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UK Tax Administration and Maintenance Day 2023 – Key Tax Consultations

On 27 April 2023, the UK government announced the administrative companion piece to the Budget announced earlier this year, which includes 23 technical tax policy proposals (although some are merely announcements of future public consultations). This package aims to support the UK government’s ambition to simplify and modernise the tax system and tackle what the UK government describes as the “tax gap”. None of the measures announced in this package are to be included in the Spring Finance Bill 2023.

In this article, we have outlined the key tax proposals that we expect to be of interest to Cadwalader’s clients and friends.

Stamp taxes modernisation

Currently there are two stamp taxes in the UK, being, broadly speaking, stamp duty for paper instruments and stamp duty reserve tax (“SDRT”) for electronic transfers. Unlike SDRT, stamp duty is not self-assessed; there is no legal obligation for anyone to pay stamp duty, with payment of stamp duty being incentivised through placing legal obligations and consequences on company registrars and by not allowing instruments that are not “duly stamped” to be used as evidence in UK civil courts. Unlike SDRT, the geographical scope for stamp duty can be described as difficult to interpret.

The UK government is now consulting on:

  • whether to have a single tax on securities rather than the current framework of both stamp duty and SDRT;
  • proposals for the assessment and administration of any new single tax on securities; and
  • proposals for key elements of any new single tax on securities including liability, tax base, geographical scope, compliance regime and exemptions and reliefs.

The main proposal is to introduce a single self-assessed stamp tax on non-government equity issued by UK incorporated companies, including stock and bonds with “equity like features”. In this regard, the UK government proposes that equity-like features will need to be defined along similar lines to the loan capital exemption. The UK government also proposes that the SDRT geographical rules would be applied to any single tax on shares. Many of the key elements of the proposed single tax on shares would adopt those that currently apply for SDRT. In terms of exemptions or reliefs, the overall picture is that the UK government merely proposes removing those exemptions and reliefs that are considered to be, or that will become, redundant by moving to a single tax, in addition to those that are unused and are, in practice, nearly obsolete.

This consultation closes on 22 June 2023 and, if these reforms are taken forward, a further technical consultation on any draft legislation is likely to be announced later this year. This reform proposal is welcome owing to the current UK stamp tax regimes being, at times, complicated and uncertain.

A new unauthorised co-ownership contractual scheme – “Reserved Investor Fund”

The UK government published a consultation seeking views on the potential scope and design for the tax regime on a new type of investment – the Reserved Investor Fund (“RIF”).

The RIF is expected to be an unauthorised co-ownership contractual scheme, focused on institutional (instead of retail) investors and open to all asset classes. The UK government is considering having the RIF tax regime replicate the treatment which applies to Co-ownership Authorised Contractual Schemes (“CoACS”). This would be mean that income arising to the RIF would be treated as arising directly to the investors for UK tax purposes, but from the investor’s perspective the RIF would effectively be opaque for UK capital gains tax and corporation tax on chargeable gains purposes. In other words, the asset held by a UK investor is treated as being the interest in the RIF scheme, instead of the investor’s share of the underlying assets. The trading in the units in the RIF would also be free of UK stamp duty land tax.

However, there is a caveat – given that the investor would be treated as holding the units in the CoACS/RIF (instead of the underlying assets), the investor, without any modification to the rules, will not be subject to UK non-resident capital gains tax (“UK NRCGT”) if the CoACS/RIF itself is not itself “UK property rich”. The UK government is concerned about this risk of loss of tax (especially when the CoACS/RIF itself is not a taxable entity and therefore suffers no UK capital gains tax when the CoACS/RIF disposes of UK property). As such, the consultation looks at some proposals to address this risk – either (i) create a “restricted” RIF which would restrict entry to the regime (resulting in the RIF being restricted in terms of its investor base and/or the assets it can invest in, with the aim of preventing any avoidance of tax by non-UK resident investors on disposals of UK property) or (ii) create an “unrestricted” RIF with more complex tax rules addressing this UK NRCGT concern.

This consultation closes on 9 June 2023. Notwithstanding the complexity in getting the right balance of tax incentives and preventing tax avoidance, the proposal for the RIF is a positive move for the UK funds industry as the RIF is intended to fill the current gap of an unauthorised version of CoACS in the UK fund landscape.

It is also worth noting that the UK government has identified the UK NRCGT risk described above in the CoACS regime. The UK government states that should it be considered necessary to make any changes to the CoACS regime, this would be subject to further consultation.

Decentralised finance involving the lending and staking of cryptoassets

Following a previous consultation, the government accepts and proposes in a consultation that the potential disposal of beneficial ownership for crypoassets lent or staked in a decentralised finance transaction should be disregarded for tax purposes by a regime similar to that applicable to repos and stock lending.

Decentralised finance (“DeFi”) here refers to decentralised lending (“DeFi Lending”) and decentralised staking (“DeFi Staking”). DeFi Lending means lenders depositing their crypoassets and receive a financial return in exchange. DeFi Staking means the owners providing their crypoassets to a platform to pool with those of other users (called a “liquidity pool”) for a financial return. Just like in a stock lending and repo, the legal and beneficial ownership of the crypoassets is transferred to the borrower in a DeFi, but the lender has a legal right to receive the same quantity of crypoassets back at some point in the future and therefore retains the economic interest in the lent or staked crypoassets.

The current rules can lead to DeFi being treated as disposals by the lender in some situations. The UK government proposes that, by adopting a regime similar to that applicable to stock lending and repos, such transfer of beneficial owner of crypoassets from the lender to the borrower (and from the borrower to the lender upon the return of the crypoassets) would be disregarded for UK capital gains tax (and UK corporation tax on chargeable gains) purposes.

Under the current rules, the DeFi financial return can be either taxed as miscellaneous income if it is of a revenue nature, or taxed as a capital gain if it is of a capital nature. Whether the DeFi return is capital or income can be a complex tax question which may involve the analysis of case law. To reduce the administrative burden for participants, the new tax framework could treat all DeFi returns as being revenue in nature and charged to a new miscellaneous income charge specific for crypoasset transactions.

The UK government intends that the above proposal would also apply to lending and staking transactions involving an intermediary.

This consultation runs until 22 June 2023. This is welcome news because the new tax regime will align the tax treatment of DeFi Lending and DeFi Staking with the economic substance of these transactions.

Future consultation on diverted profits (“DPT”), transfer pricing (“TP”) and permanent establishment (“PE”) reform

The UK government announced that it will issue a consultation in May 2023 on simplifying and updating the following legislation: (i) DPT (increased rate on diverted UK profits); (ii) TP (related party transactions); and (iii) PE (right to tax non-resident entities with a UK business presence).

No detail has been disclosed yet, but the UK government’s stated goal is to ensure that the application of these legislations is clear to taxpayers, and the outcome of their application remains consistent with the underlying policy intention, international standards and the UK’s bilateral treaties.

These are important tax rules that multinational enterprises and cross-border transactions must take into account. Therefore, the upcoming consultation in May 2023 is likely to be read closely by stakeholders and commentators. Some practitioners are worried that “simplification and update” may just be a euphemism for changes that increase HMRC’s tax take. We will wait and see.


Overall, the tax administration and maintenance announcements are not particularly objectionable. Indeed, the first three proposals covered by this article are positive developments and are likely to be broadly welcomed by practitioners.  However, several commentators and tax practitioners have noted that the UK government may have missed the point on some of these topics, owing to the proposals not addressing the fundamental problem causing tax administrative inefficiencies – namely, the underfunding of HMRC.

Key Contacts

Linda Z. Swartz
T. +1 212 504 6062


Adam Blakemore
T. +44 (0) 20 7170 8697

Jon Brose
T. +1 212 504 6376

Andrew Carlon
T. +1 212 504 6378

Mark P. Howe
T. +1 202 862 2236

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