Immediate tax cuts and handouts are unlikely to feature in the Chancellor’s November 22 statement.
UK Chancellor Jeremy Hunt will deliver his penultimate (or perhaps last) Autumn Statement to this Parliament on 22 November 2023. It will be accompanied by economic and budgetary forecasts from the Office for Budget Responsibility.
The Chancellor’s room for further tax measures is expected to be limited but, with the general election approaching, the statement could pave the way for more detailed tax announcements to be made in this Parliament’s final budget in the spring of next year or in the Conservatives’ electoral platform. .
Tax cuts unlikely
While the UK tax burden is at its highest level in decades (with an increase in corporation tax, a reduction in allowances and a freeze on personal tax thresholds until 2028) , no immediate tax reduction is expected.
The chancellor has always said that his primary objective is to bring down inflation. Although he has previously ruled out any tax cuts, he could use the fall statement to chart his course on future tax-cutting measures. There are rumors that he may consider reducing (or improving) inheritance tax – although any interest rate cuts could be reserved for the spring budget or perhaps the Tories’ agenda for the next general election .
Stimulating business investment
Capital allocations
The Chancellor announced in this year’s Spring Budget that the Government would make the new capital allowances regime permanent.when tax conditions permit“. The new regime introduced a 100% allowance in the first year for main rate expenditure relating to the provision of new plant and machinery – known as full expenditure (or a 50% allowance in the first year for expenses at the special rate for eligible expenses) for three years (until April 2026).
Current fiscal conditions may not be strong enough to make the measure permanent, but any announcement would help companies with their long-term strategic investments, knowing that the measure would extend beyond April 2026.
EIS and CDV relief
One of the measures the government is expected to introduce is the extension of the sunset clauses of the Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT), which limit relief to eligible share subscriptions made before 6 April 2025. said he would provide further details on plans beyond 2025 at a fiscal event, which may well be the fall return.
The Government has stated (in its response to the Treasury Committee’s report on venture capital published this summer) that it does not, however, agree that extending the age and funding limits for venture capital EIS and VCT companies is the best way for the government to support regional investments and increase investments, so immediate changes are not expected in this area.
Improved relief for AI
Leading technology companies have, through UK trade association techUK, writing to the Chancellor ahead of the Autumn Statement to encourage the Government to support investment in digitalisation by providing enhanced tax relief for spending on digital services for small and medium-sized enterprises (SMEs). The letter recommends increased support of 140% on the first £50,000 of spending on productivity-enhancing digital services.
On the heels of the AI summit at Bletchley Park and the desire to see Britain become ‘the next Silicon Valley’, the Chancellor is expected to weigh this option in the context of a generous full depreciation scheme already in place and the tax incentives for research and development (R&D) expenditure already available to SMEs.
R&D
Regarding R&D more generally, there could be an announcement on whether the government will introduce a single program for R&D (merging the two current programs). Draft legislation was published in July on the proposed design of a merged system for technical consultation and it could be confirmed whether or not the merged system will take effect from April 2024.
Green tax measures
The Chancellor could announce green tax measures, which could help regain lost ground following the government’s recent announcements pushing back the timetable for some of its carbon neutrality commitments.
There are rumors that the Chancellor may introduce a ‘green’ property tax (SDLT) measure, which would give an SDLT reduction to buyers who improve the energy efficiency of their home within two years of purchasing it.
The Government could also respond to its consultation (which closed this summer) on extending VAT relief on energy saving materials (ESMs). The consultation proposed to include additional technologies (e.g. electric battery storage) within the relief and to reintroduce the relief for ESM installations in buildings intended solely for relevant charitable purposes.
Responses to recent consultations
The results of a series of other consultations concluded during this year are still to be delivered. The Chancellor could provide an update on some of these political consultations.
- Reform of the construction sector regime. Osborne Clarke responded to the consultation to strengthen the Gross Payment Status (GPS) tests and excluding UK Construction Industry Scheme landlord contributions.
- Proposals to modernize stamp duty on shares. HMRC has been consulting on proposals, including whether there should be a single tax on securities
- VAT reform on fund management. Although the government confirmed in the spring 2023 budget that it would publish its response to the consultation on the proposed reform of the VAT rules on the management of funds “In the coming months“, the answer is still awaited.
- Improving and simplifying Save As You Earn (SAYE) and tax-efficient share incentive plans. Osborne Clarke answered the call evidence on shareholding plans reserved for all employees. It is hoped that the responses will lead to continued cross-government support for these important and much-welcomed plans, as well as simplifications to make them easier for businesses to operate.
- Proposals for targeted reform of the tax treatment of employee share trusts and employee benefit trusts. Osborne Clarke responded to the consultation, generally supporting the proposals put forward by HMRC for targeted measures. reform of the tax regime for employee shareholding trusts and employee benefit trusts.
- Proposals to regulate and combat non-compliance in the umbrella company market The UK government has consulted on Umbrella arrangements in the UK and how to achieve better compliance and regulation in the temporary labor market.
- Reform of the tax on diverted profits, transfer pricing and permanent establishments. This is a broad area in which further consultations should be undertaken.
- Proposals to introduce a new type of investment fund – the Reserved Investment Fund. The Government is considering introducing a new unauthorized contract system in the UK to improve the UK’s existing funds regime.
- Reform of the tax treatment of crypto-asset transactions in decentralized finance (DeFi) lending and staking. Osborne Clarke responded to the consultation, welcoming HMRC’s reform of tax treatment of lending and staking tokens UK.
Commentary by Osborne Clarke
The autumn declaration will be a real challenge for the Chancellor. With the UK still in a difficult economic situation, it is unlikely to be able to announce immediate tax cuts or generous giveaways. With the Labor Party waiting in the wings and with Rachel Reeves having already given a hint about her and a the Labor government’s potential future tax measuresthe chancellor will undoubtedly wish, as the legislative elections approach, to have more resources.
