Given the desire for stability in light of recent tumultuous times, Chancellor Jeremy Hunt's Autumn Statement unsurprisingly lacked any real tax shocks. With a few minor exceptions, the bulk of the announcements confirmed previously trailed measures and leaks, with threshold changes and windfall taxes both featuring. But with an Autumn Finance Bill and Spring Budget both promised, further tax changes must surely be on the horizon.
We've set out below a summary of the key tax measures from the Autumn Statement. If you would like to discuss the impact of any of the changes, please get in touch with a member of the tax team or your usual Taylor Wessing contact.
The government is consulting on a package of reforms to simplify and modernise reliefs which support and incentivise the production of culturally British film, animation, high-end TV, children’s TV and video games.
A targeted anti-avoidance rule is to be introduced for share exchanges carried out on or after 17 November 2022, to ensure that non-domiciled individuals pay tax on the value built up on UK company shares in the UK, even when they are exchanged for shares in an offshore holding company.
This is an interesting comment in the budget. It implies that, even where there are very clear bona fide commercial reasons for flipping into a non-UK company (for example to enable fundraising in the US) advanced clearance on the share for share exchange should always be obtained first, which will cause difficulties for some companies seeking to raise funding urgently in difficult times.
The Autumn Statement confirmed numerous rumours that have been circulating over the past few weeks, as well as clarifying the status of various measures following the unwinding of Kwasi Kwarteng's Growth Plan.
Earlier this year a consultation explored proposals to introduce an OST as a means to rebalance the taxation of the retail sector between online and in-store. In light of the responses received, the government has decided not to proceed, citing complexity and risks of distortion. This will be most welcomed by a number of our clients who were grappling with these proposals.
The government has confirmed that it will legislate for the OECD's 'Pillar Two' rules in Spring Finance Bill 2023, requiring:
A backstop rule, which will allocate any remaining top-up tax among jurisdictions in which the group has operations, will be implemented at a later date.
The introduction of these rules was anticipated. A number of commentators suggested that in the current climate the UK would be unlikely to be a first adopter of the proposals along with the Euro 5 (the EU having failed to achieve a consensus because Hungary exercised its veto rights). However, consistent with a number of recent international tax developments, the UK continues to want to be seen to be at the vanguard of fiscal reform.
Autumn Finance Bill 2022 will contain legislation for various rate changes for expenditure incurred from April 2023:
These changes are a step towards a single RDEC-like scheme (the design of which the government will consult on) and supplement previously announced reforms to R&D tax relief in particular focusing support on innovation in the UK
As the rate of corporation tax rises to 25% from April 2023, associated increases have been confirmed from the same date:
The VAT registration and deregistration thresholds will remain at £85,000 and £83,000 respectively until April 2026.
The government has confirmed the previous Chancellor's commitment to increase the generosity and availability of the Company Share Option Plan (CSOP) and Seed Enterprise Investment Scheme (SEIS), as well as extending Venture Capital Trusts (VCT) and the Enterprise Investment Scheme (EIS).
As widely rumoured, the energy industry will bear some of the burden of the Chancellor's income-raising measures:
The Chancellor has proposed a new approach which will focus on knowledge-intensive growth 'clusters', the first of which will be announced in the coming months.
As expected, the Chancellor focused on adjusting thresholds and reducing allowances, rather than increasing taxes, as a means of generating revenue:
Annual exempt amount will reduce from £12,300 to £6,000 from April 2023, then to £3,000 from April 2024.
The IHT nil-rate band (NRB) will be frozen at £325,000 for a further two years until April 2028.
The SDLT changes announced as part of Kwasi Kwarteng's Growth Plan will come to an end in March 2025, namely:
The Chancellor has made it clear that the sunset clause to these measures is very deliberately aimed at encouraging the housing market to take advantage of the lower SDLT costs before the rules revert back in March 2025.
From April 2025, electric cars will no longer be exempt from VED.