September 2022

Last week, the Bank of England (BOE) raised interest rates to 2.25%, the highest level since 2008. They believe the UK economy has shrunk by 0.1% between July and September and, for the seventh time in a row, has made the increase to interest rates in an attempt to halt soaring prices. Inflation is at its highest since the 1980s and prices are expected to rise further in October, with inflation peaking at just under 11%.

We will have more insight in November when the BOE will work out the effect of the government’s recent interventions to bring down inflation and ease the cost-of-living crisis, albeit with vastly increased borrowing.

On Friday the Chancellor Kwasi Kwarteng announced a series of “growth” measures that the government thinks will help businesses and households get through this winter and beyond.

The chancellor announced:

• The 1.25% percentage point rise in National Insurance contributions will be reversed from 6 November 2022 and the government will not go ahead with the planned April 2023 levy to fund health and social care.
• The planned increase in corporation tax from 1 April 2023 will not happen and it will remain at 19%, irrespective of the level of company profits.
• The basic rate of income tax will be cut from 20% to 19% from April 2023.
• Dividend tax rates will reduce by 1.25 percentage points from April 2023.
• The 45% and 39.35% ‘additional rates’ of income tax that apply to income over £150,000 will be abolished from 6 April 2023.
• The annual investment allowance, allowing 100% tax relief on certain capital expenditure including computer equipment and vans, will remain at £1million beyond April 2023, when a reduction had been planned.

• From April 2023, workers providing services via an intermediary will once again be responsible for determining their employment status and paying the correct amount of tax and National Insurance contributions under the IR35 rules. The complex ‘off-payroll’ working rules for larger employers will be repealed.
• New ‘Investment Zones’ are to be established across England, with the Government currently in discussions with 38 local authorities. Within each Zone there will be targeted and time limited tax cuts for businesses on offer. The 38 local authorities taking part in discussions can be viewed here.
• A possible future extension to the tax-advantaged Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT). In relation to the Seed Enterprise Investment Scheme (SEIS), there will be a widening of the criteria, allowing companies to raise £250,000 under the scheme, 66% more funding than previously.
• Enhancements to the tax advantaged Company Share Option Plan (CSOP) scheme. The maximum employee share option limit will be increased from £30,000 to £60,000 for any new options granted from 6 April 2023. There will also be increased flexibility for share options granted from 6 April 2023 due to a removal of conditions around the class of shares used.
• Modifications will be made to the Universal Credit regime, to support claimants to secure more or better paid work.
• Stamp Duty Land Tax (SDLT) in England and Northern Ireland has been permanently cut from 23 September 2022. The cut is delivered by an increase in the threshold before SDLT is payable from £125,000 to £250,000. First time buyers currently pay no stamp duty on the first £300,000 and that will be raised to £425,000. The revised rates table can be viewed here.
• VAT-free shopping for overseas visitors is to be introduced as soon as possible.
• A package of measures to help households and businesses with energy bills.

Tax-free Childcare Accounts will gradually replace Childcare Voucher schemes as no new schemes could be set up after 4 October 2018. Those within voucher schemes continue to be eligible until their child is aged 16, provided the employer is willing to continue operating the scheme. Many organisations provided the vouchers by way of salary sacrifice and there were tax and NIC advantages. However, with many employees working from home during the pandemic and the move to hybrid working many families found that they were not using all of their vouchers and chose to leave the scheme.

Note that the two schemes are mutually exclusive, and employers must stop giving their employees childcare vouchers with income tax and NIC relief if the employee informs them that they’ve started using the Tax-Free Childcare scheme.

The employer may need to stop or change the employee’s salary sacrifice arrangement and must also update the employee’s contract and their payroll software.

In recent years, Parliament has taken a series of steps to create more transparency around the beneficial ownership of UK property. The most recent development is the introduction of the Economic Crime (Transparency and Enforcement) Act 2022 (ECTE Act), which received Royal Assent on 15 March 2022. The Register of Overseas Entities (“ROE”) has been introduced under the new Act and came into effect on 1 August 2022.

The ROE requires overseas entities who want to buy, sell or transfer land or property  in the UK to register with Companies House and provide details of beneficial owners and managing officers. It also applies retrospectively to entities who bought land or property on or after:

• 1 January 1999 in England and Wales
• 8 December 2014 in Scotland
• 1 August 2022 in Northern Ireland

Entities that disposed of UK land or property after 28 February 2022 will also need to register.

The deadline to register details of beneficial ownership of the overseas entity is 31 January 2023. Further information on what needs to be registered and how you register can be found as follows - Register an overseas entity and tell us about its beneficial owners.

Please note that failure to register by 31 January 2023 will be considered a criminal offence and could result in daily penalties of up to £2,500 a day and/or imprisonment. It may also prevent you from selling UK land or property as the UK Land Registry will require a unique Overseas Entity ID which will be issued once registered on the ROE.

Once registered on the ROE, the entity will be required to report any changes or confirm there have not been any within 14 days on the anniversary of the date of registration each year.

We will contact any clients we believe will be required to comply with the ROE to discuss your obligations. If you are an existing client with an interest in UK land or property via an overseas entity for whom we do not currently act for, we would advise you speak to your legal adviser to obtain further guidance.