Other news in brief

The Labour manifesto promised a Business Tax Roadmap (the Roadmap) for this Parliament which is intended to allow businesses to plan investments with more confidence. No specific timetable was included in the manifesto, but Labour had previously stated that we could expect the Roadmap to be published in its first six months of Government. Then on 3 September 2024, during Treasury Questions, the Chancellor Rachel Reeves said “today I can confirm that the Government will outline a tax road map for business at the Budget to offer the certainty that encourages investment and gives business the confidence to grow, including our commitment to cap corporation tax at 25 percent for the duration of this Parliament and to retain full expensing”. Given this wording, we are not expecting a complete and final Roadmap to be published on Budget Day. Instead it is likely to be the first public step in the process and will provide an outline of the content which will then be completed in the months following with wider stakeholder input.

The Budget Responsibility Bill, which legislates to ensure that all significant tax and spending changes are subject to an independent assessment by the Office for Budget Responsibility (OBR), completed its final stages in the House of Lords on 9 September 2024. We discussed the contents of this Bill when it was first published in a recent edition of Tax Matters Digest and no amendments were made to the Bill at any stage of its passage through Parliament. The Bill then received Royal Assent on 10 September and became the Budget Responsibility Act 2024.

On 10 September 2024, the Court of Justice of the European Union (CJEU) set aside the judgment of the General Court concerning tax rulings issued by the Irish tax authorities in favour of two companies incorporated but not-tax resident in Ireland. Those tax rulings had approved the methods used by the companies to determine their chargeable profits in Ireland in relation to the trading activity of their respective Irish branches. In 2016, the European Commission decided that the companies had, from 1991 to 2014, received tax advantages that constituted State aid granted by Ireland. However, in 2020, the General Court annulled the Commission’s decision, holding that the Commission had not sufficiently established that those companies enjoyed a selective advantage. On appeal, the CJEU has now given final judgment in the matter, confirming the European Commission’s 2016 decision that Ireland had granted unlawful aid which it is required to recover.

The Upper Tribunal (UT) has allowed HMRC’s appeal in HMRC v S&L Barnes Ltd, finding that engagements between the personal service company of a rugby commentator (Stuart Barnes) and a sports broadcaster were within the IR35 (or Off-Payroll Working, ‘OPW’) rules. Assessing whether the IR35/OPW rules apply to an engagement falls into three stages: (1) establishing how the worker’s services are provided – which includes examining the contractual arrangements between their intermediary (e.g. a personal service company) and the end-client; (2) determining the hypothetical contract that would have existed between the worker and end-client had they instead engaged directly; and (3) analysing that hypothetical contract by reference to the tax employment status case law tests of mutuality of obligation, control, and whether other relevant factors are consistent with a contract of service (i.e. employment) or a contract for service (i.e. self-employment). In this case, the appeal turned on whether, overall, the relevant factors were consistent with an underlying employment relationship. The UT held that the First-tier Tribunal (FTT) had, when hearing the taxpayer’s original appeal, erred when applying that test. In summary, this was because the FTT had taken as indicating self-employment factors that were irrelevant, neutral, or which in fact suggested an employment relationship; and had failed to set out the terms of the hypothetical contract that pointed towards employment and explain why these were outweighed by other factors. Like other recent cases, this judgment demonstrates the challenge for contractors and end-clients in applying the IR35/OPW case law.

At the Spring Budget the previous Conservative Government published a consultation on the potential introduction of a new UK ISA, with an additional allowance of up to £5,000 for investment in UK assets. Although, at the time of writing, there had not been an official update from the new Labour Government, it has been widely reported in the press that plans for a UK ISA will not be taken forward. HMRC have also confirmed that they will shortly publish regulations allowing fractional shares to be held in ISAs.

At Autumn Statement 2023 the Government announced that it intended to extend the sunset clauses in the EIS and VCT legislation by 10 years to 5 April 2035 but these changes were “subject to domestic and international subsidy obligations being met”. These formalities have now been completed and on 3 September 2024 The Finance Act 2024, Section 11 (Extension of Enterprise Investment Scheme Relief and Venture Capital Trusts Relief) (Appointed Day) Regulations 2024, which bring into effect this extension, were made. The impact of the extension of the sunset clauses from 6 April 2025 is that shares in a company (for EIS relief) or in the VCT issued before 6 April 2035, will qualify for relief, provided all the other conditions are met.

The 2025/26 Budget will be presented to the Scottish Parliament on 4 December 2024. This will set out the Scottish Government’s proposals for devolved taxes (e.g. Land and Buildings Transactions Tax and non-domestic (business) rates) and the income tax rates paid by Scottish taxpayers (other than on dividends and interest). The Scottish Government is also expected to publish its Tax Strategy alongside the Budget, which will set out its medium-term aims for the Scottish tax system. The current expectation is that the Welsh draft Budget for 2025/26 will be published on 10 December 2024, with the final Budget expected on 25 February 2025.

It has been a growing concern that not enough workers are saving for retirement. Ranjit Shoker of KPMG in the UK discusses the changes to auto-enrolment and what employers should be doing in a recent article published by the Reward and Employee Benefit Association (REBA).

Register now to hear our panel of KPMG experts discuss, on 17 September, the employment reforms proposed by the new Labour Government and how you and your team can prepare now by assessing the impact of the prospective changes on your business.