Other news in brief

The next stage of the Autumn Finance Bill’s progress through Parliament is scrutiny by the Public Bill Committee scheduled to conclude by 4 February 2025. In preparation for this, on 19 December 2024, the Government published proposed amendments to the Bill and associated updated explanatory notes. The first set of amendments tabled are in relation to the Pillar Two legislation included in Schedule 4 of the Finance Bill. They correct a number of unintended drafting errors and also introduce new wording designed to do the following:

• Clarify how substituted values are to be consistently used when determining profits for multinational top-up tax and domestic top-up tax purposes;
• Clarify how to calculate top-up amounts in cases where amounts for a prior period have had to be recalculated;
• Ensure that multinational top-up tax and domestic top-up tax apply properly in cases involving joint ventures;
• Remove the requirement for a transfer between members of a multinational group to be reflected on the arm’s length basis where the members are of the same type and in the same jurisdiction; and
• Secure that a decrease in covered taxes in a previous accounting period is insignificant (and will therefore be ignored) only if the aggregate of covered taxes payable by the standard members is not reduced by 1 million euros or more.

The second amendment sets out the updated rate of Vehicle Excise Duty (VED) for the General Haulage vehicle tax class from 2025 to 2026 which was inadvertently omitted from the Finance Bill as originally published. It is highly likely that these amendments, along with any others subsequently tabled by the Government, will be passed when the associated clauses are discussed in the Public Bill Committee.

On 31 December 2024, HMRC published guidance on how companies should tell HMRC if they have claimed too much Research and Development (R&D) tax relief. This includes a new ‘R&D disclosure service’ which should be used when the company: (i) claimed too much R&D tax relief; (ii) cannot amend its tax return to correct an R&D claim because the time limit to do this has passed; and (iii) needs to pay further Corporation Tax or pay back overpaid tax credits for R&D relief. The online disclosure service requires a calculation of the amount owed to HMRC, including interest and any penalties. If you are considering using this disclosure service, it is strongly advised that you speak to your usual KPMG in the UK contact for advice before doing so.

The UK is signed up to the OECD model rules for reporting by platform operators and the first reports under this new regime are due by 31 January 2025. On 30 December 2024, HMRC published a new online service to enable platform operators to register with HMRC. NB Even excluded operators who will not be submitting reports still need to register with HMRC by 31 January 2025. HMRC have also published a new service for platform operators to use to manage their digital platform reporting account after completing the registration process – this is the service to be used for submitting reports and updating details. Both services are accessed via the Government Gateway ID.

Although this case is one of a long line of HMRC wins in this space (with a few notable exceptions) the recent First-tier Tribunal decision in Tretyakov v Revenue and Customs [2024] UKFTT 1144 (TC) does have some key differences which are worth noting. For a building to be considered ‘residential property’ (resulting in a higher rate of stamp duty land tax (SDLT) applying) it only has to be ‘suitable for use as a dwelling’, which is key to this decision. While previous cases have all made it clear that the tests for residential v non-residential are ‘multi-factorial’ (taking into account all the facts and circumstances) and therefore hard and fast rules are hard to find, in this case the Tribunal put the actual use of part of a property ahead of its permitted use in terms of importance. The Tribunal’s view was that a commercial element to an otherwise residential property in terms of permitted use was overruled by the fact that, in reality, it was being used mainly for residential purposes – hence demonstrating that a part of the property paying business rates was ‘suitable for use’ as part of the residential property. This is not the whole story (and ‘multi-factorial’ is still the right phraseology) but a significant factor nonetheless.

From 1 January 2025, the UK-Ecuador Double Taxation Agreement took effect in the UK for taxes withheld at source, as well as taxes on income in Ecuador. The remainder of the agreement will take effect in the UK from 1 April 2025 and 6 April 2025, for corporation tax and income and capital gains taxes respectively. 

The UK economy is expected to experience moderate growth in 2025, but with a persistently higher level of inflation and a cautious approach to interest rate cuts. Our latest UK economy forecast provides a full forecast for GDP growth, inflation, interest rates and consumer spending, as well as a look at UK fiscal and monetary policy, and the possible impact of US tariffs.