Anticipating the Autumn Statement '23

Looking ahead to next week’s Autumn Statement, we examine the possible changes across key tax areas for both private clients and businesses.

The economic context for this Statement is fragile:?weak growth, a high tax burden and the prospect of short-term recession. In better news, interest rate rises seem to have peaked and inflation has subsided.

?Easing the way: tax incentives rather than budget increases

In such an environment, the government’s challenge is to find the right levers to boost investment and productivity without mandating tax increases and so increasing their own budget for public spending. We anticipate a focus on areas such as addressing tax avoidance, reducing bureaucracy for small businesses and introducing or refining tax incentives.

These may seem like minor changes, but they can have a significant cumulative impact on clients’ portfolios, so we are preparing to act quickly on their behalf.

Key tax areas for private clients

Inheritance tax is the subject of much current speculation. As it brings in ￡7bn to the treasury annually, we do not anticipate its entire removal, but a headline-grabbing cut is possible. We do expect to hear news of changes to the nil rate tax band.

?As ever, we will continue to work with our private clients to ensure the best possible tax structure is in place for their asset base, and that effective tax planning is engaged to protect their estates.

?Key tax areas for business

Capital allowances were subject to the new 100% first year allowance for three years from April 2023. There is speculation that the allowance will be extended past April 2026, which would undoubtedly ?help businesses with their longer-term strategic investments.

?Sunset clauses under the enterprise investment scheme (EIS), and venture capital trust (VCT) scheme may be extended past the current 2025 date.

?Artificial Intelligence (AI) relief

Leading technology firms have written to the Chancellor to encourage government support for investment in digitalisation, by offering enhanced tax reliefs for expenditure on digital services for small and medium-sized enterprises (SMEs). We expect this to be a key area for tax legislation development in the coming years.

The firms’ recommendation is for a 140% deduction on the first ￡50,000 of expenditure on certain digital and AI services.

Other anticipated areas of focus

?The R&D relief schemes merger (between SME and RDEC) into a single scheme for simplicity, effective from April 2024, is now expected to be amended. This would result in less complexity for businesses and so increase their competitiveness on the global stage.

?The Pillar Two rules (BEPS 2.0) implementation is for international companies with worldwide revenues of over €750m, from 1 January 2024. This is expected to feature in the Autumn Statement and the likely revenue to be included in government’s projections. It would mean a top up tax on profits arising in jurisdictions where the effective tax rate is below 15%.

In June, the government launched a consultation on aligning the UK’s international tax with OECD norms, including transfer pricing and corporate permanent establishments. We expect further news here. The Diverted Profits Tax was brought into line with mainstream corporation tax rules; with some of the proposals aiming to simplify reporting for UK groups; further clarifications are expected.

Finally, the Prime Minister is being lobbied to appoint a high-level investment minister, to create a ‘concierge service’ to attract foreign investment to the UK.

Liberalisation of pension fund investment rules, reductions in stamp duty land tax for first time buyers and proposals to review and amend tax-advantaged share schemes, including Share Incentive Plan (SIP) schemes and Save-As-You-Earn (SAYE) may also be forthcoming.

If you would like to discuss efficient tax structuring for international groups, UK property purchases, or for the upcoming personal, tax, business, and investment implications of the Autumn Statement 2023, please do not hesitate to contact one of our team:

Patrick TR Thornton – Partner – [email protected]

Rhea Rughani – Partner – [email protected]

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