Midweek Tax News

The Finance Bill 2024-25 was published on 7 November. The Bill is available here and the explanatory notes can be found here.

The Bill features many of the Autumn Budget measures announced on 30 October. As expected, it includes legislation implementing the changes to the energy (oil and gas) profits levy (EPL); legislation for the removal of non-domicile status and its replacement with residence-based regimes for foreign income and gains (FIG) and inheritance tax; and legislation to introduce additional tax relief for visual effects expenditure. With respect to Pillar Two, the Bill includes clauses amending the existing UK legislation to ensure that it remains consistent with commentary and administrative guidance to the GloBE rules, to introduce the under-taxed profits rule (UTPR) for accounting periods beginning on or after 31 December 2024 and to repeal the offshore receipts in respect of intangible property (ORIP) rules.

The Bill received its first reading in the House of Commons on 6 November and the date for second reading has yet to be announced.

On 7 November, HMRC published the two latest documents in its series of Guidelines for Compliance (GfC) documents, which are intended to assist taxpayers with understanding HMRC’s position on various issues and highlight common errors that HMRC sees arising.

Help with Patent Box computations (GfC9) sets out the steps that HMRC recommends taxpayers to take to minimise errors in their computations, lists the information that HMRC would like taxpayers to include in the computation and sets out its expectations of taxpayers regarding record keeping.

Help with the Apprenticeship Levy and Employment Allowance - connected entities (GfC10) focuses on the connected entities rules for the apprenticeship levy and employment allowance. It aims to help employers identify connected entities, enabling them to report their apprenticeship levy liability and claim employment allowance correctly.

The GfC documents do not represent a change in the law or HMRC policy, and are intended to be read alongside existing guidance.

The First-tier Tribunal has found in favour of HMRC in Syngenta Holdings Limited (SHL), the first loan relationship unallowable purpose decision to be released following the Supreme Court’s recent refusal to grant leave to appeal the Court of Appeal decisions in Blackrock, Kwik-fit and JTI Acquisition. As part of a group reorganisation, SHL had acquired another group company from its parent, funded by an intra-group loan. SHL treated interest arising on the loan as allowable under the loan relationship rules. However, HMRC concluded that the main purpose of SHL being party to the loan was an unallowable purpose within s442 CTA 2009, and therefore that the deductions were not allowable.

SHL argued that the loan was a commercial transaction intended to fund the acquisition of the subsidiary company, which was expected to yield dividend income in excess of the interest payments, and that it did not have an unallowable purpose for being party to the loan. However, the Tribunal disagreed. Although it acknowledged that there had been some benefits from the transaction, including achieving a single entity holding structure in the UK and allowing dividends to be paid by creating distributable profits, it found that the sole main purpose for the transaction was the unallowable purpose of obtaining a tax advantage. As a result, all debits should be disallowed under s441 CTA 2009.

On 7 November, HMRC announced that its interest rates for late payment and repayment will decrease, following the decision of the Bank of England Monetary Policy Committee to decrease the Bank of England base rate from 5.00% to 4.75%. These changes will come into effect on 18 November 2024 for quarterly instalment payments and 26 November 2024 for non-quarterly instalments payments.

The Economic Crime and Corporate Transparency Act 2023 (ECCTA) introduced the corporate offence of failure to prevent fraud, under which large organisations may be held criminally liable if an employee, agent, subsidiary or other "associated person" commits a fraud intending to benefit the organisation. The failure to prevent fraud offence will come into force on 1 September 2025.

In-scope organisations must demonstrate 'reasonable procedures' to prevent fraud by employees or associated persons, with guidance that stresses six key principles: top-level commitment, risk assessment, proportionate prevention procedures, due diligence, communication and training, and ongoing monitoring. On 6 November, the Home Office issued guidance on 'reasonable procedures' for this new offence.

We will be hosting a webcast on Thursday, 21 November at 10:00, during which our panel will consider:

• Core elements of the 'reasonable procedures' guidance and best practices
• How other organisations are approaching these new requirements
• Common challenges and pitfalls to avoid
• Immediate actions to get prepared within the nine-month timeline

To join this event, please register here.

Following Donald Trump’s presidential election victory last week, the implications for global trade and tariffs are at the forefront of economic discussions around the world. The outcome of this election is set to have a significant impact on trade policies, global partnerships, tariff structures and the overall economic landscape. Our global alert looks at the potential impact of the election on tariffs and trade, and highlights actions for businesses to consider.

Whilst most discussions of immigration policy during the election campaign focused on illegal immigration, significant change can be expected in the legal and employment-based immigration spaces in President-elect Trump’s second administration. Based on policies pursued during his first administration and recent public statements made by the president-elect and his advisors, US employers and their foreign national employees can expect changes to temporary work visa and immigrant (green card) visa processing. Our global mobility alert provides a summary of potential developments that may occur in the immigration landscape with the incoming administration.

As highlighted in Midweek Tax News last week, on 5 November the Council of the EU reached agreement on the EU’s VAT in the digital age (ViDA) proposal, which includes new rules on electronic invoices and real-time data reporting. An alert was sent to EY VAT News subscribers last week and is also available here.

We have included links to a selection of our tax alerts below. Additional articles are available in our global tax alert library.

EU: On 30 and 31 October respectively, the EU published two draft implementing regulations regarding the EU Carbon Border Adjustment Mechanism (CBAM): on applying to become an authorised CBAM declarant and on establishing a CBAM registry. Interested businesses have until late November 2024 to submit comments.

Italy: Italy has proposed removing the revenue thresholds in its digital services tax (DST) rules, making any business generating digital service revenues in Italy subject to the tax from 1 January 2025. The Budget Law is pending parliamentary approval.

Luxembourg: Luxembourg has proposed amendments to the legislation which implements Pillar Two, in order to align it with OECD guidance issued during 2023. The changes will be effective for financial years starting 31 December 2023, including provisions for the treatment of securitisation entities.

Argentina: Argentina's tax authorities have issued regulations on transfer pricing for Sole Purpose Vehicles within the Incentive Regime for Large Investments. The regulations are intended to ensure that transactions are carried out as if they were between independent parties, and require annual filings for SPVs.

Canada: Newly enacted rules and recent draft legislation update Canada’s investment tax credit for qualifying expenditure on carbon capture, utilisation and storage projects and equipment. Changes include updates to the classification of dual-use equipment and the timing of qualifying activities.

Colombia: The Colombian tax authority has issued a ruling addressing several questions related to applying the new rules on Significant Economic Presence, under which non-residents who sell goods and/or provide certain services to customers and/or users located in Colombia become taxable in Colombia.

Hong Kong: Hong Kong has published the outcome to its consultation on the implementation of Pillar Two GloBE Rules. The publication recommends that the Income Inclusion Rule and domestic minimum top-up tax be effective from 1 January 2025, while the Undertaxed Profits Rule will be postponed subject to further work. The Government has proposed some changes to the rules and has set out the proposed compliance and administration approaches. The Pillar Two bill is expected to be introduced by January 2025 and enacted by mid-2025.

Saudi Arabia: Saudi Arabia has announced the approval of the Real Estate Transaction Tax Law, outlining and providing guidance on exemptions for various real estate transactions.

Singapore: Singapore has introduced minimum conditions for a new 15% concessionary tax rate and updated conditions for the 5% and 10% rates under the Development and Expansion Incentive.