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Finance Bill 21/22: the implications for corporate taxpayers

The Finance Bill 2021-2022 was published yesterday - the draft legislation is available here. The Bill includes the following changes, most of which have already been the subject of detailed consultation, that may be of interest to corporate taxpayers.

Qualifying asset holding companies

Following detailed consultation, draft legislation has been published for a new regime for the taxation of qualifying asset holding companies (i.e. companies used to hold investment assets by collective investment vehicles). 

The aim of the new regime is to make the UK a more competitive jurisdiction for fund domicile and to address a number of difficulties that have been identified with the use of UK companies as asset holding companies.  However, the legislation is detailed and naturally detailed conditions must be met to access the treatment.

Companies that meet the conditions will qualify for a number of exemptions from UK corporation tax in respect of their qualifying business (which is ring-fenced) and will also be able to access a number of relaxations to the tax treatment of interest expense in respect of that business.  The intention is for investors to be taxed as if they had invested directly in the underlying assets.

It will apply broadly where a UK resident intermediate holding company holds underlying assets for investors but does not trade, with eligibility conditions based on ownership (by institutional investors or diversely owned funds) and activity.  

Real estate investment trusts (REITs)

The REIT regime, which allows investors to invest in real estate through a company with tax privileged status has grown in popularity in recent years.  As of June 2021 there were 92 REITs, with many new REITs being smaller and having a more limited investor base than previously was the case.

As part of the asset holding company consultation a number of relaxations to the REIT regime were proposed.  The REIT rules are now being amended to remove unnecessary constraints, which could further increase their popularity with investors (and in particular institutional investors).

The proposed changes include:

  • removing the requirement for a REIT to be listed on a recognised stock exchange if it is owned 99% or more by Institutional Investors (e.g. charities and non-UK REIT equivalents);
  • relaxes the definition of an overseas equivalent of a UK REIT so that it is more widely drawn; and
  • introducing a simplified “balance of business” test which will be administratively easier; and
  • abolishing the “holders of excessive rights” tax charge (which is payable by the REIT in certain circumstances if a payment is made to a corporate shareholder owning 10% or more) in respect of distributions made by the REIT to a shareholder in respect of which the REIT would not be required to withhold tax (e.g. UK companies and charities).
Notification of uncertain tax treatment

Large businesses will be subject to a new compliance requirement for returns due to be filed on or after 1 April 2022.  Returns relating to corporation tax, income tax and VAT are within scope.

Companies, partnerships or groups with UK turnover of over £200 million and/or UK balance sheet assets of £2 billion or more will be required to notify HMRC of any tax positions that are “uncertain”. 

A tax position is uncertain if there is a provision in the accounts recognising that a different tax treatment may apply, the taxpayer has taken a different interpretation of the law than HMRC are known to take (e.g. in their published guidance), or there is a substantial possibility that a court or tribunal would find that the tax treatment is incorrect in one or more material respects.

Tax avoidance

HMRC’s powers to tackle tax avoidance are further expanded in the new Bill. HMRC will be entitled to publish details of tax avoidance schemes and their promoters. A new penalty payable by UK entities that facilitate tax avoidance schemes for offshore promoters is introduced. HMRC will have new powers to call for the winding up of companies involved in the promotion, management and facilitation of tax avoidance.


Following on from the changes made in Finance Act 2021, a technical change is being made to the hybrid and other mismatches rules.  The intention of the changes is to ensure that non-UK transparent entities are taxed in the same way as partnerships.

A change will be made to Structure and Building Allowance statements to ensure that the date that expenditure qualifying for SBAs is incurred is shown on the statement, where this falls after the date that the new building is brought into use.

For more information on any of the above changes please contact Helen Coward.

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