The Chancellor of the Exchequer Jeremy Hunt yesterday announced his Spring Budget for 2023. Growth was the focus of his Budget, and the majority of his statement to the Commons focused on his 4 E’s (Enterprise, Education, Employment, Everywhere).?
Please see below for some significant tax measures that came from yesterday’s statement:
- The?Pension Lifetime Allowance (‘LTA’) is to be abolished. Currently, an individual ‘crystallising’ UK pension funds in order to take benefits is subject to a tax charge of up to 55% on the value of funds that are above the ￡1.07m lifetime allowance. From 6 April 2023, the lifetime allowance charge will be scrapped, giving individuals 100% of their crystalised funds from which to take pension benefits.
- Most individuals are currently able to receive up to 25% of their pension benefits tax free, up to the amount of the LTA. This is called a Pension Commencement Lump Sum (‘PCLS’). The maximum amount which can be accessed in this way tax-free will remain frozen at 25% of the current LTA, resulting in a limit of ￡268,275. Higher PCLSs will be available for eligible individuals who have protections in place due to making elections following earlier reductions in the LTA.?
- Channel Islands based trusts with a UK filing requirement should be aware that the?￡1,000 standard rate band?for discretionary trust income is be to abolished from April 2024, so moving that slice of income out of the basic or dividend tax rate and into the special trust tax rates.
- Inheritance tax Agricultural Property Relief?– from 6 April 2024, APR is to be restricted to assets situated in the UK only and will no longer be available to assets in the Channel Islands, Isle of Man or the European Economic Area.
- The increase to the main rate of UK corporation tax from 19% to 25% from 1 April 2023 will go ahead as planned.
- For expenditure incurred between 1 April 2023 until 31 March 2026, investments made by companies in qualifying main rate assets will qualify for a?100% first-year allowance?(‘full expensing’). Companies investing in ‘special rate’ assets will benefit from a 50% first-year allowance in the year of investment.??
- From 1 April 2023?R&D intensive?Small and Medium Enterprises (SMEs) that meet certain eligibility criteria will be able to claim the repayable tax credit at the higher rate of 14.5% (equivalent to 27p in the pound) compared to 10% for other SME claimants.?
- Investment Zones?– the government intends to create twelve growth zones across the UK, including four across Scotland, Wales and Northern Ireland. Each English Investment Zone will have access to interventions worth ￡80 million over 5 years. Local government and research institutions will be able to tailor their Investment Zone plan to their local circumstances.??
- As initially announced in the Edinburgh Reforms on 9 December 2022, the Real Estate Investment Trust (‘REIT’) regime will be amended. The amendments will relax the requirement for a REIT to own at least three properties where a REIT owns at least one commercial property worth ￡20 million or more; and amend the rule for disposals of property within three years of significant development work.
- The Spring Finance Bill will amend the?Genuine Diversity of Ownership(GDO) condition in the Qualifying Asset Holding Companies (QAHC), REIT and Non-Resident Chargeable Gains (NRCG) rules. The GDO condition is intended to prevent funds that are only open to a small number of predetermined investors from benefitting from those regimes. The changes are intended to improve the operation of the?GDO?condition for fund structures involving multiple pooling vehicles.
- Carried interest?– from the 2022/23 tax year onwards, carried interest may be taxed on the accruals basis if a voluntary and irrevocable election is made. Legislation in Spring Finance Bill 2023 will include a calculation for the taxable accrued carried interest where such an election has been made. The intention is to enable alignment of the UK tax point for carried interest with that in other jurisdictions in order to alleviate timing issues for double tax relief claims.??
If you have questions or would like to discuss any of the above, please get in touch with your usual Deloitte contact.
