The Chancellor announced a range of measures around re-skilling and “levelling up” the nation to help recovery in a post-Covid economy.

Whilst these measures have received a mixed reaction, schools are in line to get an extra £4.7 billion by 2024-25 with nearly £2 billion of new funding to help schools and colleges recover from the pandemic. In real-terms, this should return funding to 2010 levels with more than £1,500 extra per pupil.

From a wider tax perspective, there weren’t many tax changes which will directly impact on the Education sector although the extension of the Museums and Galleries relief should provide additional opportunities for savings.

Corporation Tax

Corporation tax rate – As previously announced the rate of corporation tax will increase from April 2023 to 25% on profits over £250,000. The rate for small profits under £50,000 will remain at 19%, and there will be taper relief for businesses with profits between £50,000 and £250,000, so that their average rate is less than the main rate. 

Annual Investment Allowance (AIA) – The £1 million Annual Investment Allowance (AIA) has been extended to 31 March 2023 to continue to encourage business investment and support economic activity. AIA provides a 100 percent first year capital allowance for qualifying expenditure on plant and machinery up to a specified annual limit. Businesses claim the AIA in respect of expenditure which would otherwise be eligible for writing down allowances (WDAs) at 18 percent and 6 percent per annum on a reducing balance basis, so relief is given over a number of tax periods.

Whilst in the main, most universities do not seek to claim capital allowances in light of their charitable tax exemptions, subsidiary companies should continue to benefit from the regime as it typically helps to reduce reliance on gift aid payments.

Review of R&D tax reliefs - Following a comprehensive consultation into research and development (R&D) tax incentives earlier this year, the Chancellor announced several changes that will be made with effect from 1 April 2023. Firstly, it was confirmed that the incentives will be modernised to include costs on data and cloud computing. There will also be changes to the administration of the regime to make the anti-avoidance deterrent more robust. No details on the precise design of these measures have yet been released and these are not expected until later this autumn.

Whilst the R&D opportunities for universities were closed several years again, they remain for subsidiary entities carrying on qualifying activities.

Creative Sector Tax Reliefs

 It is very good news for a sector which has been particularly impacted by Covid-19 restrictions:

  • Museums and Galleries Exhibition Tax Relief (‘MGETR’) was due to expire (the ‘sunset’ clause) on 31 March 2022 – this has now been extended until 31 March 2024.
  • Furthermore, the headline rates of tax credit available have also been temporarily increased significantly, as follows:


Theatre Tax Relief (‘TTR’)

Museums and Galleries Exhibition Tax Relief (‘MGETR’)

Orchestra Tax Relief (‘OTR’)

27 October 2021 to 31 March 2023

Non-touring productions: 45% (from 20%)

Touring productions: 50% (from 25%)

Non-touring productions: 45% (from 20%)

Touring productions: 50% (from 25%)

50% (up from 25%)
1 April 2023 to 31 March 2024

Non-touring productions: 30%

Touring productions: 35%

Non-touring productions: 30%

Touring productions: 35%

1 April 2024 onwards

Non-touring productions: 20%

Touring productions: 25%

TBC 25%
  • Switch between Film Tax Relief and High-End TV Relief during production. New legislation will allow film production companies (for any new film commencing production on or after 1 April 2022 and to ongoing productions that have not completed principal photography by 1 April 2022) to claim Film Tax Relief for films that were initially intended to be released in cinemas, but which are instead put on streaming services, as long as they meet the criteria for High-End TV Tax Relief. This will ensure that relief is not lost should a company decide to change its distribution method during production.

To the extent that universities haven’t previously made a MGETR claim, we would suggest this is considered in light of the changes as it could provide an effective rate of relief up to 40p for every £1 spent on producing an exhibition.

Notification of uncertain tax treatments

Following a long period of consultation, the Government confirmed that it will legislate in Finance Bill 2021-22 to introduce a new requirement for certain large businesses to notify HMRC when they take an ‘uncertain’ tax position in their returns for VAT, corporation tax, or income tax (including PAYE). Such businesses will need to notify HMRC where the tax advantage is expected to be over £5 million for a 12-month period in tax returns due to be filed on or after 1 April 2022. This is intended to address the legal interpretation part of the tax gap.

In a policy paper published alongside the Budget, HMRC confirmed uncertainty is to be defined by reference to two ‘triggers’ (broadly that a provision has been made in the accounts for the uncertainty, or that the position taken by the business is contrary to HMRC’s known interpretation (as stated in the public domain or in dealings with HMRC)). The Government has also committed to further consideration of a potential third trigger previously proposed in draft legislation (where there is a substantial possibility that a tribunal or court would find the taxpayer’s position to be incorrect).

Although this is not, on the face of it, something that would affect many transactions in the HE sector, the inclusion of VAT could mean that the position taken on large construction projects, for example, would need to be considered, at least by the larger universities which would be within scope of this new requirement.

We have sought clarification from HMRC regarding the term "public bodies", which they had used in the draft legislation to describe certain entities which would be outside the scope of this legislation. They confirmed that they had intended that universities should be included in the term "public bodies", and have now proposed a revised wording.

However, HMRC have stated that they do not wish to extend the exclusion to include subsidiaries.  Therefore, if an uncertain tax treatment was being applied by a subsidiary of a university (with more than £200 million group turnover) and resulting in an overall tax advantage of over £5 million, then this could still, in HMRC’s view, need to be notified.

Employment Tax

Public sector pensions and taxation of the McCloud case remedy

Aspects of the 2015 public sector pension reforms were found in the McCloud case to give rise to unlawful age discrimination. The Public Service Pensions and Judicial Offices Bill will, when enacted, amend the pension provision of affected individuals with effect from 1 April 2015. Legislation will also be introduced to ensure that the pensions tax framework applies as intended to these changes. Broadly, compensation payable will not be taxable, and affected individuals will not be taxed on any retrospective breaches of their pension savings limits due to the McCloud case remedy.

Employment issues

The previously announced 1.25 percentage point increase to employer’s National Insurance Contributions, to fund health and social care prior to the introduction of the separate Health and Social Care Levy, comes into force from 6 April 2022. As anticipated, the National Living Wage/National Minimum Wage will be increased so that employees aged 23 years and over will be entitled to £9.50 per hour for pay periods starting from 1 April 2022.

On benefits-in-kind, the van benefit charge and fuel benefit charges for cars and vans will rise in line with the Consumer Price Index from 6 April 2022. A new Scale-Up visa will launch in Spring 2022 to help eligible growth businesses recruit key overseas talent who meet certain language requirements and have a salary of at least £33,000.

The income tax personal allowance and higher rate threshold remain frozen and the additional rate threshold remains at £150,000. Whilst the personal allowance is available to all qualifying UK taxpayers, Scottish and Welsh taxpayers are subject to tax on non-savings and non-dividend income based on rates, and for Scottish taxpayers bands, set by the Scottish and Welsh Parliaments. These will be announced in the Scottish and Welsh Budgets in December 2021.

Pension tax relief for low earners in Net Pay Arrangements

The take home pay of individuals with taxable income below the personal allowance can be affected by the method of tax relief operated by their pension scheme. In summary, employees contributing to Relief at Source (RAS) schemes receive a 20 percent top-up on their pension contributions, even if they pay no, or a lower rate of, income tax. In contrast, employees contributing to a Net Pay Arrangement (NPA) scheme receive relief at their marginal rate, which for those with taxable earnings at or below the UK personal allowance is nil. To address this anomaly, the Government will introduce direct top-up payments for affected NPA scheme members. These will start to be paid from 2025/26 in relation to contributions made in 2024/25 onwards.


If you would like to discuss any of these points, please do not hesitate to contact your usual KPMG contact, or one of the following:

Corporate Tax:         

Millie Crosse               (0161 2464925)

Simon Robinson         (07825 682 425)

Peter Chapman          (0121 335 2782)                    



Richard Turnbull         (0121 2323318)

Sarah Anthony            (0161 2464002)

Kerry Sykes                (01223 582093)


Employment Tax:

Paul Moreels       (0191 401 3703)