Other news in brief

Since the last edition of Tax Matters Digest, the Finance (No. 2) Bill 2022-23 (Spring Finance Bill) has completed the Public Bill Committee stage and an amended version of the Bill has been published. The Committee considered all the remaining clauses of the Bill that had not been looked at during the Committee of the whole House. All clauses were passed including, as expected, a number of amendments which had been tabled by the Government, but no other amendments were accepted. The Bill will now progress to the Report Stage for which, at the time of writing, no date has yet been set but which we anticipate will take place after the House of Commons returns from recess on 5 June.

The 2023 UK/San Marino Double Taxation Convention was signed in London on 17 May 2023 but is not yet in force. This is the first comprehensive tax treaty with San Marino and largely follows the OECD model. The explanatory memorandum attached to the draft Double Taxation Relief and International Tax Enforcement (San Marino) Order 2023 provides details of the treaty provisions.

On 11 May 2023, the Bank of England Monetary Policy Committee voted to increase the Bank of England base rate to 4.5 percent from 4.25 percent. As a result, HMRC interest rates for late and early payments will increase. HMRC’s late payment interest rate for most taxes is set at the Bank of England base rate plus 2.5 percent so their late payment interest rate will increase from 6.75 percent to 7 percent. Interest charged on underpaid quarterly corporation tax instalment payments is calculated as base rate plus 1 percent so this will increase to 5.5 percent. These changes will come into effect on 22 May 2023 for quarterly instalment payments and 31 May 2023 for non-quarterly instalment payments. HMRC will also increase their repayment interest rate for most taxes to 3.5 percent, as it is set at Bank Rate minus 1 percent, with a 0.5 percent lower limit. For interest paid on overpaid quarterly instalment payments and on early payments of corporation tax not due by instalments the rate will be 4.25 percent.

On 12 May 2023, the Government published a consultation on reforms to the Working Time Regulations 1998, TUPE and holiday pay. The proposed holiday pay changes in particular will be of interest to payroll and HR teams involved in calculating and paying holiday pay, and organisations with irregular hours workers. On holiday pay the proposals would harmonise current EU and UK annual leave entitlements, with a consistent calculation of holiday pay for the new single annual leave entitlement. The consultation also proposes allowing rolled-up holiday pay to be paid at 12.07 percent of pay for workers (regardless of whether they work irregular hours) – provided this is communicated to workers and shown clearly on their payslip.  These simplifications are likely to be welcomed by employers. However, further detail on the practical implications will be required to design the changes required to payroll processes and controls.

In April 2023 the Government published guidance on Ethnicity Pay Gap (EPG) reporting for UK employers. While this reporting continues being voluntary, it is encouraged and gives an opportunity for strengthening employers’ Inclusion, Diversity and Social Equality (IDSE) programmes. In a recent blog post Donna Sharp, partner, KPMG Law, reviews the recently published guidance and how you might use it to drive future success though a diverse and engaged workforce.

Our guide includes the questions HR Directors and the C-Suite should be asking.