Listening to the Chancellor's speech, it was clear that his focus in the Autumn Budget was the "spend" element of the tax and spend equation, perhaps because the key tax announcements (the 2023 increase in corporation tax and the new Health and Social Care Levy) had been made and debated earlier in the year. Headlines in the press will no doubt focus on the measures taken to alleviate pressures on households from increased costs of living and reductions in universal credit. For businesses, the announcements were less eye catching, but on a closer look contained a number of interesting details.
If there was a theme to the announcements, it was perhaps a focus on UK business remaining competitive in a post-Brexit world. Extensions to R&D tax reliefs to include data and cloud computing costs were highlighted by the Chancellor in his speech, but the intention to reform the reliefs to focus on activities carried out in the UK may outweigh the impact of these changes. To find out more, see Research and Development Tax Relief below.
In a similar vein, changes to the Bank Profits Surcharge (reducing the rate and increasing the threshold above which it is payable to coincide with increases in the main rate of corporation tax in April 2023) are designed to balance the revenue-raising potential of the Surcharge with concerns that the current 8% rate, when coupled with an increase in corporation tax, could make UK banking activity uncompetitive. New Treasury powers to introduce changes to the stamp duty and SDRT treatment of securitisation and insurance linked securities are aimed at increasing the attractiveness of the UK as a location for securitisation vehicles (See Stamp duty on securitisations and insurance-linked securities below for further details).
Most intriguing, though, is the announcement that the government is considering whether to allow companies to re-domicile in the UK. This is a significant change, and could well be timed, alongside the introduction of the new Asset Holding Company regime, to capitalise on companies wishing to relocate to the UK for tax, administrative or regulatory reasons. To read more on the proposals, see Corporate re-domiciliation proposal below.
Another piece of welcome news is the measured approach being adopted to the new rules on the reporting of uncertain tax treatments adopted by large businesses. Having been delayed to allow further consultation on the proposals and draft legislation, it has been announced today that whilst the legislation will be introduced in the Finance Bill 2021/22, the most problematic of the three reporting "triggers" will not be introduced for the time being. This is a gratifying result for the many advisers and industry bodies who have participated in the consultation on these significant measures and shows the value of the consultation process in refining draft legislation. To read more, see Notification of uncertain tax treatment by large businesses below.
For employers and employees, there was little that was new. Many of the more technical details of the new Health and Social Care Levy, to be introduced in April 2023, are still awaited, although there has been confirmation of the related changes to rates of tax on dividends and the "loans to participators" charge. Also announced were measures to assist lower paid workers in claiming tax relief on pension schemes using the "net pay" system. For further details, see Pension schemes below.
In the world of real estate, there was more to catch the eye – significant changes to business rates, detailed below in Business rates, which the Chancellor heralded in his speech and further detail of the new Residential Property Developer tax, including the announcement of the headline rate of tax (4%) and the annual allowance (£25 million), discussed in more detail in Residential Property Developer Tax (RPDT) below. Investors in this sector will continue to focus on the development of the Asset Holding Company regime and the proposals on the re-domiciliation of companies to the UK to assess the opportunities created by these measures.
For asset managers, the journey towards the introduction of the new Asset Holding Company regime continues, with the current state of play outlined below in New regime for Qualifying Asset Holding Companies (QAHCs). HMRC has confirmed that it will consult on the VAT treatment of investment managers, which will be a key element alongside the AHC regime in making the UK an attractive location for holding structures in this context.
With the tax burden on the British public forecast by the Office for Budget Responsibility to be the highest since the Attlee government of the 1950's, it is clear that today's Budget aims to promote investment and growth, alleviating the need for further tax increases and perhaps allowing for tax cuts before the next election. In these uncertain times, it remains to be seen whether it will achieve this objective.