: do the existing anti-avoidance rules need beefing up?
  
  
• Asset base costs: should the rule for re-basing of assets to market-value on migrations from EU countries be extended to non-EU countries?
  
  
• Stamp taxes: would anti-avoidance rules be needed if outward re-domiciliations are permitted?

 

Comment

This proposal would appear to go hand-in-hand with the asset holding company regime (see our note here) set to come in from next April – each is designed to facilitate and promote the UK as a jurisdiction in which to locate companies, although there is no mention of AHCs in this consultation document.

More specifically, the proposal may be of interest to purchasers of non-UK incorporated/resident companies holding UK real estate who might prefer the target company to be in the UK post-acquisition (whether for ease of administration, regulatory reasons or otherwise). Following reforms in 2019 and 2020, non-resident corporate landlords are now to all intents and purposes in the same UK tax position as UK resident companies (i.e., within the charge to UK corporation tax), so the UK tax benefits of retaining a non-UK incorporated/resident company are limited (aside from the potential stamp duty saving on a future disposal of the shares in the target). 

However, real estate does not get a specific mention in the document, so this scenario may not have featured in the thinking behind the proposal.

Overall, this is an interesting and - for the UK - fairly radical proposal, and it will be interesting to see how it is implemented and (assuming it is) the extent to which it is utilised. Watch this space.

READ CONSULTATION

On 8 October 2021 the OECD updated its statement setting out the framework for international tax reform. The two-pillar plan will require the UK and other OECD members to make major changes to their domestic tax law over the next couple of years.

Read our full briefing

On 7 September 2021 the government announced the introduction of a new UK-wide Health and Social Care Levy, which will be used to pay for adult social care reforms and enable the NHS to tackle the COVID-19 backlog.

Read our full briefing