With the latest developments in corporate tax enforcement, changes to R&D tax relief, and looming Capital Gains Tax reforms, this quarter has been anything but quiet for tax professionals. We’ve sifted through the most impactful updates from Q3 to ensure you’re equipped with the key insights to help steer your company’s tax strategy in the right direction.
TLDR: Throughout Q3 2024, speculation continued around potential Capital Gains Tax (CGT) reforms, with many predicting that rates could rise to align more closely with income tax. This is expected to form part of the government’s fiscal strategy, with details likely to be confirmed in the Autumn Budget.
Our POV: If these changes go ahead, individuals and companies with significant capital assets could face higher tax liabilities on disposals. To safeguard against this, tax professionals should consider strategies like crystallising gains now to lock in the current lower rates, utilising the annual CGT allowance, and exploring tax-efficient vehicles such as ISAs to manage potential liabilities.
Moving Forward: Now is the time to review your company’s capital assets and explore opportunities for strategic disposals or investments. Helping your organisation to take advantage of the current lower rates before any potential changes could provide significant savings in the long term. Consider restructuring assets where necessary to optimise future tax efficiency.
Source: HM Treasury, BBC News
TLDR: The UK reaffirmed its commitment to the OECD’s Pillar Two Global Minimum Tax (GMT) initiative, setting a 15% minimum tax rate on multinationals. The implementation is expected in early 2025, with significant discussions taking place during Q3 2024.
Our POV: For tax professionals working with multinational corporations, preparing for this global shift is essential. Now is the time to conduct thorough internal reviews of your company’s global tax structures and ensure compliance with the incoming regulations. Identifying areas of risk and realigning operations to comply with the GMT will help avoid penalties and optimise global tax positions.
Moving Forward: Begin working on cross-border tax strategies to manage your company’s exposure. Evaluating the impact of the GMT on your company’s overall tax burden and restructuring operations as needed can put your firm in the best position ahead of the 2025 deadline.
Source: OECD, HMRC
TLDR: During Q3 2024, HMRC intensified its focus on corporate tax compliance, deploying AI-powered tools to detect non-compliance. This has led to an increase in audits, particularly targeting firms with complex reporting structures or suspected underreporting.
Our POV: Tax professionals should take proactive steps to review their company’s tax filings to ensure they are fully compliant with HMRC’s regulations. AI detection tools mean that inconsistencies are more likely to be flagged, so accurate and timely reporting is more critical than ever.
Moving Forward: Ensure your corporation tax filings are up to date and fully transparent. Implement regular internal audits and automated checks to catch discrepancies before HMRC does. A focus on maintaining accuracy in tax reports can help your company avoid the costly penalties associated with non-compliance.
Source: HMRC, Financial Times
TLDR: Q3 saw further tightening of R&D tax relief compliance, with HMRC increasing scrutiny on claims, particularly those from SMEs. The number of rejected claims has risen significantly, underscoring the need for companies to provide robust documentation and clear evidence of innovation.
Our POV: Tax professionals must ensure that their company’s R&D claims are fully substantiated with accurate documentation. Failure to do so could result in the rejection of claims, impacting cash flow and financial forecasts. The onus is on ensuring that claims align with HMRC’s definitions of qualifying activities and expenditure.
Moving Forward: Conduct a full review of your company’s R&D projects and claims before submission. Strengthen your documentation processes to ensure that all claims are well supported. Tax professionals can play a critical role in helping their company access the full benefits of R&D tax credits while staying compliant.
Source: KPMG, Deloitte
By staying ahead of these developments and taking a proactive approach to tax planning, you can help your company navigate the evolving tax landscape and capitalise on available opportunities.
