Other news in brief

On 22 September 2022, the Bank of England Monetary Policy Committee voted to increase the Bank of England base rate to 2.25 percent from 1.75 percent. As a result, HMRC interest rates for late payment will increase. HMRC’s late payment interest is set at the Bank of England base rate plus 2.5 percent so their late payment interest rate will increase from 4.25 percent to 4.75 percent. These changes will come into effect on 3 October 2022 for quarterly instalment payments and 11 October 2022 for non-quarterly instalment payments. HMRC will also increase their repayment interest rate to 1.25 percent, as it is set at Bank Rate minus one percent, with a 0.5 percent lower limit.

On 22 September 2022, HMRC published ‘Corporation Tax Statistics 2022’. This latest edition of the annual corporation tax (CT) statistics publication includes the CT, Bank Levy and Bank Surcharge receipts figures for the financial year 1 April 2021 to 31 March 2022. Total CT receipts increased by 28 percent (or £14.6 billion) compared to the prior year, reaching £67 billion for the period. This increase was largely driven by the recovery in the economy and increase in company profits following the impact of COVID-19 on the prior year. The publication also includes the first published CT liability estimates for company accounting periods ending between 1 April 2020 to 31 March 2021. According to the estimates, total CT liabilities fell by £2.6 billion (5 percent) in the financial year 2020-2021. COVID-19 was a key contributing factor to the decrease in liabilities, with three national lockdowns taking place during the period. The largest percentage drop in CT liabilities was seen in travel agency, tour operator and other reservation service and related activities, with the largest percentage increase in CT liabilities seen in postal and courier activities.

Earlier this year HMRC issued a revised version of supplementary page CT600B to the corporation tax return, which requires companies to fill out 10 new boxes relating specifically to the hybrid mismatch rules from 6 April 2022 (see our previous article). HMRC have now published guidance on how supplementary page CT600B should be completed. This new guidance provides information on what companies should enter into each of the 10 new boxes, as well as links to the relevant HMRC guidance and legislation.

The Upper Tribunal (UT) has dismissed HMRC’s appeal in Revenue and Customs v Aozora GMAC Investment Ltd. The case involved the ability of a UK company (UKCo) to obtain unilateral credit relief for US withholding tax (WHT) suffered on interest received by UKCo on a loan to its US subsidiary. The WHT was suffered because UKCo was not a ‘qualified person’ entitled to treaty benefits under Article 23 (Limitation of Benefits) of the US/UK double tax treaty (DTT). The First-tier Tribunal (FTT) agreed with the taxpayer that UKCo should be entitled to unilateral credit relief – our previous article written at the time of the FTT decision provides a summary of the facts of the case and the basis on which HMRC argued that unilateral credit relief should be denied. The UT has agreed with the FTT but it is not yet known if HMRC will appeal this latest decision. The case will be of interest to other UK companies whose claims for unilateral credit relief have been disallowed by HMRC on the basis that an article in a relevant DTT (made on or after 21 March 2000) denies treaty relief.

Following earlier consultation on design, HMRC have now published draft tax regulations to spread the transitional impact of International Financial Reporting Standard 17 (IFRS 17) and revoke the requirement for life insurance companies to spread acquisition expenses over seven years for tax purposes. The Insurance Contracts (Tax) (Change in Accounting Standards) and the Finance Act 2022 (Part 2 of schedule 5) Commencement and Transitional Provisions Regulations 2022 have been published in draft for comment until 7 October 2022. It is expected that the final regulations will then be made during autumn 2022 and will apply to accounting periods beginning on or after 1 January 2023.

The Scottish Government is consulting on a devolved tax to replace UK Aggregates Levy in Scotland, seeking views on how a replacement devolved tax should be structured and operate. If introduced, the new devolved tax would be administered by Revenue Scotland, and be expected to apply from 1 April 2025. Responses to the consultation should be submitted by 4 December 2022.