In line with the Tax Policy Making framework, the government is publishing draft legislation ahead of potential inclusion in the next Finance Bill. This allows for technical consultation and provides taxpayers with predictability over future tax policy changes. Alongside this, the government is making announcements in a small number of technical areas of tax policy to support the operation of the tax system. Draft legislation is being published to seek stakeholder views at this stage. The final contents of the next Finance Bill will be a decision for the Chancellor. The government is also publishing a number of tax-related consultations and summaries of responses to consultations which have already been conducted.
Publication of draft legislation
The government is publishing draft legislation and associated documents, further to previous announcements, including at Budget or on tax administration and maintenance day.
- Additional tax relief for R&D intensive SMEs: The government is publishing draft legislation which will introduce a new permanent rate of relief for the most R&D intensive loss-making SMEs from 1 April 2023. This additional support will be worth over £1.8 billion over the next 5 years, and will provide eligible R&D intensive loss-making SMEs with support worth £27 per £100 of R&D expenditure. The scheme would continue to operate alongside any merged scheme.
- R&D: Merging RDEC and SME relief: The government is publishing draft legislation on the proposed design of a merged scheme, alongside a summary of responses to the consultation. This would combine the SME and RDEC schemes into a single, simplified above-the-line tax credit. This legislation will keep open the option of implementing a merged scheme from April 2024. A final decision on whether to merge schemes will be taken at a future fiscal event.
- Reform of audio-visual creative tax reliefs: The government is publishing draft legislation to implement the modernisation and reform of the audio-visual tax reliefs into expenditure credits. The reforms include a higher rate of relief for animation and children’s TV to provide additional support for this burgeoning sector. This higher rate of relief will also be extended to animated films.
- Administrative changes to creative industry tax reliefs: The government is publishing draft legislation to make a number of administrative improvements to the creative industry tax reliefs, alongside the introduction of the new expenditure credit regimes.
- Technical clarifications to the cultural tax reliefs: As announced at Spring Budget 2023 alongside the 2-year extension to the higher rates, the government is publishing draft legislation to make several changes to clarify what is eligible for the three cultural tax reliefs: Theatre, Orchestra, and Museums and Galleries Exhibition Tax Relief.
- Lifetime Allowance abolition: As announced at Spring Budget 2023, the government is publishing draft legislation to abolish the pensions lifetime allowance, following the removal of the lifetime allowance charge from 6 April 2023.
- Pensions schemes relief at source: The government is publishing draft legislation which will ensure that the legislative framework supports the modernisation of the Relief At Source (RAS).
- Doubling maximum sentences for tax fraud: The government is publishing draft legislation to double maximum sentences for the most egregious cases of tax fraud from 7 to 14 years. This demonstrates the government’s intent to crack down on tax fraud and deter criminal actions, which reduce the amount of money available to fund vital public services.
- Tonnage Tax: The government is publishing draft legislation to permit third party ship management companies to join the Tonnage Tax regime and to raise the limit on capital allowances to £200 million for lessors of ships into the regime. These measures will help to keep the UK Tonnage Tax regime competitive internationally.
- Geographical scope of agricultural property relief and woodlands relief: The government is publishing draft legislation which will restrict the scope of agricultural property relief and woodlands relief from inheritance tax to property located in the UK only.
- Enterprise Management Incentives: This measure extends the time limit for a company to notify HMRC of a grant of an Enterprise Management Incentives (EMI) share scheme option.
- Improving the data HMRC collects from its customers: The government is publishing draft legislation to improve the quality of data collected by HMRC. This will provide better outcomes for taxpayers and businesses, improving compliance, and resulting in a more resilient tax system.
The government is also publishing draft legislation and associated documents in the following areas which have not been previously announced:
- Ukraine vehicle excise duty exemption: The government is also publishing draft legislation to enable a Vehicle Excise Duty (VED) exemption for Ukraine Visa Holders. Individuals in the UK under the Family, Sponsor and Extension Ukrainian visa schemes, driving vehicles with Ukrainian number plates, will be exempt from VED and registration requirements for a period of 36 months (in line with the length of their visas). This will ensure that individuals fleeing the war in Ukraine, who have not yet registered their vehicles in the UK, do not have to face the costs associated with VED and registering their vehicles while they are temporarily in the UK.
- Real Estate Investment Trusts (REITS): The government is publishing draft legislation to make further improvements to the operation of the tax rules for Real Estate Investment Trusts. As well as engaging on the detail of these provisions, the government will continue to consider the case for other reform options.
- OECD Pillar 2: The government is publishing amendments to the Pillar 2 rules to ensure it functions as intended and reflects the latest internationally agreed guidance. Alongside this, the government is setting out the draft legislation of the structure of the undertaxed profits rule (UTPR).
- Post Office compensation schemes – corporate entities: The government is publishing draft legislation that will provide an exemption from corporation tax on compensation payments made to corporate entities from the Horizon Shortfall Scheme or Group Litigation Order compensation schemes.
- Tougher consequences on promoters of tax avoidance: The government is publishing draft legislation which creates a new criminal offence that will apply to promoters of tax avoidance schemes who fail to comply with a HMRC legal notice requiring them to stop promoting an avoidance scheme. The government is also publishing draft legislation which will enable HMRC to apply to the court for a disqualification order against directors of companies involved in promoting tax avoidance.
All draft legislation is accompanied by a Tax Information and Impact Note (TIIN), an Explanatory Note (EN) and, where applicable, a summary of consultation responses document.
- Administrative Changes to the High Income Child Benefit Charge: The government wants to simplify the process for customers who become liable to the High Income Child Benefit Charge, particularly for those who currently need to register for Self Assessment to pay the charge. The government will provide details in due course on how it will enable employed customers to pay through their tax code, without the need to register for Self Assessment.
- Exempting Payments Under the Department for Education’s Family Network Support Package: The government will legislate to ensure that payments made under the Family Network Support Package trialled in the Family Network Pilot by the Department for Education, will be exempt from income tax. This legislation will apply retrospectively from 31 July 2023, when payments start. HMRC will exercise its collection and management discretion and will not collect any income tax that may have been due on payments made from 31 July 2023 to the date the legislation takes effect.
The government is also publishing the following consultations:
- Plastic Packaging Tax - mass balance approach: The government is consulting on how a mass balance approach can be used for calculating the recycled content in packaging made from chemically recycled plastic for the purposes of Plastic Packaging Tax.
- Energy Profits Levy Energy Security Investment Mechanism: The government is publishing a discussion paper to support engagement with the sector on the technical details of the ESIM’s application.
- Taxation of employee ownership trusts and employee benefit trusts: The government is consulting on proposals to reform the tax treatment of two types of employee trusts: Employee Ownership Trusts (EOTs) and Employee Benefit Trusts (EBTs). These reforms ensure that the favourable tax treatment remains available to those who use EOTs and EBTs for the intended policy purposes, whilst preventing tax advantages being obtained through use of these trusts outside of these intended purposes.
- Updating the VAT Terminal Markets Order legislation: As announced at tax administration and maintenance day, the government is consulting on proposals to update the Terminal Markets Order legislation to clarify the VAT treatment of exchange traded commodity transactions, ensuring the legislation reflects how the markets operate today and provides greater certainty in relation to the VAT treatment.
All publications can be found on the gov.uk website. The government’s tax consultation tracker has also been updated.
This statement has also been made in the House of Lords