Personal Tax
Cheers to the Chancellor? – By Matt Herd
Following numerous announcements in the run up to the Autumn Budget including the introduction of the Health and Social Care Levy, increases to the National Living Wage and a variety of spending commitments, many advisers like myself sat down to listen the Chancellor on Wednesday wondering what additional changes to the tax system might be announced.
In such unprecedented times it was hard to anticipate what announcements might be made, especially in light of the fact that the Prime Minister had effectively already broken the Tory party’s manifesto pledge not to raise the rate of Income Tax or National Insurance when he unveiled the Health and Social Care Levy in September. Would the Chancellor increase the rates of Capital Gains Tax to bring them in line with Income Tax rates as some had predicted?
The Chancellor spent much of his speech detailing the Government’s spending commitments. As more and more billions of Government spending was announced, it seemed likely that the Chancellor would move on to reveal the corresponding tax increases that would be necessary to support them.
However, such announcements never came! As the Chancellor sat down, I quickly turned to the internet and the supporting Government publications to see whether I had missed something – after all, the devil is often in the detail!
Upon initial inspection, and at the time of writing, it appears that there were indeed no new announcements that will significantly affect personal taxes such as Income Tax, National Insurance, Capital Gains Tax or Inheritance Tax.
Upon reflection, it appears that the Chancellor is hoping to fund his spending commitments through a combination of growth and the additional revenue that previous announcements will generate such as the increase in the rate of Corporation Tax, the introduction of the Health and Social Care Levy and the effect of fiscal drag caused by the freezing of a variety of personal tax allowances and rate bands until 2025/26.
The only personal tax announcement of note came in the form of a doubling of the time limit for reporting relevant property disposals to HM Revenue and Customs and paying the corresponding Capital Gains Tax. E.g. An individual selling a UK residential property after 26 October 2021 now has 60 days (previously 30 days) to file the Capital Gains Tax return and pay the tax.
The chancellor concluded his speech with the typical ‘rabbit out of the hat’ announcement that following the withdrawal of the £20 per week increase in Universal Credit, the taper rate which reduces the amount a claimant will lose for every pound they earn above their worker allowance will be reduced from 63p in the pound to 55p.
Other announcements included the cancellation of the planned Fuel Duty rise, simplification of Alcohol Duties and an end to the pay freeze for public sector workers.
In the absence of any further increases to personal taxes and with reductions to the price of a pint of beer or a bottle of prosecco, there may be a handful of taxpayers who raise a glass to the Chancellor’s Autumn budget!
Corporate Tax
The Budget that promised sparkle but fell flat – By Katie Varney
I’m afraid I can’t help but feel a little cheated by the Chancellor this Autumn. Having made a point of calling this speech a ‘Budget’, which, I thought, hinted at some significant tax announcements to come, it transpired to be more of an economic update and spending review, with little in the way of significant changes to the tax regime. This made it somewhat difficult to prepare a 30-minute Budget Breakfast presentation on the Corporate and Business Tax implications of the speech!
In hindsight, given the raft of measures that were announced just five months previous in the Spring Budget, I perhaps shouldn’t have been surprised, and there were actually a few points of note that I took away from Rishi’s speech on Wednesday.
There was a lot of reference made to Research & Development in this Budget, particularly with regard to its importance for economic growth and the creation of future jobs. For a split second, I thought we might have been on the brink of some significant reform to R&D Tax Reliefs, particularly the SME Scheme, given that we are no longer bound by the constraints of EU State Aid rules, but although the Chancellor announced a couple of important changes, these stopped considerably short of the shake- up that there could have been.
The expansion of the definition of qualifying expenditure for R&D purposes to include data and cloud computing is a welcome change and is finally recognition of the modern research methods that the relief is designed to encourage. The refocus of reliefs towards innovation in the UK, however, will actually see relief for UK companies restricted in many cases, despite it being it being spun as a positive in the speech.
There was little in the way of Capital Allowances this time, which, on reflection, is unsurprising given the announcement of the company-only 130% super-deduction and 50% first year allowance in March. There was, however, one important update that is relevant to both companies and unincorporated businesses alike, and that’s the extension of the £1 million Annual Investment Allowance (AIA).
The AIA, which provides 100% tax relief in the year of acquisition for eligible assets, had previously been increased from its ‘permanent’ level of £200,000 to £1 million, but this was due to end on 31 December 2021. The increase will now extend for a further 15 months until 31 March 2023 for both Income Tax and Corporation tax. As always, when the level of the AIA changes, there will be transitional rules to determine a business’s entitlement for Accounting Periods spanning the date of change.
Outside of R&D and the AIA, the major Corporate and Business Tax announcements were all very targeted to specific sectors: cultural tax reliefs were temporarily increased and in some cases, extended; an overhaul of the UK’s Tonnage Tax system for shipping companies was announced; and the introduction of a Residential Property Developers Tax, targeting large developers, with the intention of funding building safety remediation, was confirmed.
All in all, for a Budget speech given in the run up to Hallowe’en, it delivered neither trick nor treat, and gave tax professionals little to sink their teeth into. Still, at least the prospect of cheaper beer and prosecco may have lifted the spirits of some taxpayers…
