Perhaps unsurprisingly given the looming general election, flagship measures announced at the UK’s Spring Budget 2024 felt more focussed on individuals than, for example, during the Autumn Statement 2023 when we had several exciting corporate tax announcements, including the creation of a new merged regime for R&D relief (see this blog post), that full expensing would be made permanent (see this post) and that ORIP would be abolished when the UTPR comes into force (see here). 

In addition to a further decrease in employee and self-employed national insurance contributions (amongst other measures), the government appropriated one of the opposition’s flagship policies: the abolition of what is commonly referred to as the “non-dom regime” whereby individuals who are tax resident, but not domiciled, in the UK are taxed on their foreign income and gains only to the extent these are remitted to the UK (but, if they opt into the regime, individuals would also lose certain allowances and have to pay an annual charge if they have been resident in the UK more than a certain amount of time). The government proposes to replace this regime with a residence-based one with effect from 6 April 2025, subject to certain transitional arrangements. It is proposed that, under the new regime, new arrivals would benefit from full tax relief for a period of four years after which they would be subject to tax on foreign income and gains in the same manner as other UK residents. The government further intends to consult later this year on moving inheritance tax to a residence-based regime. 

But what about corporate tax?

• The main rate of corporation tax will remain at 25% (with a small profits rate staying at 19%). This does not come as a surprise; the opposition had recently announced that, if in government, they would not look to increase the main rate.  
• There will be a technical consultation including draft legislation on the potential application of full expensing to leased assets, but a final decision has not yet been made on this policy. 
• Despite it having been noted in the summary of responses to the Oil and Gas Fiscal Review that the “government has heard loud and clear that in the fiscal regime certainty and predictability are the most important influence on investment”, there will be further tinkering with the Energy (Oil and Gas) Profits Levy in the form of an extension of the end date by one year to 31 March 2029. On a more positive note, the Spring Finance Bill 2024 will include legislation to provide for a possible early termination of the levy through the Energy Security Investment Mechanism as previously announced (see this policy paper).
• HMRC will establish an expert advisory panel in respect of the administration of R&D tax reliefs. 

The Spring Finance Bill 2024 will also include legislation in respect of a Reserved Investor Fund (Contractual Scheme) (RIF), but the detailed tax regime (to be modelled on that applicable to Co-ownership Authorised Contractual Schemes) will be fleshed out in secondary legislation. Key elements of that tax regime are that the fund would not be subject to direct taxes, but neither would it be fully tax transparent - the investors would be taxed on gains realised on the disposal of their units (not on a share of gains realised on the disposal of underlying assets) although they would be taxable on income as it arises. The original consultation indicated that the government saw this capital gains treatment as problematic in the context of non-residents and investments in UK real estate. The solution is that, in order to be eligible for the RIF regime, a fund will have to meet certain eligibility criteria (broadly, to ensure that there is either no UK real estate-related tax charge or that it is UK-property-rich so that non-resident investors would be within the scope of UK tax on the disposal of units in the fund, subject to any relief under an applicable double tax treaty). The consultation had mooted the possibility of an unrestricted fund with a more complex tax regime, but this option will not now be pursued. If a fund breaches the eligibility criteria (and does not come within proposed mitigation provisions), it would lose RIF status. 

What else caught my eye?

The government is fixing a perceived gap in the transfer of assets abroad (TOAA) rules (which are, in essence, an anti-avoidance regime to prevent UK resident individuals from escaping UK tax by transferring assets to a non-resident). In Fisher, the Supreme Court had broadly decided that the relevant legislation did not allow individual shareholders to be deemed the transferor (and therefore subject to a tax charge under the TOAA rules) in respect of assets transferred to a non-resident by the company they owned (or at least not in absence of contrived avoidance arrangements that could invite a Ramsay approach). Counsel for HMRC had argued that this left a lacuna in the legislation. The Supreme Court’s response was that “if there is indeed a gap created by this ruling,…gaps in our tax law can be and usually are speedily filled”. It appears that the government does indeed consider that the ruling created a gap and decided to fill it as part of the Spring Finance Bill 2024. 

Finally, I would be remiss if I did not mention that we have “a further set of tax administration and maintenance announcements” to look forward to; these are planned for 18 April 2024. I suspect that they might include a consultation in respect of the VAT treatment of private hire vehicles (which the Budget indicates would be launched “in April”).