June 2023 / United Kingdom

6 Giugno 2023

Tax Authority Updates Double Taxation Treaty Passport Form

The United Kingdom's tax authority, His Majesty's Revenue and Customs (HMRC) has published an updated form DTTP1, which overseas companies can use to apply for a Double Taxation Treaty passport or to renew it.

The form can be used if the company or entity:

  • is resident in a country that has concluded a double taxation treaty with the UK; and
  • receives relief from UK income tax on interest gained in the UK.

The double taxation treaty passport scheme allows overseas lenders to register with HMRC. Subject to approval, they can then provide their unique "passport number" to a UK borrower which can then be advised of the correct rate of withholding tax by HMRC.

The form must be completed online and cannot be saved during the process hence all required information should be obtained before its completion.

More information on the scheme can be found here.

9 Giugno 2023

New oil and gas tax changes set to protect energy security and British jobs

The Energy Profits Levy, which puts a marginal tax rate of 75% on North Sea oil and gas production, will remain in place for the next five years while oil and gas prices remain higher than historic norms – but this will fall back to 40% when prices consistently return to normal levels for a sustained period.

Put in place to tax extraordinary profits made by industry following record high prices of oil and gas driven by Putin’s invasion of Ukraine, the levy has raised around £2.8 billion to date and is expected to raise almost £26 billion by March 2028 – helping to fund the measures to help with the cost of living, such as the Energy Price Guarantee.

While the levy included an investment allowance to encourage firms to continue to invest in oil and gas extraction in the UK, industry has warned that companies are cutting back on investment. This puts the long-term future of the UK’s domestic supply at risk, meaning we would be forced to import more from abroad at a time when reliable and affordable energy is a focus for families and businesses.

In response to this, the Government has today announced an Energy Security Investment Mechanism to give the oil and gas sector certainty to raise capital and invest in new and existing projects, securing affordable and reliable domestic energy supply and protecting some of the 215,000 British jobs the sector supports. It will mean that if prices fall to historically normal levels for a sustained period the tax rate for oil and gas companies will return to 40%, the rate before the Energy Profits Levy was introduced. Based on the independent Office for Budget Responsibility’s forecast the Energy Security Investment Mechanism won’t be triggered until before the tax’s planned end date in March 2028.

In light of Putin’s weaponisation of energy, the UK government is taking concrete steps to accelerate home-grown sources of energy to reduce the UK’s reliance on foreign imports. In October 2022, the industry regulator the North Sea Transition Authority (NSTA) opened applications for oil and gas licences to explore and potentially develop 898 blocks and part-blocks in the North Sea which may lead to over 100 licences being awarded from later this year.

Gareth Davies MP, Exchequer Secretary to the Treasury, said:

“It is right that we recover excess profits resulting from Putin’s war and use the money to help people with their energy bills. Thanks to the revenue raised from windfall taxes on energy profits, we will have helped save the typical household £1,500 on their energy bill by July.

“While we stepped into help, never again can our energy supplies be at the whim of petrostate despots like Putin. That’s why it’s so important that we secure investment in our own domestic supply, protecting the tens of thousands of British jobs that come with it.

“It would be beyond irresponsible to turn off the North Sea taps overnight. Without oil and gas from British waters, we would be forced to import even more from overseas, putting our security of supply at risk.”

This ‘windfall tax’ takes the total revenues from taxes on oil and gas companies to £50 billion over the next five years. These taxes will have helped the Government save the typical household over £1,500 to July. It also helped cut the energy bills of businesses from pubs to leisure centres, with just under £40 billion paid out across businesses and households to date.

The tax rate for oil and gas companies will only return to 40% if both average oil and gas prices fall to, or below, $71.40 per barrel for oil and £0.54 per therm for gas, for two consecutive quarters. This level is based on 20-year historical averages. The Energy Security Investment Mechanism is not expected to impact receipts from the Energy Profits Levy, based on current market forecasts.

Today the Government has also published the terms of reference for the oil and gas fiscal regime review that was announced at the Autumn Statement. The review will focus on how the tax regime can support the country’s energy security and our net-zero commitments, while ensuring the country retains a fair return in exchange for the use of its resources when responding to any future price shocks.

Further information:

  • Offshore Energies UK estimate that 215,000 UK jobs are reliant on the upstream oil and gas sector and have warned that nine out of ten oil and gas companies operating in the North Sea are cutting back investment. If there was no investment in new fields, production could be a third lower than otherwise by 2035, putting the UK’s energy security, jobs, and economy at risk.
  • Projections by the North Sea Transition Authority suggest that stopping investment in new North Sea oil and gas fields would mean that by 2035 the proportion of UK oil and gas demand met by net imports could increase by around 10%, adding significantly to the trade deficit.
  • The Energy Security Investment Mechanism level is calculated from 20-year historic averages based on World Bank data for oil, and Independent Commodity Intelligence Services for gas. The last time monthly average prices were at or below this level was in March 2021 for gas and August 2021 for oil.
  • Based on the independent OBR’s forecast the Energy Security Investment Mechanism won’t be triggered until before the tax’s planned end date in March 2028.
Source: Gov.uk
3 Luglio 2023

HMRC late payment interest rates to be revised after Bank of England increases base rate

HMRC interest rates for late payments will be revised following the Bank of England interest rate rise to 5%.

The Bank of England Monetary Policy Committee announced on 22 June 2023 to increase the Bank of England base rate to 5% from 4.5%.

HMRC interest rates are linked to the Bank of England base rate.

As a consequence of the change in the base rate, HMRC interest rates for late payment and repayment will increase.

These changes will come into effect on:

  • 3 July 2023 for quarterly instalment payments
  • 11 July 2023 for non-quarterly instalments payments

How HMRC interest rates are set

HMRC interest rates are set in legislation and are linked to the Bank of England base rate.

Late payment interest is set at base rate plus 2.5%. Repayment interest is set at base rate minus 1%, with a lower limit - or ‘minimum floor’ - of 0.5%.

The differential between late payment interest and repayment interest is in line with the policy of other tax authorities worldwide and compares favourably with commercial practice for interest charged on loans or overdrafts and interest paid on deposits.

The rate of late payment interest encourages prompt payment and ensures fairness for those who pay their tax on time, while the rate of repayment interest fairly compensates taxpayers for loss of use of their money when they overpay.

Source: gov.uk