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Slew of tax announcements from Treasury

13 November: The Treasury has published a series of tax announcements on issues ranging from the plastic packaging tax to the implications of withdrawing LIBOR. ICAEW’s Tax Faculty provides a summary.

In a written statement to the House of Commons, the Financial Secretary to the Treasury made a string of tax policy announcements on 12 November, covering:

Hybrid and other mismatches

HMRC has published amendments to the hybrid and other mismatches regime for corporation tax following a consultation announced in the Spring Budget 2020.

The regime implemented the OECD Base Erosion and Profit Shifting (BEPS) Action 2 recommendations and the changes aim to ensure that it operates “proportionately and as intended”.

Technical changes include amending the definitions of “dual inclusion income” and “acting together”. Some of the changes apply retrospectively from 1 January 2017 (when the regime first came into force). Others will have effect from Royal Assent of the Finance Bill 2021. Read a full list of the amendments.

Plastic packaging tax

HMRC has published the details of a new tax on plastic packaging produced or imported into the UK that does not contain at least 30% recycled plastic.

The new tax will come into effect from April 2022 at a rate of £200 per tonne of packaging and there will be a registration threshold of 10 tonnes of plastic packaging. Find out more.

Soft Drinks Industry Levy – milk review

In light of data from Public Health England showing progress in the reduction of sugar in milk-based drinks, the government has confirmed it will not review whether to extend the Soft Drinks Industry Levy (SDIL) to sugary milk and milk-substitute drinks until 2022. More information on SDIL.

Tax implications of the withdrawal of the LIBOR

HMRC has confirmed details of changes to tax legislation to remove reference to the London Inter-Bank Offered Rate (LIBOR). There are three references to LIBOR in tax legislation related to leases within the Capital Allowances Act 2001 (s700 and s228MB) and the Corporation Tax Act 2010 (s437C). From the date on which Finance Bill 2021 receives Royal Assent, the legislation will instead refer to the “incremental borrowing rate”. Find out more.

Tobacco duty uprating

The Treasury is increasing duty rates on all tobacco products with additional rises for hand rolling tobacco (HRT) and the Minimum Excise Tax (MET). All tobacco products will increase by RPI +2% in line with the existing escalator, while HRT will increase by RPI +6% and MET by RPI +4%. The changes will take effect on 16 November.

Van vehicle excise duty

In light of the impact of the coronavirus pandemic the government has decided it will not introduce a new graduated system of vehicle excise duty for light goods vehicles or motorhomes as planned in April 2021. Motorhomes will remain in the private/light goods class.