Other news in brief

On 19 September 2024, nine jurisdictions signed and a further 10 expressed their intent to sign the Multilateral Convention to Facilitate the Implementation of the Pillar Two Subject to Tax Rule (STTR MLI). The Subject to Tax Rule (STTR) ensures a minimum level of taxation on relevant cross-border payments and is designed to prevent circumstances where income is either taxed at very low rates or not taxed at all due to differences in tax regimes between countries. Individual jurisdictions can implement the STTR either by joining the STTR MLI or by bilateral amendments to tax agreements. The UK participated in the ceremony but was not one of the 19 jurisdictions to sign or express an intent to sign.

Finance Act 2024 brought in research and development (R&D) tax relief reforms by merging the previous two schemes and introducing an enhanced relief for loss-making, R&D intensive small and medium sized enterprises (SMEs). The new merged R&D expenditure credit (RDEC) came into effect from 1 April 2024. As a result, the information requirements for the merged RDEC scheme and the new enhanced relief have changed and The Research and Development Relief (Information Requirements etc.) Regulations 2024 have now been published to implement these changes. Broadly, the information requirements under the legislation, which determine the content of HMRC’s Additional Information Form for R&D tax incentives claims, remain consistent with the requirements under the previous two schemes. The regulations do, however, now provide a statutory footing for claimants to disclose expenditure claimed in relation to the qualifying element of a contractor payment (i.e. for contracted out R&D expenditure) and, where expenditure is incurred in relation to Externally Provided Workers and contracted out R&D, the regulations now include a requirement to disclose further information where the relevant activity was undertaken outside of the United Kingdom (as a result of the general exclusion of overseas R&D activity under the reforms, subject to certain exclusions). There are also additional disclosure requirements in relation to companies that have a registered office in Northern Ireland. These new requirements will have effect from 2 October 2024.

On 17 September 2024, HMRC’s guidance titled ‘Corporation Tax for non-UK incorporated companies’ was updated in relation to the corporation tax registration process for overseas companies that cannot use the joint registration process offered by Companies House. As the guidance explains, although there are various categories of non-UK company which can be within the scope of UK corporation tax (broadly companies that dispose of UK property or land, offshore property developers dealing in or developing UK property or land, companies trading in the UK through a dependent agent permanent establishment and companies that are UK resident because central management and control is in the UK), these will not always fall within the rules that can require non-UK companies to register with Companies House. The updated page clarifies the process required for companies in this position and links through to further new guidance and online forms.

Page CFM98485 of HMRC’s Corporate Finance manual provides detail on the ‘exceptional circumstances’ where something has prevented a group from appointing a corporate interest restriction (CIR) reporting company and HMRC will make use of their powers to appoint a reporting company on behalf of the group. The guidance makes it clear that “Where a group believes there are exceptional circumstances which justify HMRC making an appointment on behalf of the group, it should approach HMRC as soon as reasonably practicable with full details”. Examples HMRC give for where they would normally accept they should appoint include where HMRC have incorrectly told a group an appointment was valid, and certain cases where service issues with HMRC online systems prevented an appointment. A longer list of examples is given of circumstances where HMRC would not normally use their powers to appoint a reporting company, which include the group not being aware of the requirement or misunderstanding the process. For more background, see our earlier article on HMRC’s evolving approach in this area.

During his speech to the Labour Conference on 24 September 2024, Sir Keir Starmer restated the Labour Party’s manifesto commitment to replace the existing apprenticeship levy with a new growth and skills levy. According to a press release accompanying the speech, in England this will include new ‘foundation apprenticeships’ and will allow funding for shorter apprenticeships than currently possible under the apprenticeship levy. Employers will also be asked to rebalance their funding towards younger workers. Skills England, which was launched by the Government in July, published its first report on the same day providing “an initial assessment of the nation’s working skills, as well as future skills needs and gaps which employers are struggling with across the country”. The press release confirmed that Skills England will help determine which types of training will be eligible for the growth and skills levy. Further details on how the new growth and skills levy will operate, and implications for funding training in Northern Ireland, Scotland and Wales (where apprenticeship training is devolved), might be announced at the Budget.

We knew a review of employment rules was on the new Government's agenda, with the election campaign highlighting the promise to deliver A New Deal for Working People and a plan to Make Work Pay. Key proposals of the plan include legislation to ensure a real living wage, ending exploitative working practices, and enhancing rights from the first day of employment. What does this mean for businesses? In a recent article our employment law and employment tax teams broke the plan down into key strategic areas for your business to help you find out what changes and obligations should be on your radar.