In the last few months UK tax policy has been on a journey, a journey which has now ended up fairly close to where it started. Of course, that completely ignores the political, economic and market significance of that journey. The journey (the details of which can be found in our earlier posts here and here) will also be significant for individual UK taxpayers, who will end up paying significantly more tax over the next few years as nil rate bands and other tax thresholds are frozen or reduced, and for energy companies which will be hit by windfall taxes.

The need to raise taxes to appease financial markets had been very heavily trailed in advance, so I had expected some revenue-raising surprises. However, none were delivered; nearly everything had been trailed in advance.

For our private equity clients, the most significant element is confirmation that the UK corporation tax rate will rise from 19% to 25% with effect from April 2023. While the rate is not high by international standards, this may give rise to increased focus on the availability of tax assets and tax reliefs in deal structure and negotiation. In the real estate context, the attractiveness of REITs will be enhanced.

The UK has confirmed that it will implement the OECD's Pillar 2 reforms for accounting periods beginning on or after 31 December, 2023.

Very broadly, these rules require large UK headquartered multinational groups to pay a top-up tax if they have operations in any jurisdiction where they are not subject to an effective tax rate of 15% or more. In addition, UK operations of large multinationals headquartered outside the UK will be subject to a top-up tax if their effective rate of tax in the UK would otherwise be less than 15%. These rules have been criticised for the administrative burden they put on multinationals and the potential to create arbitrary tax charges. The UK's announcement means that it is likely to be an early adopter in international terms and so will be at the vanguard in working through these issues, which is unlikely to be good news for in-scope UK businesses.

In spite of some rumours, there is no change to the rate or scope of UK capital gains tax. As a result, the structuring of incentives for UK management teams and investment professionals will continue to focus on capital gains treatment.

Away from tax, the announcement that a pathway has been found for reform of the Solvency II rules for insurance companies is likely to be significant. Insurance companies may shortly become competitors for infrastructure and certain other asset classes.

While growth retains a chapter heading, very little of the pro-business substance or tone of Kwasi Kwarteng's mini-budget remains. The investment zone programme, one of the last remaining elements, is quietly being "refocused".

Overall, a quieter day than I had been expecting.

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