UK: Autumn Statement 2023 - Key Tax Measures Announced

The Chancellor seemed in a particularly chipper mood as he got to his feet to deliver the Autumn Statement, and he was keen to pass on the feel-good factor to the watching nation. With the Office for Budget Responsibility forecasting reductions in inflation and government borrowing in 2024 giving headroom for some reductions in tax, the tone of the Autumn Statement was optimistic, promising investment, supply side reform and future economic growth. While many commentators had predicted that this fiscal event might in fact be a non-event from a tax perspective, there were some interesting announcements which may suggest that the Government is gearing up for a General Election sooner rather than later in 2024.

For businesses, the biggest headline is the permanent adoption of full expensing, allowing companies to claim a 100% deduction for capital expenditure in the year in which it is incurred. Billed as "the largest business tax cut in modern British history", this measure comes at a sizeable cost to the Exchequer of around £11bn a year by 2028, but is clearly intended to promote investment in future years which will offset this cost.

Another headline measure for innovative businesses is the merger of the R&D tax credits for SMEs and large companies into a single scheme. Whilst billed as a simplification measure aimed at incentivising R&D expenditure, the changes come at a relatively limited cost given that many SMEs will now enjoy less generous reliefs for R&D.

Rather than taking the opportunity to make potentially divisive changes to the inheritance tax regime, the Chancellor instead opted for the arguably more unifying alternative of reducing and simplifying national insurance contributions for both employees and self-employed taxpayers, a measure designed to have maximum impact with those of working age on middle incomes, although that impact may be dampened somewhat by the fact that the relatively modest savings are outweighed by the effects of frozen tax allowances.

On pensions, the abolition of the lifetime allowance is due to go ahead as previously trailed, but also notable are the proposed reforms designed to promote investment by local government pension schemes and the consolidation of those schemes and the consultation on possible changes to policy in relation to the administration of defined contribution schemes allowing for the consolidation of small pension pots held by individuals. You can read more on these changes here.

Continuing the themes of investment and growth, the extension of both the Freeport and Investment Zone schemes are a nod to the "levelling up" agenda, with a new group of Investment Zones being announced in Greater Manchester, the West Midlands, and the East Midlands. On a different note, proposed changes to ISAs are designed to increase opportunities for investment and address some issues with the current system, although they are arguably less ambitious than expected.

Looking internationally, the UK's implementation of the BEPS Pillar 2 framework marches ahead, with previously trailed changes to the UK's multinational and domestic top-up tax regimes to be included in the Autumn Finance Bill, together with the backstop Undertaxed Profits Rule. Also of note are changes designed to ease the discomfort associated with the departure from retained EU law, including, importantly the much-discussed legislation to prevent the reintroduction of the 1.5% SDRT charge on the issue of shares into clearance services and depositaries and legislation dealing with the interpretation of VAT in the light of changes made by the Retained EU Law (Revocation and Reform) Act 2023.

Alongside the more high profile measures, there were also changes to the off-payroll working rules, the REIT regime, measures to deter tax avoidance and evasion, business rates and electricity generator levy.

In many ways, for all of the positive noise, this was a modest fiscal event, but not without its notable points and certainly interesting in terms of showing a direction of travel, with the possibility of more tax cuts to come in the Spring – if a General Election doesn't arrive before that...

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