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Given where the country is economically and politically (with a General Election almost certainly going to be around this time next year), it was always going to be a difficult Autumn Statement for Jeremy Hunt.
There was little headroom to do anything given the poor state of the public finances. But, in what many in his party feel is a high tax environment (and it is high when looked at in the round for the UK historically – albeit maybe not high when comparing to other jurisdictions) and this increasing due to the impact of still higher inflation rates at this point than previously anticipated, whilst having a headwind of poor public services standards (some are saying the plans on spending are not reliable – and further spending will be required).
The proximity to the next General Election was the large elephant in the room – meaning that it felt like the commencement of the election process. It was an Autumn Statement trying to appeal to specific pockets of the electorate, and the need to try and give a little away now whilst there was a small opportunity to do so – which may not be there in the Spring (which on its own, has prompted some rumours of a Spring General Election).
The headline tax announcements were as follows:
- The capital allowances “Full expensing” announced in the Spring Budget as a temporary measure (from 1 April 2023 – 31 March 2026), has been made permanent. Welcome for more sizeable company clients that regularly spend amounts on new plant and equipment in excess of the available Annual Investment Allowance (AIA – namely either because spend is high, or because the AIA has been reduced significantly due to the number of ‘associated companies’ a company has). This measure is obviously welcomed and required for the incentivisation for the private sector to invest and increase productivity.
- The rate of class 1 NIC for employees will reduce from 12% to 10% from 6 January 2024, and the class 4 NIC rate for the self-employed will reduce from 9% to 8% from 6 April 2024. Welcome, but falls in the shadow of the frozen income tax rates and the impact of “fiscal drag” mean that this is a drop in the ocean.
- The abolishment of class 2 NIC (£3.45 per week) is minor for the self-employed – but welcome from a point of view of simplification.
- The National Living Wage will increase to £11.44 from £10.42 (which was for 23+ year olds) for 21+ year olds from 6 April 2024. This will be something all businesses need to consider and budget for.
- The planned merger of the current 2 R&D rax relief schemes (broadly that for larger companies and that for smaller companies – the small and medium-sized enterprise (SME) scheme and the R&D expenditure credit (RDEC)) will be merged from 1 April 2024, as previously announced. The stated objective being simplification. The rate of relief has been confirmed at 20% of R&D expenditure, which translates into a net benefit of 15% – assuming the 25% corporation tax rate is paid. Loss making “R&D intensive” SMEs (defined as companies that spend at least 40% of their total expenditure on qualifying R&D a high bar!) will be able to continue to benefit from the higher R&D tax credit rate of 14.5%. Overall, for many SMEs, the changes will not be favourable. This coupled with the additional administration around R&D tax relief claims and the aggressive stance taken by HMRC to all claims, all mean a difficult landscape for SMEs and R&D tax relief.
- The Enterprise Investment Scheme and Venture Capital Trust schemes were set to end on 6 April 2025 under current rules – 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 obviously a “no-brainer”.
- A change to the Construction Industry Scheme (CIS) was announced to tighten up the compliance test that an entity has to meet to achieve ‘gross payment status’ – this now adding VAT filing and payment obligations to both the application test and the circumstances where HMRC can cancel the status.
- Current turnover restrictions on use of the accounting cash basis will be removed so that sole-traders and partnerships of any size can use the basis, and the current position will be upended so that an election into the accruals basis will be required, as opposed to the current position of electing into the cash basis. This is clearly a measure with a view to the implementation of Making Tax Digital (MTD).
- Some further clarifications around the implementation of MTD were announced – the previous limits for required use of MTD remain in place but some administrative simplification has been announced. One of the sizeable ones being the removal of the previously named ‘End of Year Statement’ – this was effectively the replacement of the tax return, and therefore it will be interesting to see the detail here as to how this will now work. We will provide further updates when we know more.
- ISA limits will remain unchanged in 2024/25. Some simplifications around the administration around ISAs was announced.
- In line with a July 2022 consultation, changes will be implemented on 6 April 2025 requiring: employers to provide more detailed information on employee hours worked under PAYE reporting; and interestingly, shareholders in owner-managed companies (as many of our clients are) will need to include more details on the dividend income and percentage shareholding they own in the relevant company. It is unclear what the reasoning behind this requirement for further data is, the official line is “Better understanding of customers’ circumstances helps to improve customer experience, enhancing interaction with HMRC, by reducing unnecessary enquiries, and ensuring HMRC can better understand their circumstances when contacted.”
- For those companies that utilise the creative tax reliefs, there were some detailed clarifications that will be effective from 1 April 2024. Importantly, claimants will be required to complete a new ‘online information form’ to accompany claims for the reliefs – this similar to the newly introduced form for R&D tax relief, as is clearly aimed at reducing fraudulent claims. Claimants should seek advice early in relation to this additional administration, and seek robust advice around claims in general as all of this points to significantly increased scrutiny by HMRC.
- There was an extension of notification of options granted under the Enterprise Management Incentive (EMI) scheme – increasing from the notoriously stringent 92 days to 6 July following the end of the tax year in which the grant is made. This is important for those companies using the scheme – many errors, and failed applications, have been made historically due to the 92 day deadline being missed.
- The rate of Plastic Packaging Tax will be increased in line with Consumer Price Index (CPI) from 1 April 2024 (from £210.82 per tonne to £217.85 per tonne).
- The Aggregates Levy will increase in line with Retail Price Index (RPI) from £2 per tonne to £2.03 per tonne from 1 April 2024.
- A glaring omission was the heavily rumoured inheritance tax scrappage or reduction in that rate. Presumably potentially delayed until the Spring Budget!
- And… not a tax measure but the Cornwall Devolution Deal featured.
