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The UK government is set to introduce a new tax designed to deter the monetisation of assets from critical public interest businesses to try and combat rising energy prices.
The proposed public interest business protection tax is being introduced in this year’s Finance Bill through government amendments at the report stage of its passage through Parliament. The tax is intended to be in place for only a year but may be extended to 2025.
The tax will be charged on profits that could arise where a business undertakes steps to realise a valuable asset for its own and its shareholders’ benefit, which as a result, precipitates or exacerbates the collapse of licensed gas and energy supplier businesses. It may be extended to other critical public interest businesses by future regulations.
To be subject to the tax, the following conditions apply:
This includes all forms of assets, including contractual rights, forward purchase agreements and derivative financial instruments. The tax is 75 per cent of the asset’s adjusted value. The adjusted value is the underlying value of the asset reduced by 10 per cent.
The new tax will only apply where the combined adjusted value of all the assets that are the subject of the steps, including those held by a connected person held in connection with the public interest business, exceeds £100 million (referred to in the legislation as the £100 million threshold condition).
The special measures referred to above are the special administration regime and the appointment of a supplier of last resort between 28 January 2022 and 27 January 2023.
The tax will apply to a principal taxpayer taking the steps referred to above. Companies that are associated with the principal taxpayer (at some point between the date of the first disqualifying step and the deadline for return relating to the tax) will be jointly and severally liable for the tax. Part 2 of the proposed new schedule to the Finance Bill provides more details on this, together with details of the circumstances in which other persons may also be liable for a proportion of the tax. For example, because they receive proceeds from the steps or because they hold an interest in the principal taxpayer.
The person with the principal tax liability must file a return including a Self Assessment and supporting documentation to HMRC within 30 days of whichever of the following comes later:
Royal Assent of FA 2022
Payment of the tax is due 15 days after the date by which the return must be filed. An administration framework for the new tax is set out in part 3 of the proposed new schedule, which includes the following details:
Part 4 sets out supplementary provisions, which include an anti-avoidance provision designed to counteract any arrangements with a main purpose of reducing or avoiding a charge to the tax. It also confirms that this tax cannot be taken as deduction for income tax, capital gains tax or corporation tax purposes.