UK Tax Quarterly Update – February 2022

February 1, 2022

In this client alert, we outline a number of significant UK and international tax developments over the last few weeks and months, many of which will continue to take shape throughout 2022.

In the UK, domestic tax policy is likely to play as important a role as ever as the government continues to walk the tightrope to stimulate economic activity and investment while raising much-needed revenue. Forecasters have projected strong economic growth in 2022, but against a backdrop of record pandemic borrowing, a fall in tax revenues for 2020/2021, high inflation and expected interest rate hikes (which, of course, will exacerbate government borrowing costs). Many will wonder if the current administration will be able to keep all aspects of the “triple tax lock” promise of not raising income taxes, social security contributions or VAT until 2024 – already in relation to national insurance contributions, of course, which will start from April 2022 to increase by 1.25%.

In the international tax arena, 2022 promises to be a landmark year, perhaps a make or break year. The OECD’s BEPS 2.0 project is well underway, at least as far as Pillar II is concerned, for which model rules were published in a flurry of activities in December 2021. With a projected effective date of 2023, some degree of turbulence seems inevitable as numerous stakeholders are grappling with the finer details of local implementation before we even begin the interaction with US tax policy and to understand reform. Pillar I proposals, on the other hand, appear to be much less advanced and less certain of success so far, although model rules for national implementation are expected in early 2022.

In any event, we expect the UK government to continue to uphold the UK’s claim to be ‘open for business’, with significant action particularly in the wealth management and investment fund sectors aimed at enabling the UK to compete with other jurisdictions and strengthen the financial services component of the UK economy – as analyzed below.

We hope you find this warning useful. Please do not hesitate to contact us with any questions or requests for more information.

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Gibson Dunn’s attorneys are available to answer any questions you may have about these developments. For further information please contact the Gibson Dunn solicitor you normally work with, a member of the Tax Practice Group or the authors in London:

Sandy Bhogal (+44 (0) 20 7071 4266, [email protected])
Benjamin Fryer (+44 (0) 20 7071 4232, [email protected])
Bridget English (+44 (0)20 7071 4228, [email protected])
James Chandler (+44 (0) 20 7071 4211, [email protected])
William Inchbald (+44 (0) 20 7071 4264, [email protected])

© 2022 Gibson, Dunn & Crutcher LLP

Attorney Promotion: The attached materials have been prepared for general informational purposes only and are not intended as legal advice.

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