As with all fiscal events, there was significant speculation prior to today's Autumn Statement. However, with an eye on next year's election, and possibly reflecting on the economic damage caused by the Mini Budget of September 2022, the Chancellor presented an Autumn Statement without significant tax changes or proposals.
It is important to comment on what was not included today. Despite speculation, there was no change to inheritance tax (IHT). The threshold of £325,000, which has applied since 6 April 2009, will remain unchanged until 5 April 2028. No changes to IHT reliefs were proposed, leaving business property relief and agricultural property relief untouched. Equally, the Chancellor made no comments on the tax regime for non-domiciliaries, which Labour have proposed to abolish should they win the next election. It was announced in November 2022 that the Treasury's high net worth individuals policy team would review the regime but nothing further has been heard on the subject.
Key points on National Insurance and capital allowances amongst others are noted below.
Employee National Insurance Contribution (NIC) – freezing of Lower Earnings Limit threshold and reduction of rate from 12% to 10% with effect from 6 January 2024
Not only was the rate reduction greater than expected but the change is to take effect from 6 January 2024, rather than at the start of the 2024/25 tax year. Whilst the news will be welcome for many, the short-notice, mid-year change will have payroll teams scrabbling to update systems and prepare for different deductions to be applied at the start of the 2024 calendar year. Some employers may find it takes longer to implement these system changes and they will need to be prepared to field queries from employees about their January payslips meanwhile. The Lower Earnings Limit – the point at which employees start to receive NI credits - has been frozen at £6,396, in line with last year’s approach. This supports low income working individuals by maintaining their access to NICs credits, without having to pay NICs. In relation to the rate cut, there may be some circumstances where employers and employees have a choice about when to trigger a tax point in relation to earnings but requests to defer bonus payments, delay settlement payments relating to termination and/or decisions to delay exercise of share options will need to be weighed carefully and advice should be sought. A marginal saving in NIC might be outweighed by other factors or other provisions which might mean a deferral is not possible or advisable in the circumstances. Additionally, in relation to statutory directors, the tax point may be when the bonus is earned and not, if later, when it is actually paid.
Author: Liz Hunter
Enterprise Management Incentive (EMI) - Draft legislation published confirming change of notification deadline
This was not new news as the measure to amend the reporting obligation regarding notification of an EMI share option grant had been previously announced in the Spring Budget earlier this year, however we have today seen published the draft legislation which will give effect to this change for EMI options granted on or after 6 April 2024. The new reporting deadline will be 6 July following the end of the tax year in which the grant was made, rather than within 92 days as it continues to apply for EMI options granted during 2023/24.
Author: Liz Hunter
Off-Payroll Working (IR35) – calculation of PAYE liability in cases of non‑compliance
The Government will legislate in the Autumn Finance Bill 2023 to allow HMRC to reduce the PAYE liability of a deemed employer to account for taxes paid by a worker and their intermediary on payments received where an error has been made in applying the off-payroll working rules. This new statutory offset position will be very welcome for employers but is not a reason to get complacent about status reviews.
Author: Liz Hunter
Reforming requirements to file a Self-Assessment tax return for employees
Individuals with income taxed only through Pay As You Earn will no longer need to file a Self-Assessment return from 2024/25. However, as there was no u-turn on the reduction in the CGT exempt annual allowance, 2023/24 and 2024/25 self-assessment tax returns will still be needed by many who may have CGT to pay for the first time. This may include those employees realising small gains from all-employee share plans unless they choose not to dispose of shares and port them into a corporate ISA or else report their gain via the 'real-time capital gains tax reporting' online system instead.
Author: Liz Hunter
Venture Capital Tax Reliefs – Regime extended to 2035
The Government will legislate to extend the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT) to 2035. This measure is necessary as otherwise the existing regimes' shelf-life expires in April 2025. There is no such sunset clause for the Seed Enterprise Investment Scheme (SEIS) so that would continue to be available in any event. These investor tax reliefs play a crucial part in supporting funding for eligible formative and growth-stage entrepreneurial business in the UK so the confirmed extension of the reliefs is most welcome. Given how highly prized these reliefs are, companies and investors should ensure they take appropriate advice to mitigate the risk of inadvertently triggering loss or partial withdrawal of relief during the early years of the shareholding, in particular in relation to any changes to share capital, business activity, corporate structuring or personal connection with the company. The mechanics of how such a subscription is managed is also important as an administrative slip-up can result in loss of expected relief.
Author: Liz Hunter
Capital allowances – full expensing
In the Spring Budget 2023, the Government announced a new 100% first-year capital allowance for qualifying plant and machinery assets, and a 50% first-year allowance for qualifying special rate assets, from 1 April 2023 to 31 March 2026. At Autumn Statement 2023, the Government announced that full expensing would be made permanent. The removal of the March 2026 end date is a welcome move in order to provide maximum certainty to businesses and enable long-term investment decisions to be made. The Chancellor stated that this change represents the "largest business tax cut in modern British history".
HM Treasury and HMRC are also launching a technical consultation into wider changes to the capital allowances regime to determine whether broader changes could be made to simplify the existing capital allowances legislation, given the sustained role for writing down allowances (as historic expenditure will remain pooled, as well as the balance of the 50% first-year allowances for special rate expenditure).
Author: Ceinwen Hayes
Business Rates
The Government announced a business rates support package worth £4.3 billion over the next five years, in order to support small business and the high street:
- the small business multiplier will be frozen for a fourth consecutive year; and
- Retail, Hospitality and Leisure (RHL) relief (a 75% discount) will be extended for another year,
these measures ensuring that the most vulnerable businesses continue to be supported. The standard rate multiplier will be updated in line with CPI inflation.
Author: Ceinwen Hayes
Real Estate Investment Trusts (REITs)
Further to the publication of draft legislation on 18 July 2023, the Government is also amending the rules for REITs to enhance the competitiveness of the regime. Various rule changes (which have been anticipated) are to take effect from either Royal Assent of the Autumn Finance Bill 2023, apply to accounting periods ending on or after 1 April 2023, or will be deemed to have always had effect.
Author: Ceinwen Hayes
R&D measures
Following consultation, the current R&D Expenditure Credit (RDEC) and SME schemes will be merged from April 2024 onwards, simplifying the system. The rate at which loss-making companies are taxed within the merged scheme will be reduced from 25% to 19%. The intensity threshold in the R&D intensives scheme will also be reduced from 40% to 30% for accounting periods that start on or after 1 April 2024. A one-year grace period will also be introduced, which will enable companies who dip under the 30% threshold to continue to receive relief for one year.
Focusing on investments in university spin-outs, the Chancellor announced that the Government is accepting all the recommendations of the Independent Review of Spin-outs and set out how it will deliver them. The Government will provide £20 million for a new cross-disciplinary proof-of-concept research funding scheme, to help prospective founders in the UK’s universities demonstrate the commercial potential of their research.
Author: Carol Katz