Other news in brief

There have been a number of developments in the tax policy cycle since the last edition of Tax Matters Digest. Most notably, the Chancellor announced that the Spring Budget will take place on 6 March 2024 and has asked the Office for Budget Responsibility (OBR) to prepare an economic and fiscal forecast to accompany it. There has also been progress on the Autumn Finance Bill with the Committee of the Whole House having taken place on 10 January 2024. A selection of clauses were debated, including those on Pillar Two, permanent full expensing and the new Research & Development (R&D) regime and all were passed without amendment. The remainder of the Bill will be considered by a Public Bill Committee starting on 16 January and due to report by 30 January 2024. Finally, the National Insurance Contributions (Reduction in Rates) Act 2023 received Royal Assent on 13 December 2023. This is the legislation that brought in the National Insurance reductions announced at the last Autumn Statement.

On 18 December 2023, the UK Government released a number of updates on the UK Emissions Trading Scheme, including the announcement of two new consultations: a consultation to explore options for managing the volatility and cost of allowances and a consultation seeking feedback on methodology for allocating free allowances, both of which close on 11 March 2024. There were also three documents released which assess the effectiveness of the UK ETS to date and setting out future plans for the scheme. Firstly a policy paper setting out plans to continue the UK ETS at least until 2050, to continue developing the scheme and to explore its expansion to new sectors. Secondly a review of the UK ETS following its first years of operation and overview of plans to further develop the scheme and finally, initial findings from an independent evaluation of the UK ETS.

Following the signing of the 2022 UK/Luxembourg Double Taxation Convention and Protocol in June 2022, HMRC have confirmed it came into force on 22 November 2023. The treaty will take effect in the UK on 1 January 2024 for withholding taxes, 1 April 2024 for corporation tax and 6 April 2024 for income tax and capital gains tax.

The Code of Practice on Taxation for Banks promotes compliance and discourages tax avoidance in the banking sector. The annual report showed that as of 31 March 2023, 316 banks had adopted the Code, and none were found to be in breach during the reporting period, nor were any ‘Disclosure of Tax Avoidance Schemes’ (DOTAS) reports made. HMRC’s compliance work with banks involves reviews and interactions to ensure adherence to the Code’s principles, including encouraging banks to discuss proposed transactions that may have tax results contrary to legislative intention.

On 8 January 2024, the UK and Scottish Governments published a joint consultation on a proposal to devolve powers to the Scottish Parliament to create a Building Safety Levy. This follows the announcement of a Levy in England in February 2021 followed by a consultation on its design in November 2022. The current consultation does not seek views on the design of a Levy in Scotland but confirms this will be done “once an agreement has been reached with the UK Government to legislate to devolve the necessary power”. It is open until 19 February 2024.

Alongside the Draft Budget 2024-25 on 19 December 2023, the Welsh Government published two consultations on Land Transaction Tax (LTT). The first consultation is on proposed amendments to extend the current LTT three-year refund and exception periods for taxpayers where the sale of a former main residence or purchase of a new one was prevented owing to emergency restrictions, and/or where the sale of a former main residence was impeded due to issues related to fire safety defects. This consultation closes on 17 March 2024. The second consultation is on proposed amendments to provide a relief from LTT for qualifying transactions of land within a designated Welsh special tax site. This relief will apply for a fixed period of time and will include qualifying transactions within Welsh freeports and investment zones. This consultation closes on 18 February 2024.

Employers with an EU presence will be within the scope of the new Pay Transparency Directive which requires companies to be more transparent on pay from 2026 onwards. ‘UK only’ companies are not directly affected but there will be an increased pressure. Read what the Pay Transparency Directive requires and the potential impact for UK employers.

Emily Salathiel and Robert Pain, KPMG in the UK, take a look at what is happening now and what they expect for the future of AI in the payroll function. It is more important than ever for organisations to stay ahead of the AI curve.