Jon Hickman
Corporate Tax Partner
We have broken down announcements from the Autumn Statement into sections – you can find in depth analysis below, under the headings of Corporate Tax, Personal Tax, Indirect Taxes, Employment Taxes, Other Taxes and Industry Impacts.
Our tax experts Liam O'Doherty, Caroline Harwood, Martyne Pearson and Ben Handley are joined by Sam Miley, Managing Economist and Forecasting Lead at cebr, to analyse the Chancellor’s 2023 Autumn Statement announcement, and decipher what this could mean for you or your business - watch the webinar here.
Provisions will be introduced to make ‘full expensing’ permanent to continue to encourage business investment on plant and machinery. Full expensing was introduced in the Spring Budget 2023 for a period of three years from 1 April 2023. At the time, the Chancellor advised that the intention was to make full expensing permanent once economic conditions allowed.
Reports from the OBR estimates the measure will lead to £14 billion of extra business investment by 2028-29.
Full expensing and 50% first year allowance
‘Full expensing’ enables companies liable to corporation tax to benefit from a 100% First-Year Allowance (FYA) for capital expenditure on qualifying plant and machinery. This deduction allows companies to potentially reduce tax payable by 25p for every £1 invested in eligible plant and machinery.
The 100% FYA is available for expenditure on new and unused plant and machinery that ordinarily qualifies for the 18% main rate of writing down allowances. A FYA of 50% is also available for expenditure on new and unused special rate plant and machinery, including integral features in a building, and long-life assets that normally qualify for 6% writing down allowances.
Making ‘full expensing’ permanent incentivises businesses to invest in plant and machinery and to plan investments over time with some degree of certainty as to the tax allowances and deductions that will be available.
Consultations and Working Groups on capital allowances
A technical consultation to determine if changes could be made to the broader capital allowances regime has also been announced. The consultation will consider whether further changes to the plant and machinery rules could simplify, condense or reduce existing legislation. It will not consider other capital allowances such as structures and buildings allowances or Research and Development allowances.
The announcement suggests that changes to the scope of qualifying expenditure or the rates of existing writing down allowances, the Annual Investment Allowance (AIA) or other first year allowances are not being considered.
While there will be consultation with stakeholders, industry experts and tax professionals, substantive reform of capital allowances and other policy measures are not being considered. Working group meetings will take place from January 2024, with draft legislation being published in Summer 2024.
A working group focusing on capital allowances on leased assets is also being set up to consider whether lessors of plant and machinery should be entitled to ‘full expensing’ relief. Lessors are currently excluded from claiming relief except where the leased assets are background plant and machinery within a building.
The intention is to identify a solution that allows the leasing sector to access ‘full expensing’ relief while minimising the risk of abuse or error.
The working groups will meet between April and September 2024 and a technical consultation will be published in due course.
Conclusion
The announcement that ‘full expensing’ will become permanent will be welcomed by businesses. The tax incentive will encourage investment and provide greater certainty when making investment decisions.
Additionally, the planned consultation to consider extending full expensing to the leasing sector is a positive development and could mean that a large area of the UK economy that has so far been excluded from the regime might soon be entitled to the accelerated allowances available.
In the Spring 2023 Budget, the Chancellor committed to creating 12 Investment Zones across the UK, in addition to the existing Freeports announced in 2021. Both Investment Zones and Freeports provide a number of significant tax benefits for businesses, which were envisaged to be available for a period of 5 years.
In a move that will provide certainty to investors, both the Investment Zones and Freeports programmes in England have now been extended to run for 10 years until 30 September 2031, and a similar extension is intended for the respective programmes in Scotland and Wales. A new £150million Investment Opportunity Fund has also been confirmed to support the Investment Zones and Freeports across the UK.
Businesses established in approved Investment Zones and Freeports areas can benefit from full relief from Stamp Duty Land Tax and Business Rates, 100% first year allowances for plant and machinery, enhanced Structures and Buildings Allowances at a rate of 10% per annum, and Employers’ NICs relief for up to £25,000 per year per new, eligible employees (for up to 36 months). Freeports also have the added benefit of being customs sites and providing relief around VAT and customs.
The Chancellor has announced a series of measures in his Autumn statement to reform the pension market and unlock the capital investment needed to drive innovation and unlock the first tranche of investment from his Mansion House Reforms, which aim to deliver an open, green, and technologically advanced financial services sector.
The proposals focus on:
The detailed proposals are as follows:
Pension fund investment reforms
Pension scheme reforms
It will also set out all necessary transitional arrangements and reporting requirements.
Following an independent review of spin out companies the government will provide £20 million for a new cross-disciplinary proof of concept research funding scheme to help founders demonstrate the commercial potential of their research.
The British Business Bank’s successful ‘Future Fund: Breakthrough’ programme will also be extended to provide at least £50m of additional funding to help these innovative university spin out companies to scale up.
On 17 November 2023, the government announced £4.5 billion in funding for British manufacturing to increase investment in eight sectors across the UK. The funding will not be available until 2025 but will last for five years. The aim is to provide companies with longer term certainty around their business plans.
The manufacturing sub-sectors that will be able to apply for funding are:
Further information, including on the application processes, will be made available by the government in due course.
The Chancellor has announced further changes intended to simplify and improve the R&D tax incentive schemes in the UK.
Draft legislation relating to the merged R&D scheme was announced earlier this year and will establish an above the line credit with relief at the current RDEC rate of 20%. The merged scheme will run alongside the SME intensive scheme.
The government confirmed that the merged scheme would take effect for accounting periods beginning on or after 1 April 2024 as well as introducing several changes to the proposals:
Rate of Relief
The notional tax rate applied to the RDEC for loss-making companies will be set at the small profits rate of 19% rather than the main rate of 25%. The R&D relief available to loss-making companies will therefore become 16.2p for every £1 of qualifying spend.
R&D relief for profitable companies continues to be 15p for every £1 of qualifying spend where the main rate of corporation tax applies.
Contracted-out R&D
In the draft legislation published in July 2023, the government proposed that the merged scheme should allow the R&D decision maker to claim for contracted-out R&D spend. Further clarity was provided as to how this would be legislated.
The announcement also included examples of how HMRC would prevent double claims for the same expenditure.
Broadly, the new rules will align the R&D claim with the company making the R&D decisions and taking the risk. Although, as already noted in the draft legislation, the new rules won’t prevent a UK entity making a claim where the work has been subcontracted to it from an overseas entity.
The changes apply to both the merged and R&D intensive schemes for relief.
Subsidised expenditure
As a result of the changes to the contracted-out R&D rules, the current provisions relating to subsidised expenditure are no longer relevant and will be removed from the legislation. This means that in some cases relief will be available to companies that have R&D projects which are either subsidised or grant funded.
Other changes
The proposal for the more generous PAYE/NIC cap rules from the existing SME scheme to be adopted has been confirmed.
Restrictions on relief for overseas expenditure will come into effect for accounting periods beginning on or after 1 April 2024.
Enhanced support for R&D intensive SMEs
It had previously been announced that loss-making SMEs whose R&D expenditure constitutes at least 40% of their total expenditure, incurred on or after 1 April 2023, would continue to receive relief in the form of an SME tax credit. This was confirmed today, along with a reduction in the threshold as follows:
Further action of R&D fraud
It has been well publicised that the cost of non-compliance in R&D reliefs is £1.13 billion. The government is clear that this level of non-compliance within the R&D tax reliefs is unacceptable.
Currently, the taxpayer can nominate a third party such as the R&D/tax agent to receive a tax refund or R&D tax credit instead of the claimant company. Similarly, an assignment gives a third party a property right over a payment.
HMRC have indicated that while most uses of nomination are not associated with fraud, a high proportion of fraudulent or fraud-adjacent claims use nominee bank accounts. HMRC will change the process so that only claimant companies can received tax refunds or R&D tax and expenditure credits.
HMRC is also preparing to publish an R&D compliance action plan to further reduce levels of non-compliance.
Summary
We had hoped the government would delay the introduction of the merged scheme for a least a couple of years. Our main concern is that in merging the schemes, the government has in fact added complications and uncertainty in the coming periods.
There are now multiple tax and tax credit rates depending on if you are a profit or loss-making company. There is the inclusion and exclusion of certain cost categories depending on a company’s period end; further complicated by periods straddling either 1 April 2023 or 2024. The concept of an SME still exists and needs to be considered, following the introduction of an R&D intensive company rules.
This is quite a minefield to navigate and we recommend speaking to our R&D specialists to review the impacts of these changes on your business.
The government will introduce the Undertaxed Profits Rule (UTPR) in the UK for accounting periods beginning on or after 31 December 2024. This will affect multinational enterprise groups with annual global revenues exceeding €750 million and business activities in the UK.
Legislation will be included in an upcoming Finance Bill. The UTPR is the backstop rule in Pillar Two, the international OECD BEPS agreement designed to combat profit shifting and aggressive tax planning by multinational enterprises.
The government will also provide technical amendments to the Multinational Top-up Tax (MTT) and Domestic Top-up Tax (DTT) legislation through the Finance Bill 2023/24. MTT and DTT are the UK’s adoption of the income inclusion rule and domestic minimum top-up tax rule in the Global Anti-Base Erosion (GloBE) Rules per the OECD BEPS project.
Other proposed GloBE revisions
Part 3 and Part 4 of Finance (No.2) Act 2023 will also be amended to effectively implement the GloBE rules, commentary and administrative guidance.
These amendments pertain to a number of revisions, including the following:
Repeal of Offshore Receipts in respect of Intangible Property (ORIP)
The government will introduce legislation repealing the Offshore Receipts in respect of Intangible Property (ORIP) rules in 2024.
ORIP rules discourage multinational enterprises from placing intangible property in low tax jurisdictions, particularly where income will be subject to low or no tax – subject to certain exemptions. For instance, if the group’s UK turnover is £10m or less. Or if, substantially, all of the Intangible Property’s related business activity has always been undertaken in the resident territory, and/or if foreign tax is at least 50% of the ORIP tax charge.
If the entity was an off-shore entity, and not resident in a full double-treaty territory with the UK, ORIP imposes an income tax charge on the ‘UK-derived amounts’ that arise in the tax year.
ORIP repeal will take effect for income arising from 31 December 2024, in tandem with the introduction of the Pillar Two Undertaxed Profits Rule, as the Pillar Two rules act to comprehensively discourage aggressive tax-planning arrangements previously targeted by the ORIP regime.
Other announcements within the Chancellor’s 110 measures that will be of interest to businesses include:
For self-employed workers there will be a reduction in the amount of NIC they pay. From 6 April 2024 Class 2 NIC (currently £3.45 per week) has been abolished, but those with profits above £6,725 will continue to receive access to contributory benefits including the State Pension. This will be an annual tax saving of just less than £180.
Those with profits under £6,725 will be able to continue to pay Class 2 NIC voluntarily to get access to contributary benefits, and the £3.45 weekly rate has been frozen for 2024/25.
The main rate of Class 4 NIC will also be reduced to 8% (down from 9%) from 6 April 2024. This applies to profits between £12,570 and £50,270 - above this the 2% rate remains the same. Therefore, if you are already paying Class 4 NIC, this represents a tax saving of £10 for every £1,000 of profit in the main Class 4 NIC band, up to a maximum of £377 per year. As the accounting period reform also takes effect from 6 April 2024, this will impact profits allocated to the 2024/25 tax year.
The government announced that individuals who only receive income that is taxed at source under PAYE will not be required to file a tax return from 2024/25. This should reduce the number of tax returns that HMRC receives annually and bring relief for up to 338,000 individuals who have simple tax affairs, even if their income exceeds £150,000.
However, it’s important to remember that the savings and dividend allowances were reduced, bringing more people into self-assessment unless the additional tax is fully collected via adjustments to their PAYE tax code. Other criteria for filing a return, including being self-employed or a partner in a partnership, renting property and receiving income from abroad will remain in place.
The ATED charge will increase in line with inflation by 6.7% from April 2024. This will take the charge to £4,400 a year for a property valued between £500,001 to £1m, and at the top end of the scale to £287,500 a year for a property valued over £20m (up from £269,450, being an increase of over £18,000).
With ATED charges increasing, and where a property is brought over the £500k threshold for the first time, it may be beneficial to consider “de-enveloping” properties from existing structures. See here for further information.
When calculating your taxable profits, you can either use the cash basis or accruals basis. Currently, access to the cash basis is restricted in terms of being able to elect to use it and when loss relief / interest costs can be claimed. From April 2024, all the restrictions have been removed and the cash basis will become the default calculation method, and an election will be needed if the accruals basis is to be used. Those moving to the cash basis will benefit from accelerated relief for costs – it will be given in the period costs are incurred rather than spreading out the cost to the periods they relate to.
Pension changes
Although the lifetime allowance charge was removed from 6 April 2023, the framework under which it operates still exists. The chancellor confirmed his intention to also abolish that framework and to clarify certain matters. However, the statement that ‘the tax treatment of overseas pensions’ will be clarified does suggest that there might be further announcements to come, as overseas pensions only have very limited reference in the draft legislation published in July.
Policy papers published alongside the Autumn Statement confirms the Chancellors intention to introduce changes to the taxation of beneficiaries who receive a lumpsum from inherited pension funds. Currently, income tax is only payable if the deceased was 75 or over when they died. The policy paper confirms the intention set out in the draft Finance Bill included clauses that would extend income tax on pension funds where they die younger than 75. The proposal triggered significant backlash in the media when first published.
The Chancellor also set out plans for a consultation on allowing employees to request their workplace pension be paid into a single pot, rather than adding new pensions with every job move.
Employer pensions
In very limited circumstances, an employer may receive a repayment of surplus funds from a defined benefit pension scheme, for example on its winding up. Currently, such repayments are subject to an ‘authorised surplus payments charge’ of 35% which the Chancellor has announced will be reduced to 25% from 6 April 2024. In addition, a consultation will be launched on the regime which allows surpluses to be repaid.
In July 2023, the High Court decided in Uber Britannia Ltd v Sefton MBC that private hire operators throughout the UK must act as deemed principal when providing private hire services.This is the position in London, following the previous Uber judgments, and Uber was asking the High Court to apply the same principles elsewhere.
There is a significant VAT impact associated with this, meaning that many operators who act as agents on behalf of (mostly) non-registered drivers would be liable to pay VAT on all the sums paid by the customer. This may in turn lead to price increases for consumers.
The government has now announced that it will consult on the impact of this judgment in early 2024.
The government announced extensions to the zero rate of VAT in areas it had already consulted on or been lobbied for:
Women’s Sanitary Products
The current zero-rated relief on women’s sanitary products will be extended to include reusable period underwear from 1 January 2024. A rate of 20% currently applies. Some major retailers have already announced price reductions on these products but all retailers will be under pressure to deliver savings to consumers.
Energy Saving Materials
The government will extend the zero-rated relief for energy-saving materials to additional technologies such as water-source heat pumps. The relief is limited to 2027.
The government will, from February 2024, re-introduce a relief for energy-saving materials installed in buildings used solely for a relevant charitable purpose. This relief has been removed at the request of the EU. More details are to be published soon.
Tax Free Shopping
The government has not re-introduced the much lobbied-for relief on Tax Free Shopping. However, it has promised to continue to hear representations and consider the matter. The announcement will give the retail sector some hope that further lobbying may see the re-introduction of this relief which ended when the UK left the EU.
The government has announced the latest estimate of the VAT Gap for the 2022/23 year. The latest estimate indicates a slightly lower VAT Gap in percentage terms (5.3%) than the previous estimate. However, the total VAT gap is estimated at £8.8bn, an increase of around £1bn.
The VAT gap is measured by comparing the net VAT total theoretical liability with actual receipts.
There were a number of other Indirect Tax measures announced. These included:
Plastic Packaging Tax
The rate of Plastic Packaging Tax will rise in line with CPI, from 1 April 2024, from £210.82 to £217.85 per tonne.
Following a consultation on a ‘mass balance approach’, the government will publish an evaluation plan by the end of the year and gather further evidence to inform the future trajectory of the rate and recycled plastic content threshold.
Rebated oil
The list of ‘excepted machines’ that can use rebated fuel (Red diesel) will be expanded to include machines and appliances that use heavy oil other than gas oil, or bioblends that do not contain gas oil, for commercial heating. This corrects an anomaly that arose when the rules were changed on 1 April 2022 and will apply from the date of Royal Assent to the Autumn Finance Bill 2023.
Tariff suspensions
The government will retain around 2000 tariff suspensions on imported goods and will extend the relief for five years rather than the current one-year tariff suspension cycle. This covers goods ranging from vaccine components to ingredients used by UK food producers. The import relief is to provide continuity and avoid unnecessary costs to UK businesses.
Remote Gambling
The government will consult on proposals to bring remote gambling (via internet, telephone, TV and radio) into a new single tax.
Interpretation of VAT and excise law from 1 January 2024
As announced in a technical consultation on 20 October 2023, the government will introduce legislation in the Autumn Finance Bill 2023 to clarify how VAT and excise law should be interpreted in the light of changes made by the Retained EU Law (Revocation and Reform) Act 2023 (REUL Act).
For the employed, Class 1 NICs apply from an annual lower threshold of £12,570 to an annual higher threshold of £50,270 - currently at a rate of 12%. For those earning above this level, the rate drops to 2% on all additional earnings. From 6 January 2024 the main rate will drop from 12% to 10%, which will generate a maximum saving of £63 per month thereafter (£754 per tax year). The thresholds will remain the same, as will the 2% rate. Employers also pay NICs, currently at a rate of 13.8% over the lower threshold, but no changes have been announced so this rate will remain.
While these changes will provide a welcome financial uplift for employees in the New Year, employers may take a different view: there will be one-off administration costs to meet, and a reduction in the Employers NIC would have been welcomed in the current economic climate. However, the increase in take home pay may relieve some pressure on wage increases, and the extension of the zero-rate exemption for Employers Class 1 NICs on the employment of qualifying veterans for the 2024/25 tax year may be of benefit.
The Chancellor’s back to work plan is a bold combination of carrot and stick.
Starting with the ‘stick’ elements of the plan, the ONS data shows that over 300,000 people have been unemployed for over 12 months, representing around one fifth of the total UK unemployed population. The longer someone is unemployed, the harder it is to return to work, so a targeted set of measures to tackle this issue will focus on those claiming Universal Credit. This will include providing Job Centre support and coaches working with claimants on the skills that will help them get a job. After six months of this, individuals will have a 12 months on an enhanced “Restart” programme, and if they have not found work at the end of this period they will be required to take up a mandatory work placement. Refusal to do so at the end of the 18m period will result in the Universal Credit Claim being stopped.
With changes in the world of work, not least the enhanced ability to work from home, the Chancellor also is looking at a package of measures costing £1.3bn over the next five years to help the long-term sick or disabled back to work. This will include £795m to support those with mental health issues, and end-to-end reform from 2025 of the “Fit Note” system, focusing on treatment options and enabling work. Employers should keep up to date with the reforms as they take shape.
In order to make work pay, a significant increase in National Living Wage will take effect from April 2024. Those aged 21 or 22 will now be paid at the same rate of £11.44 as those 23 and over, representing a 12.4% increase (9.8% increase for the older age bracket). Those aged 18-20 will enjoy a 14.8% increase to £8.60 per hour as will those under 18, and apprentices under 19 will see a 21.2% rise to £6.40 per hour.
For those employing a high proportion of lower paid workers this will represent a significant cost increase, and the complex nature of the NMW/NLW rules mean that it will be more important than ever for employers to focus on ensuring that they do not inadvertently under pay. Now is the time to review your NMW/NLW policies and procedures to ensure that you are fully compliant before the rate increases come into effect.
Following a consultation, the chancellor confirmed that VAT compliance will be included in the statutory compliance obligations for subcontractors applying for and maintaining gross payment status (GPS) from 6 April 2024.
This is a welcome measure - however, for those who apply for and obtain GPS on or after its commencement, HMRC would look at the 12 months preceding the application, which if it includes a pre commencement period, could be problematic. For those who already hold GPS, compliance or otherwise with VAT obligations will only apply from 6 April 2024 onwards.
The government is also extending the ability of HMRC to immediately cancel GPS if it has reasonable grounds to suspect that the holder has fraudulently provided an incorrect return or incorrect information in respect of its VAT, Corporation Tax Self-Assessment (CTSA), Income Tax Self-Assessment (ITSA) and PAYE.
In response to HMRC consultation, further changes are to be introduced to remove the majority of payments from landlords to tenants from the scope of CIS. This will result in subcontractor registrations not being required. Other changes have been introduced, such as the reduction from 12 months to 6 months for the review following GPS being granted, and the move to digital applications for CIS registrations. Assuming the platform is safe and secure, this should be more effective and allow HMRC to be chased for a response.
The Government has announced that it will allow offsets of income tax and NIC paid by a contractor operating via a personal service company (PSC), plus any Corporation Tax (CT) paid by the PSC, where the contractor is deemed to be an employee under the Off-Payroll Working legislation (otherwise known as IR35).
This will entitle the deemed employer to deduct from assessments of PAYE/NIC due appropriate taxes already paid on the same payments by the deemed employee. These offsets are available for both public sector and private sector employers.
The offsets will only be available for settlements agreed after 6 April 2024, but from that date will retrospectively apply to cover historic assessments. For public sector employers this means back to 6 April 2017 when the Off-Payroll Working legislation applied for them, and for private and third sector employers back to 6 April 2021 when the Off-Payroll Working legislation was rolled out more widely.
This will be a welcome move and one that we have been advocating for, as it gives more certainty in settlements, provides greater consistency with the offsets approach where self-employed contractors are categorised as employees, and reduces the overall risk of double taxation.
As these measures are not immediately enacted and are subject to change through Parliamentary process, employers currently facing an enquiry with HMRC regarding the use of off-payroll workers may wish to defer agreeing any settlement until after 6 April 2024. In some cases, HMRC have already offered the deferment as a consequence of the consultation preceding this announcement.
Employers agreeing such settlements should also be mindful that there will be amounts due to HMRC even after offsets, so the new measures will not completely remove their liability. Firstly, employer’s NIC (and possibly Apprenticeship Levy) will be assessed by HMRC and will not have been paid by the contractor. Secondly, most contractors do not pay all their contractor income through their own payroll and apply PAYE/NIC in full. Instead, most contractors draw a lower salary with the balance in dividends.
Their PSC will pay corporate tax under this approach because dividends are taxed at a lower rate. The PSC will not be liable for NIC, and because the corporate tax rate is lower than income tax the amount available for offset is unlikely to cover the PAYE and employee NIC due.
Despite the overall good news message of the announcement, some uncertainties remain. The offset will be based on HMRC’s “best estimation” of tax/NIC paid by the contractor and their PSC – how that will operate in practice, and whether the purported employer will be able to appeal for a higher offset if they can demonstrate the basis of HMRC’s estimation is incorrect, is unclear.
At this stage it is not exactly clear which taxes are included in the amounts available for offset. Hopefully the draft legislation will clarify these matters and result in a smooth implementation of this positive measure.
HMRC was owed around £45.5 billion in unpaid taxes as of 30 September 2023. The government has announced it will invest a further £163 million to enhance HMRC’s ability to manage tax debts.
The additional money should enable HMRC’s debt management and banking team to expand its capacity to collect debts from individuals and businesses and provide support those taxpayers who need it. The funds are also intended to help HMRC better distinguish between taxpayers who are temporarily unable to pay, and need support, and those who can pay but choose not to do so. HMRC will be better target its debt collection work.
HMRC now offers Self-Service Time to Pay (SSTTP) so that many taxpayers who owe self-assessment tax, PAYE or VAT can request an instalment payment arrangement online. Anyone who owes money to HMRC should proactively contact HMRC, either using SSTTP or by telephoning HMRC to arrange to settle debt by instalments. They should do this before HMRC’s debt collection teams or third-party debt collection agencies take the initiative.
Late payment interest on unpaid taxes accrues daily with the current interest rate at 7.75%. Late payment penalties may also be charged.
The main point of note for life sciences businesses will no doubt be the merger of the R&D tax credit regimes from April 2024. It is good news for the sector that grant funded R&D activities should still qualify under the new regime. The reduction in intensity threshold to 30% should also be helpful to many in the sector. However, we must wait for more details on the subcontracting changes, including criteria for certain overseas activities, such as clinical trials to qualify for relief.
The results of a review of university spin-out business companies were published today including recommendations on how to further support Spin-out success. £520m of funding was announced to support the sector and the EIS/VCT rules sunset clause has also been extended to April 2035. It was also encouraging to hear that the Chancellor is looking at capital reforms for making the UK more attractive for growth and listing.
Lastly, the life sciences M&A market is showing more resilience than many other sectors and for shareholders looking to sell there were, once again, no changes to Capital Gains Tax.
If you would like to discuss today’s announcement in more detail, please email Carole Le Page and one of our Life Sciences experts will get in touch shortly.
The Autumn Statement announcement was a welcome one for the UK manufacturing sector, addressing some long-standing concerns and providing much-needed support.
The government's commitment to growth and attracting foreign investment is a positive move, as it recognises the potential of the UK's advanced manufacturing industry. The £4.5bn direct investment in strategic sectors such as automotive and aerospace demonstrates a forward-thinking approach to embracing zero-emissions technology and fostering innovation. The Made Smarter programme is particularly promising, as it will enable SMEs to adopt advanced technologies and improve productivity while reducing their carbon footprint.
On the tax side, the decision to make "full expensing" capital allowances relief permanent is a welcome one, and something the sector has long called for. Whilst the £50m pilot for apprenticeships is also a good start, the sector still needs a comprehensive review of how to fully bridge the skills gap and encourage long-term growth.
Finally, the merging of SME and RDEC R&D incentives is a positive step towards simplifying the process for manufacturers, but more can be done to streamline the system and provide consistent support for businesses as they grow.
Overall, the Autumn Statement has provided some much-needed support for the UK manufacturing sector, and it is reassuring that the government has listened to the industry's concerns and is looking to work collaboratively to ensure long-term growth and success - read our full analysis here for the sector.
If you would like to discuss today’s announcement in more detail, please email Simon Bird and one of our Manufacturing experts will get in touch shortly.
Autumn Statement 2023: How will it affect the Not For Profit sector?
The Chancellor used his Autumn Statement to introduce several reforms relevant to the Not for Profit sector, specifically:
If you would like to discuss today’s announcement in more detail, please email John Angood and one of our Not For Profit experts will get in touch shortly.
It was a relatively quiet Autumn Statement for real estate investors, but one that nevertheless included several important announcements that the industry should note:
In summary, a more incremental set of announcements with no material policy changes, but the Autumn Statement should provide a degree of certainty for real estate investors.
If you would like to discuss today’s announcement in more detail, please email Phil Smith and one of our Real Estate & Construction experts will get in touch shortly.
In this budget the Government reaffirmed its commitment to the oil and gas industry and to renewable power generation, acknowledging the importance of long-term stability for investors and operators.
The key takeaways for the industry are:
The surprise announcement of an exemption from the Electricity Generator Levy for new renewable electricity generating stations or expansion of existing renewable electricity generating stations.
Confirmation that the Electricity Generator Levy and Energy Profits Levy will end by 31 March 2028.
A range of other measures, including:
To accelerate the offshore wind deployment, the Government will bring forward legislation to provide the Crown Estate with borrowing and wider investment powers.
The oil price floor introduced to switch off the Energy Profits Levy – the Energy Security Investment Mechanism - will be adjusted annually in line with CPI from April 2024.
Plans to introduce tax relief for payments made by oil and gas companies into decommissioning funds used to repurpose assets for use in carbon capture usage and storage.
Although it is disappointing for the industry that windfall taxes remain, today has indeed provided increased certainty for the future which will be welcomed.
If you would like to discuss today’s announcement in more detail, please email Viran De Silva and one of our Natural Resources and Renewable Energy experts will get in touch shortly.
Freeport tax relief extension
The Government announced the extension of Freeport tax reliefs to 30 September 2031 in England, and extended Investment Zone tax reliefs and Freeports from five to ten years in Scotland and Wales (subject to agreement with the devolved administrations). These measures, combined with a £150 million Investment Opportunity Fund supporting Investment Zones and Freeports, should help provide additional certainty for investment in businesses operating in these areas and the associated maritime and transport sector more generally.
The Emissions Trading Scheme (ETS)
The ETS is seen as an important part of the Government’s net zero plans. The scheme will be extended to cover emissions from domestic maritime in 2026 and, following on from announcements earlier this year, it was confirmed that there will be a 45% reduction in ETS permits available for purchase from Government between 2023 and 2027.
Tonnage tax
Previous announcements that introduced third party ship management activities into the Tonnage Tax regime and increased the limit on capital allowances to £200 million for lessors of ships have been confirmed for inclusion in the Autumn Finance Bill 2023. These measures will take effect from 1 April 2024.
If you would like to discuss today’s announcement in more detail, please email James Bailey and one of our Shipping industry experts will get in touch shortly.
The announcements in the Autumn Statement that are specific to the financial Services industry include confirmation of the new long-term business fixed capital regulations and Solvency II reform and changes to pension rules that will affect insurance groups.
The government is still keen to introduce a specific regime for UK captive insurers and will consult on plans in Spring 2024. We look forward to publication of that consultation and the measures being considered.
For Banks, there were measures affecting ISAs, such as expanding investment options, and a Payments review that these groups should monitor. A draft statutory instrument regarding the government’s plans to implement reforms to the UK short selling regime was released. This is part of HM Treasury’s programme to deliver a Smarter Regulatory Framework for financial services specifically tailored to the UK. Technical comments on the draft instrument are invited by 10 January 2024.
Financial services businesses will also be affected by many of the business tax changes announced today including the measures to make capital allowance “full expensing” permanent and the R&D regime reform. Pillar Two developments will continue to be of great interest to the industry too. The announced NI reductions will also be welcomed by employees of financial services businesses that employ significant numbers of people in the UK.
If you would like to discuss today’s announcement in more detail, please email Michael Whiteside and one of our Financial Services experts will get in touch shortly.
Announcements focussed on rewarding work and creating business incentives should be good news for consultants, law firms, property advisory and recruitment firms.
The reduction and simplification of National Insurance for the self-employed, including for members of LLPs and for employees will be welcome news for people businesses, which have seen significant pressure on their reward propositions during the ongoing cost of living crisis.
However, with fiscal drag (the impact of inflation moving taxpayers into higher tax brackets) so prevalent, it is difficult to see how today’s announced cuts to National Insurance will create additional productivity or reduce the pressure on firms to make their reward incentives fit for purpose.
International firms will have already been planning for the introduction of Pillar 2’s minimum 15% effective tax rate, but the administrative burden it poses for professional services firms seems in opposition to the Government’s aim of a simpler tax system and the long-awaited introduction of Making Tax Digital.
On a positive note, the permanent introduction of full expensing of capital spend will be attractive for those professional services businesses already looking at office moves or investment in technology, but a significant question remains whether the economic outlook is sufficiently positive to use these measures as a catalyst to invest in growth opportunities.
If you would like to discuss today’s announcement in more detail, please email Neil Williams and one of our Professional Services experts will get in touch shortly.
Increases to both the national minimum and living wage together with extension of the national living wage to 21- and 22-year-olds will increase pressure on the budgets of health and social care businesses, particularly those with fixed local authority funding.
However, these increases, together with the 2% reduction in national insurance will be welcomed by care home workers who have been hit hard by the cost-of-living crisis. The key question for health and social care businesses is whether increased staff pay coupled with the roll out of 30 hours free childcare to younger children will translate into an easing of staff shortages, that may in turn enable them to reduce reliance on more expensive agency workers.
Meanwhile, the move to put “full expensing” permanently in the rule book provides care businesses investing in equipment and their care home estates with some certainty that, in the minds of the current government at least, these reliefs are now here to stay. This measure should encourage businesses to commit to capital projects safe in the knowledge that swift tax reliefs are available for plant and machinery.
If you would like to discuss today’s announcement in more detail, please email Vicky Robertson and one of our Health and Social Care experts will get in touch shortly.
The Autumn Statement will be met with mixed reviews from the consumer markets sector. Many in the retail and hospitality sectors will feel the Chancellor has not gone far enough.
The further extension of the freeze on small business rates will provide a lifeline to help keep afloat those smaller businesses that are most at risk. However, almost two-thirds of the sector, particularly mid-market and larger businesses, will receive no benefit from these measures and will face substantial hikes in business rates on top of other increasing costs pressures.
The cuts to National Insurance and increases to National Living Wage will be welcomed generally. However, these measures will not relieve costs for the employer and it remains to be seen if these measures result in an increase to consumer spending when inflation, energy costs and interest rates remain high.
The lack of any targeted reduction in VAT rates and the failure to reverse the ‘tourist tax’ will be seen as missed opportunities by the sector. Either of these would have improved confidence and been a welcome support for businesses in the midst of the ‘golden quarter’.
To end on positive note, the announcement that ‘Full expensing’ will be made permanent means business can progress their investment plans knowing 100% relief on certain assets will continue. The hospitality sector have welcomed the freeze on alcohol duty until August 2024 and hopefully this will provide a bit more than just festive cheer!
If you would like to discuss today’s announcement in more detail, please email Neil Stockham and one of our Consumer Markets experts will get in touch shortly.
"Many of the challenges that we face as a country, and many of the opportunities that we wish to exploit will not be possible without the active support and assistance of the brilliant people that we have in local government" – the words of the Secretary of State earlier this week.
Local government is under significant financial pressure caused by rising costs and demand on services with the sector looking for longer term financial sustainability. Challenges are around child social care, which currently has the highest number of cases since records began, adult social care, homelessness and housing. The measures announced in the Autumn Statement today that will impact local government include:
The measures announced go some way to addressing challenges on housing and improving the planning process. However, the announcements made did not specifically address financial sustainability for the sector, with annual financial settlements still the current arrangement. The Government also stated a clear intention to increase productivity in public sector activities by 0.5% each year to bring it in line with the private sector. This, along with the recent establishment of the Office for Local Government (a performance body for Local Government) set out ambitions for the sector to drive efficiencies and new ways of working.
Today’s Autumn Statement may leave some in the sector with the same concerns of how to balance budgets without impacting service delivery. The Autumn Statement is often followed by further announcements and details in the coming weeks and months, and voices in the sector will become louder in wanting to understand whether this will address the concerns around long term planning and financial sustainability.
If you would like to discuss today’s announcement in more detail, please email Gurpreet Dulay and one of our Public Sector experts will get in touch shortly.
The key measures of relevance from the Statement for the Tech, Media and Telecoms sector include:
Jon Hickman
Caroline Harwood
Ben Handley
Martyne Pearson
Liam O'Doherty
Dawn Register
Paul Falvey