Autumn Statement: Highlights | RRL

November 22, 2023

Given where the country is econom­i­cally and polit­i­cally (and there will almost certainly be a general election this time next year), it was always going to be a difficult autumn decla­ration for Jeremy Hunt — given the country’s dire state, there is little scope for anything undertake the public finances (the growth prospects in the statement are quite bleak) but in what many in his party consider to be a high tax environment (and by historical standards it is high for the UK, although perhaps not high by comparison). ). to other juris­dic­tions) and this increase is increasing as inflation rates are currently even higher than previ­ously expected, while at the same time there are headwinds from poor standards of public services (some say the spending plans are not reliable — and more spending is needed). necessary). ).

The proximity to the next general election was the big elephant in the room – meaning it felt like the start of the electoral process. It was an autumn statement trying to appeal to certain parts of the electorate and the need to try to give something away now, even though there was a small oppor­tunity to do so — which may not be there in the spring (which in itself has sparked some rumors about parlia­mentary elections in the spring).

The main tax announce­ments were as follows:

• The “full cost reimbursement” capital allowances announced in the spring budget as a temporary measure (from April 1, 2023 to March 31, 2026) have been made permanent. Welcome to customers of larger companies who regularly spend amounts on new plant and equipment in excess of the available Annual Investment Allowance (AIA) — either because the expen­diture is high or because the AIA has been signif­i­cantly reduced due to the number of “affil­iated companies”. . has a company). This measure is obviously welcomed and is necessary to encourage the private sector to invest and increase produc­tivity.
• The Class 1 NIC rate for employees will be reduced from 12% to 10% from 6 January 2024 and the Class 4 NIC rate for the self-employed will be reduced from 9% to 8% from 6 April 2024. Welcome, but falls under The shadow of frozen income tax rates and the impact of “fiscal drag” means this is a drop in the ocean.
• The removal of Class 2 NIC (£3.45 per week) is minor for the self-employed — but welcome from a simpli­fi­cation perspective.
• The National Living Wage will rise from £10.42 (for 23+ year olds) to £11.44 for 21+ year olds from 6 April 2024. This is something that all businesses need to consider and plan for.
• The planned merger of the two current R&D Rax relief programs (broadly the one for larger companies and the one for smaller companies — the Small and Medium Enter­prises (SMEs) program and the R&D Expen­diture Credit (RDEC)) will take place from January 1st. Merged April 2024, as previ­ously announced. Simpli­fi­cation is the stated goal. The relief rate has been confirmed at 20% of R&D expen­diture, giving a net benefit of 15% — assuming the 25% corporate tax rate is paid. Loss-making “R&D intensive” SMEs (defined as companies that spend at least 40% of their total expen­diture on qualified R&D, which is a high bar!) can continue to benefit from the higher R&D tax credit of 14.5%. Overall, the changes will not be beneficial for many SMEs. Combined with the additional admin­is­trative burden associated with R&D tax relief and HMRC’s aggressive stance on all claims, this means a difficult environment for SMEs and R&D tax relief.
• The Enter­prise Investment Scheme and Venture Capital Trust schemes were due to end on 6 April 2025 under current regula­tions — this has been extended to 6 April 2035. These are important schemes for start-up businesses in the UK to attract investment and the extension was clearly a no-brainer.
• A change to the Construction Industry Scheme (CIS) has been announced to tighten the compliance test a company must meet to achieve “gross paid” status. This will now add VAT return oblig­a­tions both during appli­cation review and in circum­stances where HMRC can remove the status.
• The current sales restric­tions on the use of the cash basis of accounting will be removed, allowing sole propri­etors and partner­ships of any size to use the cash basis of accounting, and the current situation will be turned on its head, so that an election to the accrual basis of accounting will be required the current position of election to the cash basis . This is clearly a measure with a view to imple­menting Making Tax Digital (MTD).
• Some further clari­fi­ca­tions on the imple­men­tation of MTD have been announced — the previous limits on required use of MTD remain in place, but some admin­is­trative simpli­fi­ca­tions have been announced. One of the biggest problems was the abolition of the previ­ously mentioned “financial statement” – this effec­tively replaced the tax return and so it will be inter­esting to see in detail how this will now work. We will provide further updates as we know more.
• The ISA limits will remain unchanged in 2024/25. Some simpli­fi­ca­tions to the admin­is­tration around ISAs have been announced.
• In line with a consul­tation in July 2022, changes will be imple­mented on 6 April 2025 that will require: employers to provide more detailed infor­mation about employees’ hours worked as part of PAYE reporting; And inter­est­ingly, share­holders of owner-managed companies (like many of our customers) need to provide more details about dividend income and the percentage ownership they hold in each company. It is unclear what the rationale for this request for further data is, the official statement said “A better under­standing of customers’ circum­stances will help improve the customer experience, improve inter­ac­tions with HMRC by reducing unnec­essary inquiries and ensuring HMRC can better under­stand their circum­stances when contacted.”
• There have been some detailed clari­fi­ca­tions for companies taking advantage of the creative tax breaks, which will come into force from April 1, 2024. Impor­tantly, appli­cants will be required to complete a new “online infor­mation form” to support their tax relief claims – similar to the newly intro­duced R&D tax relief form, which is clearly aimed at reducing fraud­ulent claims. Claimants should seek early advice regarding this additional admin­is­tration and should seek compre­hensive advice on claims in general, as all of this points to signif­i­cantly increased scrutiny from HMRC.
• There has been an extension to the notice period for options granted under the Enter­prise Management Incentive (EMI) scheme — from the notori­ously strict 92 days to July 6 after the end of the tax year in which the grant is made. This is important for the companies using the system — in the past there have been many errors and failed appli­ca­tions due to failure to meet the 92 day deadline.
• The plastic packaging tax rate will increase in line with the Consumer Price Index (CPI) from 1 April 2024 (from £210.82 per tonne to £217.85 per tonne).
• The aggregate levy will rise from £2 per tonne to £2.03 per tonne from April 1, 2024, in line with the Retail Price Index (RPI).
• A blatant omission was the widely rumored abolition or reduction of this inher­i­tance tax rate. Probably possibly delayed until the Spring Budget!
• And… not a tax measure, but the Cornwall Devolution Deal.

Tomorrow we will send another detailed analysis of all the content presented today.