October 2022 / United Kingdom

The government's draft proposed clauses and updates for Finance Bill 2022-23 have been published. The new legislation relating to annual taxes, new proposals and the administration of the tax system include the following:

Individual income tax

• A "top-up" payment will be made to workers who contribute to a pension scheme, but who do not receive tax relief because their earnings are less than their personal allowance. The payment will equate to the relief they would have received if their income had been higher.
• If a collective money purchase pension scheme is wound up, new legislation will ensure that savers can continue receiving authorized pension payments or make a transfer to another pension scheme and receive a drawdown pension.

Corporate income tax

• A new multinational top-up tax will apply to multinational enterprise groups if a non-UK subsidiary's profits are taxed at less than 15%.
• Changes to research and development tax relief will expand qualifying expenditure to include data licences and cloud computing and the relief will be focused on UK expenditure.
• Amendments to the qualifying asset holding companies regime will allow an investment fund to be treated as meeting the diversity of ownership condition if it is closely associated with another investment fund that meets that condition. Some funds will find it easier to access the regime and the anti-fragmentation rule will be extended.
• Transfer pricing documentation rules will require the largest UK businesses to retain, and produce upon request, a master file, local file and summary audit trail.
• Double taxation relief rules will be amended to prevent relief some claims if they relate only to deemed amounts of overseas tax.

Capital gains tax

• Transfers of assets between spouses and civil partners who are separating will be treated as made on a "no gain/no loss" basis for up to 3 tax years rather than only in the current year as at present.
• Members of limited liability partnerships and Scottish partnerships will be able to claim capital gains tax relief on an exchange of interest in land or private residences held by the partnership.

Inheritance tax

The government will amend the current legislation to ensure that the assets that were transferred to the Dormant Assets Scheme Reclaim Fund and which are subsequently returned receive the correct tax treatment.

Air passenger duty

A new domestic band for air passenger duty will be introduced from April 2023 for flights within the United Kingdom and a new ultra-long-haul band will apply to destinations with capitals more than 5,500 miles from London.

Alcohol duty

Alcohol duty will be amended to establish common tax bands based on strength. Two new reliefs and a temporary easement for the wine industry are introduced.

The legislation was subject to consultation until 14 September, although comments on the alcohol duty proposals can be made until 18 November 2022.

The first round of negotiations for a Free Trade Agreement (FTA) between the United Kingdom (UK) and Gulf Cooperation Council (GCC) took place between 22 August and 29 September 2022. The negotiations were conducted virtually.

In this round of negotiations, the UK and GCC discussed their objectives for the FTA and exchanged technical information. Technical discussions were held across 29 policy areas over 33 sessions. In total, more than 100 UK negotiators from across government took part in this round of negotiations.

An FTA will be a substantial economic opportunity, and a significant moment in the UK - GCC relationship. Government analysis shows that, in the long-run, a deal with the GCC is expected to increase trade by at least 16 percent, add at least £1.6 billion a year to the UK economy and contribute an additional £600 million or more to UK workers’ annual wages.

Both sides have committed to secure an ambitious, comprehensive and modern agreement fit for the 21st century.

The government remains clear that any deal will be in the best interests of the British people and the UK economy. We will not compromise on our high environmental and labour protections, public health, animal welfare and food standards, and we will maintain our right to regulate in the public interest. We are also clear that during these negotiations, the NHS and the services it provides is not on the table.

Source: Government of UK

Rihi Sunak gave his first speech as Prime Minister in Downing Street.

Good morning,

I have just been to Buckingham Palace and accepted His Majesty The King’s invitation to form a government in his name.

It is only right to explain why I am standing here as your new Prime Minister.

Right now our country is facing a profound economic crisis.

The aftermath of Covid still lingers.

Putin’s war in Ukraine has destabilised energy markets and supply chains the world over.

I want to pay tribute to my predecessor Liz Truss, she was not wrong to want to improve growth in this country, it is a noble aim.

And I admired her restlessness to create change.

But some mistakes were made.

Not borne of ill will or bad intentions. Quite the opposite, in fact. But mistakes nonetheless.

And I have been elected as leader of my party, and your Prime Minister, in part, to fix them.

And that work begins immediately.

I will place economic stability and confidence at the heart of this government’s agenda.

This will mean difficult decisions to come.

But you saw me during Covid, doing everything I could, to protect people and businesses, with schemes like furlough.

There are always limits, more so now than ever, but I promise you this

I will bring that same compassion to the challenges we face today.

The government I lead will not leave the next generation, your children and grandchildren, with a debt to settle that we were too weak to pay ourselves.

I will unite our country, not with words, but with action.

I will work day in and day out to deliver for you.

This government will have integrity, professionalism and accountability at every level.

Trust is earned. And I will earn yours.

I will always be grateful to Boris Johnson for his incredible achievements as Prime Minister, and I treasure his warmth and generosity of spirit.

And I know he would agree that the mandate my party earned in 2019 is not the sole property of any one individual, it is a mandate that belongs to and unites all of us.

And the heart of that mandate is our manifesto.

I will deliver on its promise.

A stronger NHS.

Better schools.

Safer streets.

Control of our borders.

Protecting our environment.

Supporting our armed forces.

Levelling up and building an economy that embraces the opportunities of Brexit, where businesses invest, innovate, and create jobs.

I understand how difficult this moment is.

After the billions of pounds it cost us to combat Covid, after all the dislocation that caused in the midst of a terrible war that must be seen successfully to its conclusions I fully appreciate how hard things are.

And I understand too that I have work to do to restore trust after all that has happened.

All I can say is that I am not daunted. I know the high office I have accepted and I hope to live up to its demands.

But when the opportunity to serve comes along, you cannot question the moment, only your willingness.

So I stand here before you ready to lead our country into the future.

To put your needs above politics.

To reach out and build a government that represents the very best traditions of my party.

Together we can achieve incredible things.

We will create a future worthy of the sacrifices so many have made and fill tomorrow, and everyday thereafter with hope.

Thank you.

Source: Government of UK

VAT-registered businesses must use Making Tax Digital compatible software for their VAT returns from 1 November 2022.

HM Revenue and Customs (HMRC) is reminding businesses that from Tuesday 1 November 2022, they will no longer be able to use their existing Value Added Tax (VAT) online account to submit VAT returns.

By law, all VAT-registered businesses must now sign up to Making Tax Digital (MTD) and use compatible software to keep their VAT records and file their returns.

MTD’s aim is to help businesses get their tax right first time by reducing errors, making it easier for them to manage their tax affairs by going digital, and consequently helping them to grow.

More than 1.8 million businesses are already benefitting from the service, and more than 19 million returns have been successfully submitted through MTD-compatible software so far.

In less than one month, businesses who file their VAT returns on a quarterly and monthly basis will no longer be able to submit them using their existing VAT online account, unless HMRC has agreed they are exempt from MTD.

If businesses do not file their VAT returns through MTD-compatible software, they may have to pay a penalty. Even if a business currently keeps digital records, they must check their software is MTD compatible and sign up for MTD before filing their next return.

Richard Fuller MP, Economic Secretary to the Treasury, said:

Making Tax Digital can help businesses get their tax right first time, which cuts the administration burden and frees up time for them to get on with what matters most to them – growing their business.

I encourage any VAT-registered businesses still to register for Making Tax Digital to get online and sign up.

If a business hasn’t already signed up to MTD or started using compatible software, they must follow these steps now:

1. choose MTD-compatible software – a list of software, including free and low-cost options, can be found on GOV.UK
2. check the permissions in the software – once a business has allowed it to work with MTD, they can file VAT returns easily. Go to GOV.UK to learn how to do this and search ‘manage permissions for tax software’
3. keep digital records for current and future VAT returns – a business can find out what records need to be kept on GOV.UK
4. sign up for MTD and file future VAT returns using MTD-compatible software – to find out how to do this, go to GOV.UK and search ‘record VAT’

If a business is already exempt from filing VAT returns online or if their business is subject to an insolvency procedure, they will automatically be exempt.

A business can check if they can apply for an exemption from MTD on GOV‌‌‌.UK if it is not reasonable or practical for them to use computers, software or the internet. HMRC will consider each application on a case-by-case basis.

If a business is new and is not yet registered for VAT, they will automatically be signed up for MTD while registering for VAT through HMRC’s new VAT Registration Service (VRS). Registering via this online service not only means a faster VAT registration and improved security, but also helps new businesses to be fully compliant with MTD requirements from Day 1 – although they will still need to get the right software to submit their VAT returns.

A range of accessible help is available online through GOV.UK, webinars and videos as well as through HMRC’s Extra Support Service. Thousands of people have also benefitted from HMRC’s live webinars, which offer support on filing digitally and explain how it can help businesses. HMRC is continuing to communicate directly with businesses and agents to support them as they transition to MTD for VAT.