This is an initial analysis of the main measures announced by the Chancellor in today’s Autumn Statement and followed up by the publication of official press material and briefing documents.
More information will emerge over the next few days and further alerts will be used as necessary.
The Chancellor says the Autumn Statement contains 110 measures to help “grow the economy”. “Today’s measures reward effort and work”.
Business taxes
- Full expensing of capital expenditure to be made permanent
- Technical consultation on wider changes to simplify the UK’s capital allowances regime
- The existing R&D Expenditure Credit and Small and Medium Enterprise R&D Scheme will be merged from1 April 2024
- At the same time the rate at which loss-making companies are taxed within the merged scheme will be reduced from 25% to 19% (i.e. lower rate of tax on the enhanced RDEC uplift), and the threshold for additional support for R&D intensive loss-making SMEs will be lowered to 30% with a one-year grace period for companies which temporarily dip below the threshold
- Legislation will be brought in to extend the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT) to 2035
Small businesses/self-employed
- Class 2 NIC (£3.45 per week) to be abolished completely from 6 April 2024
- Rate of Class 4 NIC (on earnings between £12,570 and £50,270) to be reduced from 9% to 8% from 6 April 2024
- These two measures estimated to save someone with profits of £28,200 about £350 pa
Personal taxation and reliefs
- Main rate of employee NI to be cut from 12% to 10% from 6 January 2024 (benefit to someone earning £35,400 pa will be £450 pa, benefitting 27 million workers in January)
Pensions and benefits
- Universal credit and other State benefits will increase by 6.7%. Pensions triple lock to be kept in full; State pension will increase by 8.5%.
International taxation
OECD Pillar 2
Pillar 2, which is being implemented from 2023, will ensure Multinational Enterprises (MNEs) will be subject to a minimum 15% effective tax rate in every jurisdiction in which they operate. Implementation of these rules will protect the UK from aggressive tax planning by large multinationals, help ensure that profits made in the UK are taxed in the UK, and level the playing field for tax competition that has been tipped in favour of no or low tax jurisdictions. The Multinational Top-up Tax, Domestic Minimum Tax and Undertaxed Profits Rule are expected to raise approximately £12.7 billion in the UK in total over the next 6 years. If the UK had not implemented these rules, this tax would have been collected elsewhere. It is important that the UK implements Pillar 2 to a similar timeline as other countries. More than 30 countries across the world have taken steps towards implementation. Other countries moving to implement Pillar 2 from 31 December 2023 or 1 January 2024 include members of the European Union, where a Directive obliges all but the smallest Member States to implement Pillar 2 from 31 December 2023, Australia, Canada, New Zealand, South Korea, Switzerland and Vietnam. Japan is implementing from 1 April 2024. Jurisdictions implementing in 2025 so far include Thailand and Singapore with many more countries expected to follow. The government will continue to monitor international developments on implementation.
Creating a simpler and more effective tax system
The government has outlined four main objectives on tax simplification, to support growth and fairness:
- Tax rules should have a clear consistent rationale and be easy to understand.
- The burden of compliance and administration should be proportionate for taxpayers and HMRC and it should be easy for taxpayers to get their tax right.
- Taxpayers should be able to understand their obligations and options particularly at key lifecycle points, such as when they do something for the first time or infrequently.
- Tax policy should not unnecessarily distort the decisions of taxpayers and result in poorly informed choices. The government will measure annual progress against these objectives, focusing on taxpayers’ experience and prioritising the impact of complexity on individuals and small businesses.
The government says it is now making it easier for small businesses as they set up and grow by:
- Expanding the ‘cash basis’ – a simplified way for over four million sole traders and partners to calculate and pay their income tax.
- Introducing a package of changes to simplify the design of Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA), that will benefit around 1.7 million businesses and landlords set to be mandated to use MTD.
- Merging the R&D Expenditure Credit (RDEC) and the SME schemes.
The government is undertaking a systematic review of guidance and key forms for small business including enhanced guidance when checking if you need to submit an ITSA return; new interactive guidance to help businesses register for ITSA; and improved guidance making it easier to report VAT errors.
To simplify the experience of interacting with the tax system for individuals, the government has already increased to £150,000 the threshold for individuals with income taxed only through Pay As You Earn to file a Self-Assessment return.
The government is also making it easier for people to choose the best ISA accounts for their needs and move money between them.
Our thoughts
Maybe there were 110 measures, but many were hyperbole, consultation announcements, or just headlines about schemes, incentives and initiatives “to be introduced”. Of course, the 2% tax cut (because that’s what the NI reduction is) will grab all the headlines in tonight’s news and tomorrow’s newspapers. It’s almost certainly the first part of a two-part giveaway in advance of the general election (part two will be an overt income tax giveaway in the Spring Budget).
It is particularly disappointing that the Chancellor failed to address the chaos within HMRC over the processing of R&D tax credit claims, has committed to merging (completely unnecessarily) the two schemes from 1 April, and has not listened to any of the pleas not to proceed with the restriction of qualifying R&D to that physically performed in the UK. So many companies will lose out because of that and it’s completely contra-intuitive to working practice post-pandemic. And the Chancellor’s claim that the UK has the most attractive R&D incentives in the world is meaningless unless HMRC finds its cheque book very quickly.
For most readers of this, the claim that merging the two schemes will make it simpler for most companies is complete rubbish. The vast majority of my clients claim under the SME R&D scheme, whereas the new combined scheme is based largely on the current RDEC scheme. So statements like “ at the same time the rate at which loss-making companies are taxed within the merged scheme will be reduced from 25% to 19%” will be meaningless to most companies.
Overall, this statement was rich in words but thin in substance. There’s really very little to get excited about and a lot to be frustrated about.
