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Some of Europe's brightest legal minds look at the tax issues across Europe which could impact multinational businesses.

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High energy prices, in-the-money hedges and another special purpose tax for the UK

The UK government is proposing to introduce yet another new tax, the Public Interest Business Protection Tax (PIBPT) (even though the ink on the Health and Social Care Levy Act 2021 has hardly dried and the Finance Bill already makes provision for a new Residential Property Developer Tax and a new Economic Crime (Anti-Money Laundering) Levy). From a tax certainty and administrability perspective this is far from ideal, but perhaps something has to give during the special (uncertain) times in which we live, and it seems not unreasonable for the government to be concerned that current energy price levels may cause more suppliers to fail. 

The stated aim of the PIBPT is essentially to ensure that the value of an asset (in particular, derivatives hedging against rising wholesale energy prices which are now in-the-money) that had been held for the benefit of a failing public interest business is not transferred to shareholders/investors. "Public interest businesses" would be defined as "energy supply businesses", i.e. businesses requiring a gas supply licence or an electricity supply licence, although there is an option to extend the definition by regulation to also cover other types of business subject to a special administration regime. 

Key requirements for the PIBPT to apply would, broadly, be that a person (P) takes steps which mean that an asset which was wholly or partly held for the benefit of a public interest business carried on by P or a connected person is no longer available for the benefit of that business, and that that business becomes subject to special measures (i.e. special administration or a requirement for its customers to be transferred). There would be a £100 million asset value threshold below which the PIBPT would not apply. Its application would be further restricted to public interest businesses which become subject to special measures on or after 28 January 2022 and before 28 January 2023 (although the end date can be postponed by regulation to any date before 29 January 2025).

The PIBPT would be charged at 75% of the asset's adjusted value. 

Some high level points to note in respect of the administrative provisions in relation to the PIBPT are the relatively short timeframes for making a return (30 days) and paying the tax (15 days later), and provisions for joint and several liability which could catch shareholders/investors who receive proceeds equal to 5% or more of the adjusted value of the asset. The PIBPT would not be deductible in calculating profits, losses or gains for income tax, capital gains tax or corporation tax purposes. 

Draft legislation for the PIBPT for inclusion in the Finance Bill was published on 28 January 2022 alongside a Tax Information and Impact Note (which does, however, leave the estimate for the tax yield empty), a Technical Note and an Explanatory Note. Information on the passage of the Finance Bill can be found on the UK Parliament's website.   

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slaughterandmay, tvelling, uk tax

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