Finance Bill 2022-23: at a glance

Wednesday was Legislation Day 'L-day' when the government published some of the draft legislation and consultations that will form Finance Bill 2022-23. Key highlights include measures to relax the CGT rules for divorcing couples, and for LLPs and Scottish partnerships, the tax treatment of farmers' Lump Sum exit schemes, reforms to net pay pensions, tax relief on homes for Ukraine and changes to Research & Development relief.

Income Tax

Low earners anomaly: pensions relief relating to net pay arrangements

• From April 2024 HMRC will be able to make a top-up for payments to lower-paid taxpayers who are at a disadvantage under net-pay pension arrangements. 
• This is due to benefit approximately 1.2 million individuals, 75% of whom are women, who could benefit by an average of £53 a year.

See Top-ups for pensions net pay arrangements

Pension schemes: amendment to taxation of collective money purchase schemes

• This will allow members of the new collective money purchase pension scheme that are winding up to continue to be paid authorised pension payments, or transfer to another pension scheme and receive a drawdown pension.
• See HMRC Policy note

Tax Registration: landlords and the self employed

• Following a call for evidence, the government has decided not to move ahead with proposed changes to "Income Tax Self Assessment (ITSA) registration for the self-employed and landlords": making taxpayers register early for taxes is likely to cause more problems than it would solve.

See No early registration for the self-employed and landlords

Capital Gains Tax

Transfers of assets between spouses and civil partners in the process of separating

• A new policy paper, 'Capital Gains Tax: separation and divorce', proposes to extend the time limits for transferring assets at no-gain no loss between separating partners from one to three years, or, it will be unlimited if part of a formal divorce agreement.

See CGT: Divorce rules relaxed

Disposals of joint interests in land and private residences for limited liability partnerships and Scottish partnerships

• Existing legislation will be modified to ensure that the exchanges of joint interests in land rollover relief rules can apply where interests in land, or private residences, prior to an exchange of interests, are held by a Limited Liability Partnership (LLP) or a Scottish partnership.
• A policy paper, 'Capital Gains Tax: Allowing relief on disposals of joint interests in land and private residences for limited liability partnerships and Scottish partnerships'  proposes changes to ensure that these entities can claim the same reliefs as English partnerships.
• Draft legislation has been published and these measures should apply from Budget 2022.

See CGT reliefs extended to LLPs and Scottish Partnerships

Farmer's Lump Sum Exit Scheme: taxation of payments

• Payments under the Farmers' Lump Sum Exit Scheme (LSES) will be treated for tax as capital and not as income receipts.
• The LSES opened for applications in April 2022, the scheme aims to allow Basic Payment Scheme (BPS) applicants in England to leave farming, either to retire or take up a different occupation.

See Taxing the Farmers' Lump Sum Exit Scheme

Inheritance Tax

Pension assets: Dormant Assets Scheme

• New tax provisions for Income Tax and Inheritance Tax in connection with the Dormant Assets Scheme ensure that the act of reclaiming pension assets from the Reclaim Fund Ltd (RFL) are tax neutral for Income Tax purposes.
• This will provide pension institutions the confidence that they can return a reclaimed asset to a beneficiary as if it were the original pension.
• For Inheritance Tax purposes, this measure will ensure that the amount in RFL will be treated in the same way as the original asset in circumstances where the original owner is alive at the time of transfer but subsequently dies before the asset has been reclaimed.
• See HMRC policy & draft legislation

Corporation Tax

Research and Development (R&D) Tax Relief

• Planned reforms of R&D Tax Relief cover a wider range of expenditure, relief will also be restricted in part to focus more on rewarding UK expenditure.
• Expanding the categories of qualifying expenditure to include data licences and cloud computing. This reflects recent advances in technology and the way R&D is now undertaken.
• Pure mathematics will no longer be an excluded cost.
• When claiming for Sub-contracted work and Externally Provided Workers (EPWs), this will only be granted in future where the work is undertaken in the UK, subject to a limited number of exceptions.
• To tackle abuse, all claims in the future will need:
  • To be submitted digitally (unless exempt from online filing).
  • To have a pre-claim filed in advance, notifying HMRC that a claim will be made (unless a claim has already been made in one of the last three periods).
  • To include the details of any agents who have advised on the claim.
• A number of changes have been made to address anomalies and unintended consequences of the current legislation.
• See R&D Relief reform

Introduction of the new multinational top-up tax

• A new tax on UK parent members within a multinational enterprise group. A top-up tax will be charged on UK parent members when a subsidiary is located in a non-UK jurisdiction and the group’s profits arising in that jurisdiction are taxed at below the minimum rate of 15%.
• See HMRC policy paper & draft legislation

Amendments to the Qualifying Asset Holding Companies regime

• Proposed amendments to:
  • Allow an investment fund to be treated as meeting the diversity of ownership condition when it is closely associated with another investment fund that meets that condition.
  • Facilitate the entry into the Qualifying Asset Holding Companies regime of certain types of fund entity.
  • Extend the existing anti-fragmentation rule.
• See HMRC policy paper & draft legislation

New transfer pricing documentation requirements for UK businesses

• This measure sets out new transfer pricing documentation requirements for the largest UK businesses to retain, and produce upon request, a master file, local file and summary audit trail.
• See HMRC policy paper & draft legislation

Double Taxation Relief claims

• A measure is only relevant to foreign distributions received by UK companies before the introduction of distribution exemption in 2009. It comes into effect on 20 July 2022. The relevant legislation will be included in the 2022 Finance Bill and it prevents certain new claims to Double Taxation Relief when those claims only related to deemed amounts of foreign tax.
• See HMRC policy paper & draft legislation

Miscellaneous 

Digitalising Business Rates

• As part of its ongoing work on reforming business rates, the government has published a new consultation ‘Digitalising Business Rates: connecting business rates and tax data’. The aim is to join up tax and business rates data to improve compliance, better target policy, and enable businesses to better understand and review their tax liabilities by having them all in one place.
• The consultation follows the 2021 review and consultation both of which proposed Digitalising Business Rates (DBR), with funding being allocated to this in the March 2021 Budget.
• See Digitalising Business Rates

Soft Drinks Industry Levy: concentrates mixed with added sugar when dispensed

• The definition of a soft drink which is liable to the Soft Drinks Industry Levy is amended to include packaged concentrates which are mixed with sugar at the point the drink is dispensed from a fountain machine.
• The measure will take effect from 1 April 2023. Existing Soft Drinks Industry Levy rates and provisions will continue to apply.
• See HMRC policy paper & draft legislation

Homes for Ukraine Sponsorship Scheme: tax exemptions and reliefs

• HMRC has published a policy paper and draft legislation covering temporary reliefs from the Annual Tax on Enveloped Dwellings (ATED) charge, and the 15% Stamp Duty Land Tax (SDLT) rate, where a dwelling is made available under the Homes for Ukraine Sponsorship Scheme.
• This also tax-exempts the government 'thank-you' payments of £350 per month paid to those taking in refugees tax-free.
• See Homes for Ukraine Sponsorship Scheme: tax exemptions & reliefs

New tax checks for licence renewal applications in Scotland and Northern Ireland

• New tax checks for licence renewal applications in Scotland and Northern Ireland proposes that the existing tax checks for taxi and scrap metal licence renewal which apply in England and Wales will be extended to Scotland and Northern Ireland.
• See Tax conditionality extended to Scotland and Northern Ireland

Miscellaneous duties and taxes

These are not covered on this web service, see HMRC Finance Bill 2022-23 for more detail on:

• Air Passenger Duty: banding reforms.
• Insurance premium tax: Improving the administration and operation of Insurance Premium Tax.
• Aerodromes: customs approval requirements.
• Aggregates Levy: changes to exemptions.

Useful guides on this topic

Finance Act 2022 and beyond: rolling tax planner
This rolling planner tracks the key tax announcements that impact the 2022-23 tax year and beyond. This planner is updated on an ongoing basis.

External links

Finance Bill 2022-23 draft legislation and consultations