Insight into the new windfall tax

In our latest blog, our tax manager Indu Melvin looks at the newly-introduced super tax/windfall tax which ensures energy and public interest companies aren't profiteering from the ongoing energy and gas situation.

What is the new super/windfall tax and how will it work?

A windfall tax is a one-off tax targeting specific industries where the government believe those industries unfairly benefit from excessive or unexpected profits.

Larger energy firms have benefitted from record profits because of an increase in energy prices when consumers are struggling to cope with spiralling energy costs. In response to this situation the government has introduced a Public Interest Protection Tax at a rate of 75 per cent (on adjusted asset value) targeting energy companies.

Who will be affected by this tax?

Mainly firms holding assets for the benefit of an energy supply business where those assets exceed £100 million. This will also include investors with at least a five per cent interest in those companies.

Pension funds may invest in these sectors and receive dividends from these companies, so it may impact pensioners.

What do accountants need to do? Should they be checking which of their clients are classified as ‘public interest’?

Accountants should review investor shareholdings, together with their connections, to check if they are entitled to at least five per cent of profits from the realisation of the assets.

More information on the windfall tax is available at legislation.gov.uk.