• news-banner

    Expert Insights

Some key takeaways from the draft legislation for Finance Bill 2022-23

In July 2022, the government published draft legislation ahead of potential inclusion in Finance Bill 2022-23.  A number of these measures will impact on the life sciences sector, including in particular R&D tax relief reform, draft legislation for the implementation of the OECD Pillar 2 reforms in the UK and a new requirement relating to transfer pricing documentation.  Some of the most important aspects of the changes are briefly explained below.

Research and development

The UK research and development (R&D) tax regime enables sectors such as life sciences to thrive and provides an important incentive to businesses to invest in research and development.

At Budget 2021, the government announced a number of measures that will take effect for accounting periods commencing on or after 1 April 2023 in respect of R&D tax relief.  Draft legislation was published on 20 July 2022 and life sciences businesses should ensure that they understand the implications for them.

One of the most important changes is the focusing of R&D relief for subcontracted work and the cost of externally provided workers to activity in the UK.  The expenditure must now be UK or qualifying overseas expenditure in order to be eligible for relief.  This means expenditure that is attributable to relevant R&D undertaken in the UK or that certain conditions are necessary for the purposes of the R&D that are not present in the UK and which it would be wholly unreasonable for the company to replicate in the UK.  This exception is very narrowly drawn, and a number of businesses are likely to be affected by this change.

The process for making claims will also be changing.  All claims will in the future be required to be made digitally and those claims will be required to provide a breakdown of the expenditure into various categories.  The claim will need to be endorsed by a senior officer.  Claimants will also be required to notify HMRC at least six months prior to the end of the period to which the claim relates that they intend to claim, unless they have claimed in one of the three preceding accounting periods.  Life sciences businesses should ensure they adjust their administrative systems well in advance of the changes coming into effect.

There are a number of other changes, including in relation to time limits and providing a smoother transition for companies moving from the SME scheme to the research and development expenditure credit scheme for larger groups.

OECD reforms

Pillar 2

This measure implements a new tax on UK parents of large multinational groups.  It will impact groups with UK activities where in at least two of the previous four accounting periods, annual global revenues of the group were in excess of EUR 750 million. 

Where the parent entity of the group is in the UK, it will be liable for additional tax where any non-UK members in the group do not bear tax on their profits at a rate of at least 15%.  Complex provisions apply to the computation of profits and losses and the effective tax rate.

Transfer pricing documentation

Draft legislation has also been published relating to the transfer pricing documentation requirements applicable to large multinational groups, following earlier consultation.  The new requirements will provide for master file, local file and summary audit trail questionnaire documents to be kept.  The master file will contain information relating to all of the group members and the local file will relate to transactions for the local taxpayer.  The summary audit trail will require the group to complete a questionnaire in respect of the preparation of the local file document.

For more information on the above please contact Helen Coward or your usual Charles Russell Speechlys contact.

Our thinking

  • IBA Annual Conference 2025

    Simon Ridpath

    Events

  • Alumni Drinks Reception

    Events

  • London International Disputes Week: Trusts hurt: the fraud lawyer, the trust, and the avenues of attack (and defence)

    Tamasin Perkins

    Events

  • London International Disputes Week: Navigating International M&A Disputes: Insights and Strategies for 2025

    Stephen Burns

    Events

  • The UK’s immigration white paper – what does it mean for British Nationals (Overseas)?

    Owen Chan

    Quick Reads

  • Directors’ Disqualification Under the Company Directors Disqualification Act 1986: What UK Directors Need to Know

    Claudine Morgan

    Insights

  • The Financial Times quotes Catrin Harrison on IHT Budget changes and the impact on wealthy UK expats

    Catrin Harrison

    In the Press

  • Property Patter: Applications to discharge or modify restrictions

    Emma Humphreys

    Podcasts

  • Should access be given between exchange and completion?

    Twiggy Ho

    Insights

  • What next for the hydrogen sector?

    Rachael Davidson

    Quick Reads

  • Covenant modified by Tribunal to allow office redevelopment in accordance with planning permission

    Georgina Muskett

    Insights

  • Thomas Snider and Adrian Mayer write for African Law & Business on rising levels of private investment between the UAE and Africa

    Adrian Mayer

    In the Press

  • Charles Russell Speechlys advises Country Court Care on its acquisition of assets from Retirement Villages Group

    Mark White

    News

  • Governance & Succession for Family-Owned Businesses

    Hamish Perry

    Insights

  • The Telegraph quotes Tamasin Perkins on the Law Commission’s recent report: Modernising Wills Law

    Tamasin Perkins

    In the Press

  • Maximising flexibility through subletting – key considerations for office occupiers

    Pippa Clifford

    Insights

  • People Management quotes Owen Chan on the UK government's plans to raise English language requirements on migrants

    Owen Chan

    In the Press

  • The Law Commission: Modernising Wills Law Report - a disputes perspective

    Lydia Kember

    Quick Reads

  • Retrospectively changing Indefinite Leave to Remain rules for those currently on the 5 year route to a 10 year route is unlawful and unfair

    Paul McCarthy

    Quick Reads

  • World Intellectual Property Review quotes Olivia Gray on the post-Brexit treatment of design rights

    Olivia Gray

    In the Press

Back to top