The circumstances surrounding this year’s Autumn Statement on 17 November were unusual, if not, unique, in a number of respects. Firstly, there was the reversal before the Autumn Statement of many, though not all, of the measures announced by the previous Chancellor in the September mini-budget. Secondly, from the various pre-17 November articles in the press predicting with reasonable accuracy what could be expected in the Autumn Statement (quite apart from the general comments of the Chancellor ahead of the Autumn Statement relating to the need to take “decisions of eye-watering difficulty”), it seems clear that the government was keen to ensure that the effective tax rises affecting us all and the form they would take would not come as a surprise to taxpayers – a case of letting (or trying to let) us down gently?
From a technical perspective, one of the interesting features was the absence of the usual raft of accompanying HMRC documents/policy papers – there was only one this time: a slightly obscure anti-avoidance measure relating to UK to non-UK share-for-share exchanges by non-doms (expected to raise approximately £830m over the next five years). Even for the tax practitioner, many of the key tax changes are evident from the Chancellor’s speech to Parliament and the tax section of HM Treasury’s Autumn Statement 2022 publication. That said, revised tax legislation implementing in the UK, the OECD Pillar Two Model Rules (aiming at the introduction worldwide of a 15% minimum tax rate for large multi-internationals), is keenly awaited in the next few months. While those rules (draft legislation in relation to which was initially published by HMRC in July 2022) should not directly impact smaller companies or groups of companies, these rules could impact the terms of corporate share sales and acquisitions to or from groups which are directly impacted.
Key changes in this month’s Autumn Statement include the following:
- Income tax
- additional rate threshold reduced from £150k to just over £125k (£125,140) with effect from 6 April 2023 (so additional tax of just over £1.2k payable on incomes of £150k+);
- dividend allowance reduced from £2k to £1k for tax year 23/24 and thereafter to £0.5k;
- anti-avoidance: non-dom UK residents having a 5%+ shareholding in a UK close company who, on or after 17 November 2022, exchange the shares for 5%+ shares in a non-UK close company are now taxable on dividends received from the non-UK company, even if not remitted to the UK (shares in the non-UK company in those circumstances are treated as having UK situs for the purposes of remittance basis);
- headline rates unchanged.
- annual exempt amount reduced from £12.3k to £6k for tax year 2023/24 and £3k thereafter;
- anti-avoidance: following an exchange of shares as referred to above, non-dom UK residents are to be taxed in the same way as UK dom residents on gains realised on disposals of shares in a non-UK company (no remittance basis as deemed UK situs) unless an election is made by the non-dom UK resident to realise gain on exchange (which would otherwise be no loss/no gain, i.e. tax-neutral);
- headline rates unchanged (not harmonised with income tax).
- Stamp Duty Land Tax
- the recent resi-property SDLT cuts (increase in nil rate threshold to £250k and, for first-time buyers, up from £300k to £425k on purchases of up to £625k – up from £500k)s are now set to expire on 31 March 2025.
- Corporation tax
- OECD rules to ensure all large groups of companies (with annual revenues of EUR750m+) pay tax at the effective rate of at least 15% to take effect in 2024/25 – especially, though not exclusively, relevant to large UK headquartered multi-nationals where overseas operations have an effective tax rate of less than 15%;
- rebalancing of R&D tax reliefs/credits for expenditure incurred on or after 1 April 2023: modest reduction for small and medium-sized enterprises (SMEs) R&D relief (additional or “super” deduction rate reduced from 130% to 86% and credit rate reduced from 14.5% to 10%) and substantial increase (from 13% to 20%) for RDEC credit scheme available to large companies and certain SMEs (with government to consult on the design of single R&D tax relief scheme);
- corporation tax surcharge on banks with profits of over £100m: 3% surcharge from April 2023 (when corporation tax rate increases to 25% for all companies with (group) profits of £250k, with tapering down to 19% in respect of profits of £50k or less). So, broadly, effective corporation tax rate of 28% for banks with those profits (1% more than currently);
- large multinational businesses to be required to keep transfer pricing records in standardised and prescribed format in line with OECD guidelines (would assist HMRC TP investigations).
- VAT registration threshold (£85k) and de-registration threshold (£83k) to be retained up to end March 2026.
- Vehicle Excise Duty
- VED to apply to electric vehicles in the same way as petrol and diesel vehicles with effect from April 2025.
- Diverted Profits Tax
- DPT to be increased, with effect from April 2023, from 25% to 31% (applicable to large multi-nationals seeking to divert UK-derived profits from the UK tax net, typically by means of contrived or artificial arrangements which exploit rules requiring an offshore entity to trade in the UK through a permanent establishment to be within the charge to corporation tax).
- decision taken not to introduce online sales tax;
- annual investment allowances retained at £1m allowing for upfront relief for capital expenditure on qualifying plant and machinery of up to £1m (upfront corporation tax saving of up to £250k);
- HMRC to invest an additional £79m over the next five years to allocate staff to tackle tax fraud and address serious compliance risks among wealthy taxpayers – expected to raise an additional £725m in that time;
- HMRC to consult on extending availability of audio-visual tax reliefs “to incentivise the production of culturally British content and support the growth of the audio-visual sectors”.