In focus - Spring Budget 2024

The Chancellor of the Exchequer, Jeremy Hunt, delivered his “Budget for long term growth” yesterday. He said that the Budget “sticks to the plan by delivering lower taxes, better public services and more investment, while increasing size of economy by 0.2% in 2028-29 and meeting fiscal rules – taking the long-term decisions needed to build a brighter future.”

We have highlighted the key points we have identified from the Chancellor’s Budget speech and the accompanying documents. The headlines include the abolition of the ‘non-dom’ tax regime (in the personal tax section) but, as ever, there are a number of detailed announcements to consider.?The First Reading of the Spring Finance Bill is scheduled for 13 March.

Business taxes

• No change to UK corporation tax rates.
• The Government will extend the end date of the Energy (Oil and Gas) Profits Levy (EPL) to 31 March 2029. The Spring Finance Bill will include legislation abolishing the EPL if prices return to their historic norm sooner than expected.
• There is no mention of the Undertaxed Profits Rule (UTPR) - the backstop rule in Pillar Two, which is due to be included in a future Finance Bill and to take effect for accounting periods beginning on or after 31 December 2024.
• Draft legislation is to be published on the extension of full expensing to leased assets (subject to a future decision on whether to bring it in).
• Further tax relief for the creative sector is to be introduced. This includes the confirmation that under the Audio-Visual Expenditure Credit, visual effects costs will receive tax credit at a rate of 39%. The 80% cap on qualifying expenditure will also be removed for visual effects costs. These changes will take effect from 1 April 2025. A new Independent Film Tax Credit will be aimed at films that have budgets (or total core expenditure) of up to ￡15 million and that receive a new accreditation from the British Film Institute. The Government will also make permanent the increased orchestra and theatre tax reliefs, as well as those for museums and galleries, introduced during the pandemic (45% for touring productions and 40% for non-touring productions).
• A new consultation has been launched on the UK rules to implement the Cryptoasset Reporting Framework (CARF) and amendments to the Common Reporting Standard. Responses are required by 29 May 2024.
• HMRC will establish an expert advisory panel to support the administration of the R&D tax reliefs. The panel will work with HMRC to review relevant guidance, ensuring it remains up to date and provides clarity to claimants.
• There are also proposals for tax rules for the new Reserved Investor Fund (RIF), an unauthorised contractual scheme.

Personal and employment taxes

• A further cut of 2 percentage points from 6 April 2024 was announced in respect of employee Class 1 National Insurance paid below ￡967 a week (to 8% from 10%) with self-employed National Insurance cut from 8% to 6%. There was no change in the rate of employer’s National Insurance payable.
• The abolition of the current tax regime for ‘non-doms’ from 6 April 2025. It will be replaced with a new four-year foreign income and gains (FIG) regime for individuals who become UK tax resident after a period of 10 tax years of non-UK residence. Qualifying individuals will not pay tax on FIG arising in the first four tax years after becoming UK tax resident and will be able to bring these funds to the UK free from any additional charges. They will not pay tax on non-resident trust distributions. They will, however, pay tax on UK income and gains, as is the case for non-domiciled individuals now.
• There will be transitional rules to move to the new regime including an option to rebase the value of capital assets to 5 April 2019, a temporary 50% exemption for the taxation of foreign income for the first year of the new regime (2025-26) and a two-year Temporary Repatriation Facility (TRF) to bring previously accrued foreign income and gains into the UK at a 12% rate of tax. The TRF will not apply to pre-6 April 2025 FIG generated within trusts and trust structures.
• The government will also reform Overseas Workday Relief (OWR). Eligible employees will be able to claim OWR for the first three years of tax residence, benefitting from income tax relief on earnings for employment duties carried out overseas but with the current restrictions on remitting these earnings removed. Further detail on eligibility criteria will be set out in due course.
• Legislation will be introduced so that individuals cannot take themselves out of the Transfer of Assets Abroad provisions by using a company, in which the individual is an owner or has a financial interest, to transfer assets offshore in order to avoid tax. This applies to individuals who are resident in the UK and will take effect for income arising to a person abroad from 6 April 2024.
• The Government will introduce legislation to increase the High Income Child Benefit Charge (HICBC) adjusted net income starting threshold to ￡60,000, from the 2024-25 tax year onwards. The charge will then apply at a rate of one per cent of the full Child Benefit award for each ￡200 of adjusted net income between ￡60,000 and ￡80,000, halving the rate at which HICBC is currently charged.
• The furnished holiday lets tax regime is to be abolished from April 2025.
• There was no change announced to the personal allowance or the higher rate and additional rate thresholds in the UK outside Scotland (Scotland’s tax bands and rates other than the personal allowance have already been set out in the 2024 Scottish Budget passed at the end of February).
• There were no changes to the inheritance tax general rules and thresholds but, in line with the abolition of the non-dom tax regime, the Government announced its intention to move to a residence-based regime for inheritance tax and will consult in due course on the best way to achieve this, including consulting on a 10-year exemption period for new arrivals and a 10-year ‘tail-provision’ for those who leave the UK and become non-resident. Any such changes will not take effect before 6 April 2025.
• The scope of agricultural property relief for inheritance tax will be extended from 6 April 2025 and the relief will not be limited to tenancies of at least?eight years. There will be further engagement with stakeholders.

Property taxes

• Multiple dwellings relief (MDR) for stamp duty land tax (SDLT) is to be abolished from 1 June 2024. MDR can still be claimed for contracts which are exchanged on or before 6 March 2024, regardless of when completion takes place.?
• SDLT definitions relating to registered social landlords will be amended and public bodies will be removed from the SDLT 15% higher rate charge when purchasing residential property with a value of more than ￡500,000. These changes will take effect from 6 March 2024.
• In relation to SDLT first-time buyers’ relief, purchasers of new leases using nominee or bare trusts will be able claim the relief, while ensuring they cannot claim again in the future in their own name.
• The higher rate of capital gains tax on residential property is to be reduced from 28% to 24% with effect from 6 April 2024.

Indirect tax and duties

• There will be an increase in the VAT registration threshold from ￡85,000 to ￡90,000 per year with effect from 1 April 2024. The deregistration threshold will be increased from ￡83,000 to ￡88,000.
• Updates to the Terminal Markets Order (TMO) legislation will be made, including allowing trades in carbon credits to be brought within the scope of the TMO. Legislation to support this will be in Spring Finance Bill 2024 and the consultation response will be published shortly.
• In terms of the VAT Retail Export Scheme, where people may have been expecting an announcement, the Government will consider the findings of the Office for Budget Responsibility (OBR) alongside industry representations and broader data, and welcomes any further submissions.
• The Government will publish a consultation on the potential implications of the High Court’s ruling in?Uber Britannia vs Sefton MBC?for the private hire vehicle market in April 2024.
• The Government re-confirmed that it would introduce a UK carbon border adjustment mechanism (CBAM) from 1 January 2027 which will apply to relevant goods imported in the aluminium, cement, ceramics, fertiliser, glass, hydrogen and iron & steel sectors. The details will be subject to public consultation later in 2024 (whereas many had expected at least a definite date for the consultation if not the consultation itself).
• There will be a one-off rise in air passenger duty for non-economy flights.
• There will be no increase in fuel duty (including the extension of the current temporary 5p cut).
• Alcohol duty will be frozen until February 2025.
• A new excise duty will be introduced on vaping products alongside a one-off increase in tobacco duty.?Registration for the duty will open on 1 April 2026 with the duty taking effect from 1 October 2026.

Tax administration

• A UK ISA will be introduced after consultation as a ￡5,000 additional allowance to the existing ISAs allowances to allow investment in UK equities.
• The Government also intends to bring forward requirements for Defined Contribution pension funds to publicly disclose the breakdown of their asset allocations, including UK equities, working closely with the Financial Conduct Authority (FCA) who share responsibility for setting requirements for the market. The FCA will consult in the spring. The Government will introduce equivalent requirements for Local Government Pension Scheme funds in England & Wales as early as April 2024. The Government will review what further action should be taken if this data does not demonstrate that UK equity allocations are increasing.
• The sunset date for freeport special tax sites will be extended (via secondary legislation) to: 30 September 2031 for special tax sites in respect of English Freeports and 30 September 2034 for special tax sites in respect of Scottish Green Freeports and Welsh Freeports.?
• The Government also announced further details of six Investment Zones: Greater Manchester, Liverpool City Region, North East of England, South Yorkshire, West Midlands and Tees and how they will use the funding available to them (including by offering tax reliefs to attract businesses to these Zones).
• The Government will bring forward a further set of tax administration and maintenance announcements on 18 April 2024. None of these announcements will require legislation in Spring Finance Bill 2024. This is likely to include the next steps for tackling non-compliance in the umbrella company market.

Contacts

To discuss any of the topics raised by these announcements, please?contact us?with a brief description of your query. A member of the team will be in touch shortly after.

Chris Sanger - Tax Policy

Tom Evennett - Personal taxes

Sarah Farrow - Personal taxes

Martin Portnoy - Personal taxes

Ruth Donaldson - Corporation tax

Mike Gibson - Corporation tax

Nick Yassukovich - Employment taxes

Vaneeta Khurana - Employment taxes

Richard Milnes - Financial Services

Jenny Coletta - Financial Services

Sarah Delaney - Indirect taxes

Georgina West - Stamp taxes