Autumn Statement Alert

Around this time last year, the then relatively new chancellor’s main aim was to restore a semblance of stability into the UK economy, in the wake of the mini-budget that had been delivered a few weeks earlier.

This year, the task was different; the more significant corporate tax changes could be characterised as gentle progression in place of wholesale change. 

Indeed, some of the more noteworthy announcements don’t involve the creation of new exemptions, but rather extend the duration of tax reliefs which exist already.

Eye-catching features include putting company ‘full expensing’ on a permanent footing and cutting the rate of national insurance contributions.

We summarise the highlights from the corporate tax perspective below.

Extending the duration of tax-advantaged regimes

Full expensing for business

This is described by the government somewhat boldly as “the biggest business tax cut in modern British history”. 

The essence of the measure is to allow companies to write off 100% of the cost of investment in one go.

It is essentially a 100% first-year allowance which allows companies to claim a deduction from taxable profits that is equal to 100% of their qualifying expenditure in the year that expenditure is incurred.

The fundamental features of the measure are already in existence – yesterday’s announcement removes the previous time limit of April 2026 altogether.  The measure is now described as permanent.

For certain expenditure which, due to the nature of the assets, does not qualify for full expensing, a 50% first-year allowance can be claimed instead, subject to the same conditions that apply for full expensing.

This will enable a company to claim a deduction from taxable profits in an amount equal to 50% of their qualifying expenditure, with capital allowances then being capable of being claimed on the balance of expenditure in subsequent accounting periods at a rate of 6% per annum.

EIS and VCT

The government will legislate to extend the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT) to 2035. 

They have always been temporary in nature, but this new extension places the regimes on more of a permanent footing than before. 

The reliefs had been due to cease to apply from 2025, so an extension until 2035 represents a very welcome development which further cements these important and much-used reliefs as part of the UK tax-advantaged investment landscape. 

Extended duration of Freeport tax benefits

Freeports provide significant tax benefits for companies that establish themselves there, such as reliefs from stamp duty land tax, business rates, relief from national insurance contributions up to certain limits and enhanced capital allowances.

In a similar vein to the extension to the EIS and VCT regimes described above, the government is now extending the duration of the tax reliefs available in freeports from five to ten years, with the declared aim of maximising the programme’s impact.

Stamp duty changes

The government is extending the growth market exemption, a relief from stamp duty and stamp duty reserve tax, to cover smaller, innovative growth markets.

The measure allows those Financial Conduct Authority (FCA) regulated multilateral trading facilities (MTFs), run by investment firms, that are approved as ‘recognised growth markets’ by HMRC to access the growth market exemption without needing to be recognised stock exchanges. 

It will also increase the threshold for the market capitalisation condition that is used within the exemption from £170 million to £450 million.

These changes will be included in the Autumn Finance Bill 2023 for implementation from 1 January 2024. 

Reduction in National Insurance Contributions

The government announced that employee class 1 NICs will reduce from 12% to 10% from 6 January 2024, that mandatory class 2 NICs will be abolished from 6 April 2024 and that class 4 NICs will be reduced from 9% to 8% from that date.

Turning up the heat on tax avoidance

No budget would be complete without measures countering perceived tax avoidance.

There are to be tougher consequences for promoters of tax avoidance: the Autumn Finance Bill 2023 will include a new criminal offence for those who continue to promote avoidance schemes after receiving a notice requiring them to stop; and a new power enabling HMRC to bring disqualification action against directors of companies involved in promoting tax avoidance, including those who control or exercise influence over a company.

These changes are to take effect from Royal Assent of the Autumn Finance Bill 2023.

For further information in relation to any of the above, please contact David Klass.