1. Update following the Autumn Statement last year
The Government's economic plan was revealed, after weeks of turmoil and uncertainty, on the 17th November 2022. Jeremy Hunt announced a plethora of policy changes, summarised below:
- Corporation tax – the mainstream rate will increase to 25% from 1 April 2023.
- Personal taxation – with effect from 6 April 2023, the threshold for the 45% tax rate will be dropped from £150,000 to £125,140, the capital gains tax annual exemption will reduce from £12,300 to £6,000 (to be followed with another drop to £3000 in 2024) and the dividend allowance will reduce from £2,000 to £1,000 (to be followed with another drop to £500 in 2024).
Further proposed changes in employment tax, VAT, stamp duty, R&D tax credits and other taxation areas are covered in depth in this article. The Autumn Statement appears to signal a shift to a time of higher taxation to help the Government weather the storm of a looming recession. We now await the next Budget, currently scheduled for 15th March 2023.
2. Review of the Genuine Diversity of Ownership condition
The Government's formal response to the call for input into the UK funds regime review was issued in February 2022, which included their commitment to take forward a review of the genuine diversity of ownership condition (the "GDO") in light of uncertainty in respect of its application. The GDO broadly ensures that access to a fund is made widely available to the intended categories of investors through i.e. marketing.
The GDO is used across a variety of tax regimes, consisting of regimes for certain authorised investment funds regimes, reporting offshore funds, co-ownership authorised contractual schemes. Other tax regimes incorporate the GDO by reference, which include the recent Qualifying Asset Holding Companies regime, the Non-Resident Chargeable Gains rules, and the Real Estate Investment Trust rules.
We will be participating in this review, which was recently initiated, and provide updates once possible to do so.
3. EU agrees to adopt Pillar 2
The EU member states reached an agreement on 12th December 2022 to implement Pillar 2 at the EU level. Groups or companies with annual turnover of €750 million will be taxed at a minimum rate of 15%. This directive will be implemented by the end of 2023, making the EU a global leader in applying the OECD global agreement on Pillar 2.
As we discussed in our last briefing note, investment funds should generally not be adversely impacted. However, Pillar 2 represents a large global shift in tax law and should be scrutinised as it progresses.
Feel free to get in touch if you would like to discuss any of the issues raised in this briefing note, or any other tax issues.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
