UK consultation on sovereign immunity from direct taxation

The government is consulting on restricting the scope of the sovereign immunity from UK direct taxation. If enacted, the exemption would be limited to UK sourced interest income that does not relate to trading activities undertaken in the UK and would include UK sourced interest on savings, interest on debt, income from government securities, bonds and debentures. There are no plans to remove sovereign investors from the list of qualifying investors within the new qualifying asset holding company regime but the likelihood is that they will be removed from the list of qualifying institutional investors, on the basis that this exemption is driven by tax exempt status. It is proposed that the new rules would apply from April 2024.