The UK government today proposed additional tax legislation for Finance Bill 2021 and launched a public consultation on the proposals. The consultation runs through January 7.
Today’s release includes proposed amendments to the hybrid mismatch regime applicable to multinational groups and a proposed new cap on research and development (R&D) tax relief.
The hybrid mismatch proposal is comprised of a series of technical changes to the hybrid mismatch legislation designed to ensure that the law operates proportionately and as intended, HM Revenue & Customs said.
The need for these changes was identified in an earlier public consultation, HMRC said.
The R&D tax credit proposal aims to prevent abuse of the credit by small and medium-sized businesses by capping the annual deduction. The UK government previously consulted on this proposal.
The measure limits the amount of payable R&D tax credit which a small and medium-sized entity can claim to £20,000 plus 300% of its total Pay as you Earn (PAYE) and National Insurance Contributions liability for the period.
A company is exempt from the cap if its employees are creating, preparing to create, or managing intellectual property and less than 15% of its R&D qualifying expenditure is spent with connected persons.
Legislative changes were also proposed to the leasing provisions to change the statutory language in three instances. Language referring to the ‘relevant LIBOR rate’ will be substituted with the ‘incremental borrowing rate.’ These changes reflect the withdrawal of LIBOR as a benchmark rate.
The UK also proposed a new plastic packaging tax and proposed legislative changes to tackle Construction Industry Scheme abuse.
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