HM Treasury: Autumn Budget 2024

On 30 October 2024, the Chancellor of the Exchequer delivered the Autumn Budget 2024. In the run up to the Budget the overwhelming call from business was for certainty and stability to enable long-term strategic decisions to be made and investment confidence to build. The key question for business now as it works through the Budget measures is whether this has been achieved and whether the UK is now a more or less attractive place to do business. Our Tax Team considers that question.

Coming into the Budget the Chancellor had little room for manoeuvre as she had committed not to raise income tax, VAT, the main rate of corporation tax or employee NICs. It is therefore not surprising that she has focussed her fire where she did.

Given the need for the UK to remain attractive for international business, the Chancellor’s publication of a Corporate Tax Road Map setting out her plans is to be welcomed. In it, she confirmed both that the main rate of corporation tax is to stay at 25 per cent, and that she did not expect to make major structural changes to the taxation of companies subject to UK tax.

The one major change that will affect businesses is the increase in employers’ National Insurance contributions which will increase from 13.8 per cent to 15 per cent for the 2025/26 tax year.

That left the primary focus of the Budget to be how individuals are taxed. Top of the list of areas open for change was capital gains tax. Whilst historically often lower than income tax rates due to the operation of reliefs such as taper relief and indexation relief, the significant divergence in capital gains and income tax rates has become more pronounced since 2008. The change in the capital gains tax rate for higher rate taxpayers from 20% to 24% aligns capital gains tax on share disposals with disposals of residential property which remain at 24%. The change has immediate effect for disposals made on or after 30 October 2024, including some disposals that had been unconditionally agreed (but not completed) before that date. Whilst the increase is not as high as many feared, the blunt rate change without any tapering or reduced rate for assets held longer term will be viewed as unfair by some as it means the taxation system takes no account of the effect of inflation on asset values.

This rate differential is made greater by reliefs such as Business Asset Disposal Relief (BADR) aimed at fostering entrepreneurial activity and investment in owner managed businesses. BADR has been a valuable relief. It currently applies a 10% rate on capital gains up to a lifetime limit of £1 million provided a person owns a 5% interest for at least two years prior to disposal and is an employee or officer of the company. The BADR rate will rise to 14% for disposals made on or after 5 April 2025 and to 18% for disposals made on or after 6 April 2026.

A further announcement for capital gains tax was the increase of capital gains tax rates on carried interest to 32% from April 2025. Further reforms are then planned to be effective from April 2026 with the intention of bringing carried interest into the charge to income tax.

Proposals for changes to the taxation of non-UK domiciled individuals were announced by the Conservative government at Spring Budget earlier this year. The current Labour government confirmed that it would continue with the proposal to abolish non-domicile status for income and capital purposes with effect from 6 April 2025 and published a policy paper setting out those areas of the original proposals it would change.

We now have their firm proposal. The new regime will provide 100% relief for the first four years for new arrivals to the UK provided they have not been UK tax resident at any point in the 10 years up to their arrival. The temporary repatriation facility, enabling foreign income and gains (FIG) earned personally to be remitted at a reduced rate, will be available for three years from 2025, with a rate of 12% for the first two years and 15% for the final tax year. Rebasing of foreign assets for individuals who are or have been remittance basis taxpayers will be to April 2017 with an option to elect out of rebasing. Less welcome will be the fact that UK inheritance tax will continue to apply for a number of years after a person has ceased to be UK resident; how long depends on the previous period of non-residence.

A number of changes to pensions legislation were announced in the Budget, although neither the limiting of tax-free lump sums nor the reduction of pension tax relief on contributions materialised.

The principal change for defined contribution pensions savers is that with effect from April 2027, unused pension pots will be brought into scope for inheritance tax purposes. In perhaps a surprise move, it is proposed that lump sums payable on death from DB schemes will also be caught, whether or not paid at the discretion of trustees, bringing these benefits more in line with the treatment of public sector schemes. The IHT threshold remains fixed at £325,000 (and £500,000 for those leaving their private residence to a direct heir). This will mean that many more estates are likely to be subject to IHT in future. 

A twelve-week consultation will run to 22 January 2025.

See also Tax insights | United Kingdom | Global law firm | Norton Rose Fulbright

(HM Treasury, Autumn Budget 2024, 30.10.2024) 

DBT: The Unique Identifiers (Application of Company Law) Regulations 2024 – Draft

On 31 October 2024, the draft Unique Identifiers (Application of Company Law) Regulations 2024 were laid before Parliament, together with a draft Explanatory Memorandum. 

The Economic Crime and Corporate Transparency Act 2023 (ECCTA) has amended section 1082 Companies Act 2006 (CA 2006) and the Secretary of State may make regulations about the allocation of unique identifiers (UIDs) to individuals who have verified their identity with the Registrar of Companies (Registrar), and to those who have registered as an Authorised Corporate Service Provider (ACSP). 

In May 2024, the Department for Business and Trade (DBT) laid in Parliament the draft of the Registrar (Identity Verification and Authorised Corporate Service Providers) Regulations 2024 (IDV Regulations), Part 4 of which exercises these powers. See further here.

The IDV Regulations, under section 1082 CA 2006, will enable allocation of UIDs to individuals associated with companies formed under the CA 2006, but not others (for example limited partnerships (LPs) or limited liability partnerships (LLPs)). These draft regulations will fill this gap and give the Registrar powers to allocate UIDs to individuals associated with entities other than companies formed under the CA 2006.

Once the IDV Regulations and these draft regulations are made, the Registrar will have powers to allocate one UID for each verified individual for all uses related to all relevant business entities, records of which the Registrar maintains. It will allow the Registrar to link the records of verified individuals holding multiple roles in different business entities (companies, LPs, LLPs).

The draft regulations will come into force when section 68 ECCTA (allocation of unique identifiers) which introduces section 1082 into the CA 2006 comes fully into force.

(DBT: The Unique Identifiers (Application of Company Law) Regulations 2024 – Draft, 31.10.2024)

(DBT, Explanatory Memorandum, The Unique Identifiers (Application of Company Law) Regulations 2024 – Draft, 31.10.2024)

DBT: The Companies and Limited Liability Partnerships (Protection and Disclosure of Information and Consequential Amendments) Regulations 2024 - Draft

On 31 October 2024, the draft Companies and Limited Liability Partnerships (Protection and Disclosure of Information and Consequential Amendments) Regulations 2024 were laid before Parliament, together with a draft Explanatory Memorandum. These replace an earlier draft published in May 2024.

These draft regulations will widen the range of circumstances in which individuals may apply to the Registrar of Companies (Registrar) to protect their usual residential address (URA and the home address where an individual usually lives) where it appears on the register at Companies House. 

Currently, a URA can be protected in a limited range of circumstances, as set out under regulation 9(1) Companies (Disclosure of Address) Regulations 2009. Individuals can apply to protect their URA where it was placed on the register under certain provisions in the individual’s capacity as, among other things, a director, member, or person with significant control of a company. However, individuals cannot currently apply to protect their URA where it is currently or was formerly used as a company’s registered office address (ROA). 

These draft regulations, when in force, will mean that an individual can also apply to protect a URA where it was previously used as a company’s ROA. However, individuals will still not be able to apply to protect a URA that is a company’s current ROA, to ensure that companies have a visible ROA on the register.

However, the draft regulations will allow the Registrar to disclose a protected address that was used as a ROA by a dissolved company at the point of its dissolution to a person who is permitted under section 1029 Companies Act 2006 to apply to the court to restore a dissolved company to the register. Such persons need the protected address to complete a court form needed in a restoration application. 

In addition, the draft regulations make some amendments to company law provisions as applied to limited liability partnerships (LLPs), including to apply the new provisions relating to protection of URAs to LLPs with modifications. The draft regulations also make some amendments to company law as applied to LLPs that are consequential on the reform of certain company law provisions by the Economic Crime and Corporate Transparency Act 2023. These amendments will ensure the framework for LLPs keeps in step with that for companies.

These draft regulations are due to come into force on 27 January 2025.

(DBT, The Companies and Limited Liability Partnerships (Protection and Disclosure of Information and Consequential Amendments) Regulations 2024 - Draft, 31.10.2024)

(DBT, Explanatory Memorandum, The Companies and Limited Liability Partnerships (Protection and Disclosure of Information and Consequential Amendments) Regulations 2024 - Draft, 31.10.2024)

TNFD: Discussion paper on nature transition plans

On 27 October 2024, The Taskforce on Nature-related Financial Disclosures (TNFD) published a discussion paper setting out draft guidance on nature transition planning for companies and financial institutions developing and disclosing a transition plan in line with the TNFD recommended disclosures and guidance published in September 2023.

A nature transition plan, as defined in the discussion paper, sets out an organisation’s goals, targets, actions, accountability mechanisms and intended resources to respond and contribute to the transition sought by the Kunming-Montreal Global Biodiversity Framework (GBF). The GBF seeks to halt and reverse biodiversity loss by 2030, moving towards a 2050 vision of a world living in harmony with nature.  

In developing this draft guidance, the TNFD has built on current market practice for climate transition planning, particularly on the work of the Glasgow Financial Alliance for Net Zero (GFANZ) and on the recommendations of the Transition Plan Taskforce (TPT) for climate transition plan disclosure. It covers  all aspects of nature apart from climate change and greenhouse gas emissions as drivers of nature loss, and natural carbon stocks. 

Key focus areas are as follows:

• A definition of a nature transition plan.
• An overview of related initiatives.
• Guidance on what a nature transition plan should include.
• Guidance on how a plan should be presented and disclosed.
• Areas of further work needed to support development and assessment of nature transition plans.

Key outcomes are intended to be as follows: 

• Inform the development of TNFD guidance on the content and disclosure of nature transition plans.
• Stimulate further work and collaboration to support nature transition plans including on transition pathways and transition finance categories.
• Encourage organisations to pilot test the TNFD draft guidance.

The TNFD has asked for feedback on the approach outlined in the discussion paper by 1 February 2025. Based on the feedback received through the consultation, and insights gained through potential pilot testing, the TNFD plans to develop final TNFD guidance on nature transition plans that will be published in 2025. Businesses and financial institutions are encouraged to pilot test the draft guidance set out in the discussion paper.

(TNFD, Discussion paper on nature transition plans, 27.10.2024) 

(TNFD publishes draft guidance on nature transition planning at COP16, 27.10.2024)