The Government are committed to addressing unfairness in the tax system and raising revenue for public services by closing loopholes and tackling tax avoidance.
The Government are setting out next steps on their priority tax commitments to allow for technical consultation and provide taxpayers with certainty ahead of their final confirmation at Budget.
The Government are also publishing draft legislation on certain measures ahead of potential inclusion in the next Finance Bill to seek stakeholder views at this stage.
Tax announcements and associated documents
VAT and business rates on private schools: The Government are publishing a technical note setting out their plan to introduce 20% VAT on education and boarding services provided for a charge by private schools across the UK, from 1 January 2025. 20% VAT will also apply to prepayments of fees for terms starting on or after 1 January 2025, made on or after 29 July 2024. These changes will not impact pupils with the most acute special educational needs, where their needs can only be met in private schools.
In addition, the technical note confirms that the Government will remove private schools’ eligibility for charitable rates relief under business rates in England. However, the Government will consider how to address the potential impact of these changes in cases where private school provision has been specified for pupils through an education, health and care plan. The Government will engage with schools before setting out a final proposal in due course. This is intended to take effect from April 2025, subject to parliamentary passage.
The Government are also publishing draft VAT legislation. The legislation will be accompanied by an explanatory note (EN). A technical consultation on the legislation and technical note will run from 29 July 2024 until 15 September 2024.
Abolishing the tax regime for non-UK domiciled individuals: The Government are publishing a policy note setting out their plan to remove the concept of domicile status from the tax system, and to implement a new residence-based regime. This reform will end the use of offshore trusts to keep assets outside the scope of inheritance tax and scrap the 50% foreign income discount in the first year of the new regime. Full details of this reform will be provided at the Budget.
Taking action against the carried interest loophole: The Government are publishing a call for evidence confirming their intention to take action against the carried interest loophole, and to form the basis for detailed engagement with expert stakeholders.
Energy Profits Levy reform: The Government are publishing a policy document that confirms their intention to increase the rate of the energy profits levy (EPL) to 38% from 1 November 2024, and extend that levy from March 2029 to March 2030. The energy security investment mechanism will remain, helping to provide operators and their investors with confidence the levy will no longer apply if prices fall to, or below, historically normal levels for a sustained period.
The Government will also remove unjustifiably generous investment allowances from the EPL, including by abolishing the levy’s core investment allowance. Further details on the Government’s approach to all allowances in the EPL will be set out at the Budget.
The Government recognise the importance of providing the oil and gas industry with long-term certainty on taxation after a period of change. The Government will therefore set out a way of working with the industry and others to develop an approach for responding to price shocks after the EPL ceases.
Tackling the tax gap: The Government will take a comprehensive approach to tackling the tax gap and making sure more of the tax revenues that are owed are correctly paid.
The Government will invest in HMRC’s compliance work, hiring around 5,000 additional staff to recover more tax revenues. HMRC has already started the process of recruiting additional staff into compliance roles. The Government will also invest in HMRC’s technology infrastructure, helping to make HMRC more efficient and improve taxpayers’ experience of interacting with HMRC.
The Government will reform the tax system by making policy changes to simplify tax, close loopholes and reduce non-compliance, designing out non-compliance before it happens. At the Budget, the Government will provide an update on the implementation and development of measures that form their plan to close the tax gap.
Abolishing the Furnished Holiday Lettings tax regime: The Government are publishing draft legislation to abolish the furnished holiday lettings tax regime from April 2025. This will remove the tax advantages that landlords offering short-term holiday lets have over those providing standard residential properties. The legislation also contains information about the transitional arrangements that will apply.
OECD Pillar 2: The Government are publishing draft legislation to translate an internationally agreed anti-avoidance rule into UK legislation. The draft legislation stops attempts by multinational enterprises to avoid pillar 2 top-up tax by exploiting a temporary simplification in the rules. The legislation will apply from 14 March 2024 and will prevent multinational enterprises that enter into certain avoidance transactions from accessing the simplification.
In addition, to provide certainty for affected businesses, the Government are confirming that the UK will introduce the undertaxed profits rule (UTPR) of pillar 2 for accounting periods beginning on or after 31 December 2024, and will continue efforts to ensure the UK rules are effective and up to date.
The draft legislation on abolishing the furnished holiday lettings tax regime and OECD pillar 2 legislation is accompanied by a tax information and impact note (TIIN) and an explanatory note.
All publications can be found on the gov.uk website.
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