Expert reactions to the Chancellor's announcement
The Chancellor Jeremy Hunt delivered his Spring Budget on 6th March 2024, setting out the Government’s plans for the economy, taxation, and spending for the year ahead. We asked our team of expert writers to provide a summary of their reactions to the key tax measures announced.
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Director, Deloitte LLP
Indirect Tax
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VAT treatment of private hire vehicles
As previously announced, a consultation will be published in April 2024 on the impacts of the High Court judgment in?Uber Britannia Ltd v Sefton MBC. This case considered the regulation of Uber’s business model outside of London, including whether the private hire vehicle operator is acting as a principal or agent (and therefore the tax base on which VAT should be charged) when entering into a contractual obligation with the passenger to provide the journey. If the private hire vehicle operator is acting as a principal this would mean it would have to account for VAT on the full value of the fare charged to the passenger, whereas VAT if it were deemed to be acting as an agent, VAT would only be due on its “commission”. Consequently, the outcome of this consultation could impact the pricing.
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Terminal Markets Order (TMO)
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The government will introduce legislation in the Spring Finance Bill 2024 to update the TMO to allow for further reform, including bringing trade in carbon credits within scope. A summary of responses to a consultation on reforming the TMO (published in 2023), will be published in due course.
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See?Spring Budget 2024 — Overview of tax legislation and rates (OOTLAR) - GOV.UK (www.gov.uk), para 1.17.
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Alcohol Duty
Alcohol duty will be frozen until 1 February 2025 - extending the six-month freeze announced at Autumn Statement 2023.
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The government will close the Alcohol Duty Stamp scheme following a review undertaken by HMRC. The scheme previously required duty stamping of retail containers of spirits, wines and other fermented products that are intended for consumption in the UK.?Legislation will be published later this year for a wind-down of the scheme.
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See?Spring Budget 2024 — Overview of tax legislation and rates (OOTLAR) - GOV.UK (www.gov.uk), para 2.18 and 2.19.
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Fuel Duty
Fuel duty rates will continue to be frozen for 2024/25. The temporary 5p cut in fuel duty rates will be extended until March 2025, and the inflation increase for 2024/25 will not take place. This means that the fuel duty rate applied to standard petrol and diesel will remain at 52.95p per litre, where it has been frozen since 2011/12. Following a review, the government will maintain the difference between road fuel gas and diesel duty rates until 2032.
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See?Spring Budget 2024 — Overview of tax legislation and rates (OOTLAR) - GOV.UK (www.gov.uk), para 2.24 and 2.25, and?Fuel Duty: extending the temporary cut in rates to March 2025 - GOV.UK (www.gov.uk)
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Tax Director, Crane Dale Tax
?Owner-Managed Businesses
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The abolition of IHT didn’t happen, and therefore the relevance of Agricultural Property Relief (APR), and Business Property Relief (BPR) and business structure planning is unchanged. The scope of APR may in fact be extended from ordinary farming to include ecosystem preservation activity such as woodland carbon, peatland restoration, and biodiversity preservation, and a working party will consider this in more detail. The IHT abolition story could yet be resurrected at election time but the touted middle-ground voter argument of “protecting the hard-working families” holds less water when considering the typical 4% of estates that actually pay IHT, with an average effective rate of 13% (source HMRC).
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Buy to Let (BTL) landlords see changes pointing to the door. The reduction in the residential property higher rate of CGT from 28% to 24%, makes it an easier decision to sell. The abolition of Multiple Dwellings Relief for SDLT from 1 June 2024 removes the option for purchasers of two or more dwellings in the same transaction to benefit from a lower “averaged” rate. (The option still remains, where the purchase is of six or more dwellings, to opt for the non-residential rate which caps the SDLT at no more than 5% overall.). Special reliefs for Furnished Holiday Lets (FHL) are abolished from April 2025, putting FHL’s onto the same footing as ordinary BTL. Changes will include removal of access to CGT relief (rollover, gift, Business Asset Disposal Relief), and fixtures capital allowances. Advance planning on FHL should be considered prior to 2025. The FHL special status has long felt an idiosyncrasy. The changes will help to level the playing field for owner-occupiers struggling to purchase in their local area, such as Cornwall, though in my experience the reliefs are not a driving factor for every FHL landlord.
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Advisers should update their spread sheets for remuneration and incorporation planning. The headline National Insurance (NI) rate cut of 2% is for employee NI, not employer NI, so isn’t a saving directed at businesses. But, the 2% reduction also applies to the self-employed. Changes apply from 1 April 2024, and coupled with changes already announced give rates of 8% and 6% respectively, though thresholds remain frozen until 2028. The 2% rate on earnings or profits above the Upper Earnings Limit is unaffected.
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The VAT threshold is raised to ￡90,000 from 1 April 2024, the first increase since 2017 and could take 28,000 businesses out of mandatory registration – one to consider with your clients who are on the cusp.
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The existing tax incentivised investment zones for England, Scotland and Wales get an extended lifespan of 10 years.? . These are distinct from the similar Freeport sites, and which also have an extension to their lifespan of 10 years; to 30 September 2031 for English, and 2034 for Scottish and Welsh Freeports.
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Advisers with clients in the creative arts sector should look at several changes. There is a new UK Independent Film Tax Credit. The existing rate of relief for high-end TV productions is increased, and the theatre, orchestra, museum, and galleries benefit from the enhanced relief rates being made permanent.
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Partner, Lane Clark and Peacock
Pensions
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For once it was a quiet Budget insofar as pensions policy is concerned, which was welcome after last year’s completely unexpected announcement that the Lifetime Allowance (LTA) was to be abolished and its associated LTA charge made no longer operational.? We are still working through all the regulatory complexity that LTA abolition has brought, with the new system going live in a matter of weeks.
If there was a theme on pensions matters in the Budget it was around next steps in some of the various initiatives announced by the Chancellor at the Mansion House last July and on which an update was provided in November’s Autumn Statement. Two aspects caught my attention:
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·?????? First it looks like the Government is pushing its agenda on to the long-promised value for money framework for Defined Contribution (DC) schemes, on which the Financial Conduct Authority has promised to consult in the Spring. This could culminate in some sanctions against those DC schemes deemed not to be delivering. But all this will take time, first to flesh out the actual policy, and then to deliver. Time that this Government does not have.
·?????? Second, for the DC Lifetime Provider Model, on which the DWP should be sifting through consultation responses, the language now being used suggests that the Government could be going cool on the matter. We will find out soon enough.
And in a Budget centred around tax cuts for those in work, and against a backdrop of anaemic growth, it was perhaps not a surprise for there to be silence on extending auto-enrolment eligibility to younger workers and requiring contributions to be made from the first Pound. This piece of policy emanates from the 2017 review of auto-enrolment. The worry is that the time will never be right to require those in work to make greater provision for their retirement.
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Employment Tax & Reward Partner, Mazars
Employment Tax
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Leaving the “Non-Dom” announcement to one side that Global Mobility experts will be unpicking and considering in more detail with the publication of the technical papers that follow the Budget, this was a quiet Budget from a UK Employment Taxes perspective. The expected additional NIC cut was announced, meaning employees will see the main rate of NIC reduced from 10% to 8% from April 2025, a 4-percentage point reduction since the Autumn Statement. As this was anticipated, the net pay increases generated (a maximum of ￡754 annually, or just over ￡1,500 when considering both cuts announced), are unlikely to generate the same pizzazz as a surprise tax cut would have done, albeit it will be welcomed by our colleagues north of the border given that NIC is not devolved.
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Employers will need to revisit reward strategy and communication, particularly when advertising savings made from salary sacrifice participation. This should also be assessed alongside eligibility governance given rising NMW rates (to ￡11.44 per hour for those aged 21 or over from April 2024), meaning that less employees may be able to participate in salary sacrifice impacting on the net pay increase given from the NIC cuts announced. A key area of focus here should be salaried workers and how their working time and hourly pay is reviewed.
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Lastly, in the small prints of the Red Book, it becomes clear that investment is there for HMRC to step up their compliance activity – therefore if employers haven’t been reviewed by HMRC recently, they should expect one soon, particularly on employment status, NMW or a wider “PAYE compliance” audit. One major recommendation is to take this seriously given a really focus on raising tax revenues and making people pay their fair amount of tax.
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All in all not a thriller of a Budget from an Employment taxes perspective ad interesting to note no reference to IR35 anywhere to be seen!
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Director, M B Gunn & Co Ltd
IHT, Trusts and Estates
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Those hoping for the abolition of inheritance tax were disappointed. But the tax raises around ￡8 billion per annum and every sum counts in the current fiscal environment That amount is insignificant compared to the total ￡788 billion collected in taxes over 2022/23, but we have had death duties since 1896 and they are not going away any time soon. Just be thankful that so far Capital Acquisitions Tax, which has replaced inheritance tax in Ireland, has not so far been mooted by anyone!
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There will however be a significant change in the basis of IHT. Domicile at the time of death will cease to be relevant from 6 April 2025 and instead, subject to consultation, it is envisaged that liability on worldwide assets will apply to anyone who has been UK resident for 10 years. Up to April 2025 a 15-year rule applies for deemed domicile, so this brings in liability 5 years earlier. Once resident for 10 years, it is proposed that it will take 10 years after ceasing to be UK resident before liability to IHT ceases. That long period of time surely needs rethinking. Currently liability can cease 3 fiscal years after leaving the UK, and to try and track what people are doing overseas for this 10-year period seems rather fanciful.
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But we should wave goodbye and good riddance to the domicile test for IHT. It has been in place in various guises since 1896 and produces perverse results. Disregarding deemed domicile, it is quite possible for a person to spend all their adult life in the UK and be heavily involved in UK public life and still be not domiciled in the UK, as the Special Commissioners decided.
As regards trusts, the current rules apply up to April 2025, after which a modified excluded property rule will apply to tie in with the 10-year residence test for IHT. The convoluted and flawed protected foreign source income rules will come to an end at the same time.
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One final plea must be made. Various IHT allowances are never updated which is surely outrageous. Examples are: gifts in consideration of marriage – unchanged since 1975; annual exemption unchanged since 1981; small gifts to one person – unchanged since 1980; and not forgetting the nil rate band – unchanged since 2009 and no current plans to increase it despite the useless annual indexation provision introduced in 1982.
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Partner, Saffery?LLP
General tax
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There were a lot of headline-grabbing measures in the Budget but the measure with the most far-reaching impact is likely to be the non-dom changes. Putting aside the political aspects, there are two very generous aspects to the changes. A tax exemption for four years for new arrivals is very attractive, but it does require ten years of previous non-residence, which will rule out those who are already planning around the current five-year requirement – and also those who have been here for more than four years already. The 12% rate under the Temporary Repatriation Facility is also attractive to those who are already deemed domiciled but have a significant amount of unremitted foreign income and gains.
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The problem is for those non-doms who have been here for more than four years but have not yet earned significant amounts of unremitted income or gains, and therefore reliant on earning money which is subject to the remittance basis. With the abolition of protected settlement status for income and gains arising in trusts after 5 April 2025, there will be little to keep these individuals in the UK.
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Indirect Tax Director, PKF Littlejohn
Indirect Tax
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VAT registration threshold
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The UK VAT registration threshold which has been at ￡85,000 since 2017, will be increased to ￡90,000 with effect from 1 April 2024. In addition, the deregistration threshold will increase from ￡83,000 to ￡88,000 from the same date.
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While modest, this is a welcome development for many consumer-facing businesses that take the rational step of holding back their growth to avoid becoming VAT registered.
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However, a fundamental aspect of the UK VAT system that sadly remains unchanged is that there will still be a great number of businesses bunching just below the VAT registration threshold, avoiding the associated costs and administrative burdens, and leading to a distortionary impact on business growth.
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It is worth noting that these thresholds only apply to UK-established businesses, meaning that businesses without an establishment in the UK are required to register and account for any UK VAT to HMRC if they make taxable supplies in the UK of any value.
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Vaping Products Duty
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A new duty will be brought in on vaping products from 1 October 2026, linked to a one-off increase in tobacco duty from the very same date to maintain the current incentive to choose vaping over smoking.
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A consultation that sets out the government’s objectives and proposals for the new duty has been launched. This will include the design and implementation of the Vaping Products Duty, and is open for 12 weeks, until 29 May 2024.
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Air Passenger Duty (APD)
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The government is making a one-off adjustment to rates of Air Passenger Duty (APD) on non-economy passengers to account for high inflation in recent years and help to maintain the value of APD in real terms. This is a further adjustment on top of the forecast RPI, which will apply from 1 April 2025 and that is applicable for those flying premium economy, business and first class and for private jet passengers.
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The 2025-26 APD rates for economy passengers will increase in line with forecast RPI, rounded to the nearest pound, meaning that economy, domestic and shortfall rates will remain frozen.
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Partner, Joseph Hage Aaronson LLP
Personal Tax
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Spring Budget 2024 was littered with the usual political posturing and some ineffective tinkering. Unfortunately, fiscal drag will continue to be significant. Wednesday 6 March 2024 was also an earth-shattering day for the non-UK doms and all those who advise them.
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For tax years from 2025/26 onwards, the Government announced the abolition of the remittance basis for tax purposes and a plan to move away from the concept of domicile and towards a much-simplified objective test based on residency when considering whether foreign income and realised capital gains will fall to be taxed in the UK.
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The proposed new 4-year FIG regime is clearly attractive for the first 4 years but that is a short period of time, so overall not as globally competitive as one might have hoped.
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The transitional rules and the knock-on reforms to trust taxation will be complex and need to be carefully navigated once we are equipped with the requisite legislation in the summer. And we wait with bated breath to see where IHT lands- the 10-year tail for those who leave the UK sounds somewhat ambitious!
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It should be noted that in 2020/21 there were 37,000 non doms in the UK taxed on the remittance basis who collectively paid over ￡6bn or ￡170k p.a. in IT/CGT/NICs- arguably those with the broadest shoulders already pay the most tax as the average UK taxpayer pays circa ￡5k per year of IT. One must be cautious regarding the projected potential additional revenue receipts - purportedly a further ￡2.7bn per year by 2028/29 into UK PLC. There are simply too many unknowns to accurately speak to these numbers. We do not know how much FIGs these people have, we do not know how many people will leave and we certainly do not know how many people will not come! Any political scepticism should not be mistaken for opposing the overhaul of a system in desperate need of reform - one just hopes input is obtained from the people in the trenches; we have until April 2025 to get it right (allowing for potentially yet more tinkering from a new Government).
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Director, Jerroms Miller Specialist Tax
Corporate Tax
For corporate tax advisers, the Spring Budget 2024 was relatively uneventful. For those of us involved in transactions, restructures, employment-related securities and share schemes, normal service is resumed immediately.
Generally, many of the measures announced will be effective from April 2025 onwards which leads us to question how many will remain given the impending general election.
On the capital allowances side, extending full expensing for leased assets was a welcome relief for certain businesses. That is until you read the small print (the Red Book) to find that this will only apply “when fiscal conditions allow”!
?Additional reliefs and/or tax credits benefit specific niche sectors, such as production studios, theatres, orchestras, and museums.
Notable absences from this Budget include no changes to Employee Ownership Trust legislation and no new Stamp Duty regime. Both of these were the subject of extensive consultations during 2023, and neither topic is politically controversial, so far as we are aware, so we definitely expect changes down the line. The stamp duty project, in particular, is a pretty major undertaking, but it’s nearly two years since the consultation started, so we would hope for some announcements in the near(ish) future.
The abolition of the FHL regime from April 2025 means that these properties will incur one of three different rates on disposal depending on the date of the unconditional contract:
The finance cost restriction will also apply to these properties. Both consequences may result in an increase in property portfolio incorporation enquiries; the key will be whether relief from SDLT will be available on such planning, largely dependent on whether they are run as a partnership.
Another interesting development is the release of a consultation on regulation of the tax industry (https://www.gov.uk/government/consultations/raising-standards-in-the-tax-advice-market-strengthening-the-regulatory-framework-and-improving-registration). It’s not strictly a corporate tax matter but it’s important to all of us. While the official title is about raising standards, the message strongly suggests that some sort of formal regulation is coming closer, even if it’s not a done deal. The main options are mandating membership of a professional body, some kind of hybrid regulation by HMRC and the tax industry, and a separate regulator. One major concern is the impact this will have on the many excellent tax advisors out there who are not formally qualified or members of a professional body.
Whatever your perspective, this is an important read and responses should be sent by 29th May.