Q4 2024 UK Tax Policy Updates

The final quarter of 2024 brought significant developments in UK tax policy, impacting corporate tax enforcement, R&D tax relief, and Capital Gains Tax (CGT). Below is a summary of the key updates and their implications:

Capital Gains Tax (CGT) Reforms

• Key Changes: Effective from October 30, 2024, CGT rates increased from 10% to 18% for basic rate taxpayers and from 20% to 24% for higher rate taxpayers. Rates for Business Asset Disposal Relief (BADR) will increase further in April 2025 and April 2026.
• Implications: Individuals and businesses with significant capital assets face higher tax liabilities on disposals. Anti-forestalling rules have been introduced to prevent tax avoidance through timing strategies.

OECD Pillar Two Global Minimum Tax (GMT)

• Key Developments: The UK reaffirmed its commitment to the OECD’s GMT initiative, setting a 15% minimum corporate tax rate for multinationals. Implementation is expected in early 2025.
• Implications: Multinational corporations must reassess global tax structures to ensure compliance and mitigate risks.

Increased HMRC Corporation Tax Enforcement

• Key Changes: HMRC intensified its focus on corporate tax compliance by deploying AI-powered tools to detect non-compliance. This has led to a rise in audits targeting complex reporting structures.
• Implications: Companies with discrepancies in filings face higher risks of penalties.

R&D Tax Relief Compliance Tightening

• Key Changes: HMRC increased scrutiny on R&D claims, particularly those from SMEs, leading to a higher rejection rate of claims.
• Implications: Stricter documentation requirements mean companies must provide robust evidence of qualifying activities to secure relief.

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