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Summary

The UK Chancellor of the Exchequer, Jeremy Hunt, delivered his "Budget for long term growth" on 6 March 2024. He indicated that the Budget is intended to deliver lower taxes, provide better public services and more investment, while increasing size of economy by 0.7% in 2028-29 and meeting fiscal rules.

The headlines for the Budget include the abolition of the "non-dom" tax regime (in the personal tax section), the extension of the end date of the Energy (Oil and Gas) Profits Levy (EPL) to 31 March 2029, further tax relief for the creative sector and the possibility of extending full expensing to leased assets (subject to a future decision on whether to bring this in). However, as ever, there are a number of detailed announcements to consider.

The First Reading of the Spring Finance Bill is scheduled for 13 March.

Our Budget webcast looked at the implications of the announcements in more detail and a replay is available.

Business taxes

Although no change to UK corporation tax rates are proposed, other proposals will be of interest to businesses.

The UK Government will extend the end date of the Energy (Oil and Gas) Profits Levy (EPL) to 31 March 2029. The Spring Finance Bill will include legislation to abolish the EPL if prices return to their historic norm sooner than expected.

The Budget makes no mention of the Undertaxed Profits Rule (UTPR) -the backstop rule in Pillar Two that is due to be included in a future Finance Bill and to take effect for accounting periods beginning on or after 31 December 2024.

Draft legislation is to be published on the extension of full expensing to leased assets (subject to a future decision on whether to bring it in).

Further tax relief for the creative sector is to be introduced. This includes the confirmation that under the Audio-Visual Expenditure Credit, visual effects costs will receive a 39% tax credit. The 80% cap on qualifying expenditures will also be removed for visual effects costs. These changes will take effect from 1 April 2025. A new Independent Film Tax Credit will be aimed at films that have budgets (or total core expenditure) of up to £15m and that receive a new accreditation from the British Film Institute. The Government will also make permanent the increased orchestra and theatre tax reliefs, as well as those for museums and galleries, introduced during the pandemic (45% for touring productions and 40% for non-touring productions).

A new consultation has been launched on the UK rules to implement the Cryptoasset Reporting Framework (CARF) and amendments to the Common Reporting Standard. Responses are required by 29 May 2024.

His Majesty's Revenue and Customs (HMRC) will establish an expert advisory panel to support the administration of research and development tax relief. The panel will work with HMRC to review relevant guidance, ensuring it remains up to date and provides clarity to claimants.

There are also proposals for tax rules for the new Reserved Investor Fund, an unauthorized contractual scheme.

Personal and employment taxes

A further cut of two percentage points from 6 April 2024 was announced in respect of employee Class 1 National Insurance paid below £967 a week (from 10% to 8%) with self-employed National Insurance cut from 8% to 6%. There was no change in the rate of employer's National Insurance payable.

The current tax regime for "non-doms" will be abolished from 6 April 2025 and replaced with a new four-year foreign income and gains (FIG) regime for individuals who become UK-tax resident after a period of 10 tax years of non-UK residence. Qualifying individuals will not pay tax on FIG arising in the first four tax years after becoming UK-tax resident and will be able to bring these funds to the UK free from any additional charges. They will not pay tax on nonresident trust distributions. They will, however, pay tax on UK income and gains, as is the case currently for non-domiciled individuals.

There will be transitional rules to move to the new regime, including an option to rebase the value of capital assets to 5 April 2019, a temporary 50% exemption for the taxation of foreign income for the first year of the new regime (2025-26) and a two-year Temporary Repatriation Facility (TRF) to bring previously accrued foreign income and gains into the UK at a 12% rate of tax. The TRF will not apply to pre-6 April 2025 FIG generated within trusts and trust structures.

The Government will also reform Overseas Workday Relief (OWR). Eligible employees will be able to claim OWR for the first three years of tax residence, benefitting from income tax relief on earnings for employment duties carried out overseas but with the current restrictions on remitting these earnings removed. Further detail on eligibility criteria will be set out in due course.

Legislation will be introduced so that individuals cannot take themselves out of the "Transfer of Assets Abroad" provisions by using a company in which the individual is an owner or has a financial interest to transfer assets offshore in order to avoid tax. This applies to individuals who are resident in the UK and will take effect for income arising to a person abroad from 6 April 2024.

The Government will introduce legislation to increase the High Income Child Benefit Charge (HICBC) adjusted net income starting threshold to £60,000, from the 2024-25 tax year onward. The charge will then apply at a rate of 1% of the full Child Benefit award for each £200 of adjusted net income between £60,000 and £80,000, halving the rate at which HICBC is currently charged.

The furnished holiday-lets tax regime is to be abolished from April 2025.

No change was announced for the personal allowance or the higher rate and additional rate thresholds in the UK outside Scotland (Scotland's tax bands and rates other than the personal allowance have already been set out in the 2024 Scottish Budget passed at the end of February).

No changes are proposed to the inheritance tax general rules and thresholds but, in line with the abolition of the non-dom tax regime, the Government announced its intention to move to a residence-based regime for inheritance tax and will consult in due course on the best way to achieve this, including consulting on a 10-year exemption period for new arrivals and a 10-year "tail-provision" for those who leave the UK and become nonresident. Any such changes will not take effect before 6 April 2025.

The scope of agricultural property relief for inheritance tax will be extended from 6 April 2025 and the relief will not be limited to tenancies of at least eight years. There will be further engagement with stakeholders, providing the chance to comment on the proposals.

Property taxes

Multiple dwellings relief (MDR) for stamp duty land tax (SDLT) is to be abolished from 1 June 2024. MDR can still be claimed for contracts that were exchanged on or before 6 March 2024, regardless of when completion takes place.

SDLT definitions relating to registered social landlords will be amended and public bodies will be removed from the SDLT 15% higher rate charge when purchasing residential property with a value of more than £500,000. These changes will take effect from 6 March 2024.

In relation to SDLT first-time buyers' relief, purchasers of new leases using nominee or bare trusts will be able claim the relief, but then cannot claim relief in the future in their own name.

The higher rate of capital gains tax on residential property is to be reduced from 28% to 24% with effect from 6 April 2024.

Indirect tax and duties

There will be an increase in the value-added tax (VAT) registration threshold for UK-established businesses from £85,000 to £90,000 per year with effect from 1 April 2024. The deregistration threshold will be increased from £83,000 to £88,000.

Updates to the Terminal Markets Order (TMO) legislation will be made, including allowing trades in carbon credits to be brought within the scope of the TMO. Legislation to support this will be in Spring Finance Bill 2024 and the consultation response will be published shortly.

In terms of the VAT Retail Export Scheme, where people may have been expecting an announcement, the Government will consider the findings of the Office for Budget Responsibility (OBR) alongside industry representations and broader data and welcomes any further submissions.

The Government will publish a consultation in April 2024 on the potential implications of recent court rulings for the private-hire vehicle market.

The Government reconfirmed that it would introduce a UK Carbon Border Adjustment Mechanism (CBAM) from 1 January 2027 that will apply to relevant goods imported in the aluminum, cement, ceramics, fertilizer, glass, hydrogen and iron and steel sectors. The details will be subject to public consultation later in 2024 (many had expected a definite date for the consultation, if not the consultation itself).

There will be a one-off increase in air passenger duty for non-economy flights. There will be no increase in fuel duty (including the extension of the current temporary 5p cut).

Alcohol duty will be frozen until February 2025. A new excise duty will be introduced on vaping products, alongside a one-off increase in tobacco duty. Registration for the duty will open on 1 April 2026 with the duty taking effect from 1 October 2026.

Tax administration

A UK Individual Savings Account (ISA) will be introduced after consultation as a £5,000 additional allowance to the existing ISAs allowances to allow investment in UK equities.

The Government also intends to bring forward requirements for Defined Contribution pension funds to publicly disclose the breakdown of their asset allocations, including UK equities, working closely with the Financial Conduct Authority (FCA) who share responsibility for setting requirements for the market. The FCA will consult in the spring. The Government will introduce equivalent requirements for Local Government Pension Scheme funds in England and Wales as early as April 2024. The Government will review what further action should be taken if this data does not demonstrate that UK equity allocations are increasing.

The sunset date for freeport special tax sites will be extended (via secondary legislation) to: 30 September 2031 for special tax sites in respect of English Freeports and 30 September 2034 for special tax sites in respect of Scottish Green Freeports and Welsh Freeports.

The Government also announced further details of six Investment Zones: Greater Manchester, Liverpool City Region, North East of England, South Yorkshire, West Midlands and Tees and how they will use the funding available to them (including by offering tax relief to attract businesses to these Zones).

The Government will bring forward a further set of tax administration and maintenance announcements on 18 April 2024. None of these announcements will require legislation in Spring Finance Bill 2024. This is likely to include the next steps for tackling noncompliance in the umbrella company market (umbrella companies being vehicles often used by agencies to pay non-permanent workers).