[co-author: Bradley Lindsay]*
Chancellor of the Exchequer, Rishi Sunak, unveiled an unsurprising 2021 Autumn Budget and Spending Review (the Budget), as the headline grabbing fiscal plans had already mostly been leaked to the press (including by the Chancellor himself). The Budget intends to implement the Government’s pledges to invest in businesses, public services, and people as part of its “levelling up” a “Global Britain” (to borrow the Government’s current soundbites). The Chancellor did not announce any significant new tax increases to fund these investments, as the Health and Social Care Levy and the increase in the corporation tax rate are already old news. Instead, the Budget promised tax reliefs and assistance for the benefit of businesses designed to reset the clock for a post-Covid Britain.
We have set out below four key themes and takeaways.
- Supporting business survival and encouraging capital investment
- The Chancellor announced a reform to the tax credits regime to ensure it continues to support modern and innovative R&D as part of the Government’s strategy to achieve economic growth. Qualifying expenditure will now be expanded to include data and cloud computing costs to reinforce the UK’s status as a “science superpower”. In addition, the Government will set out plans to tackle perceived abuse in order to ensure that only R&D activities occurring in the UK qualify for relief.
- The increase to the annual investment allowance to £1 million, which is the cap on certain qualifying capital expenditure that can be 100% deductible in the year in which it is incurred (rather than written down over a period of years, which is generally the case), will remain in place until 31 March 2023.
- New reliefs from business rates were also set out. The retail, hospitality and leisure sectors will be boosted by a temporary 50% relief (up to a maximum of £110,000) for one year. From 2023, a new relief will support investment in certain property improvements by ensuring businesses will not pay higher business rates for 12 months as a result. These measures are intended to encourage productivity as employees return to the workplace post-Covid.
- Improving the competitiveness of the UK as a place to do business
- Following a review of the Bank Corporation Tax Surcharge (the Surcharge) announced at this year’s Spring Budget, the Chancellor announced that the Surcharge will be set at 3% above the main rate of corporation tax from 2023, on the basis that banks should continue to pay a higher rate of tax (28%) to maintain a fair contribution, whilst maintaining the UK’s position as a world-leading centre for financial services. The Chancellor also announced an increase in the Surcharge allowance from £25 million to £100 million for the benefit of start-up banks.
- A consultation has opened regarding the possible introduction of a regime for non-UK companies wishing to re-domicile in the UK, in the hope that such companies will bring investment and skilled jobs to the UK.
- Brexit-related tax measures:
- The Chancellor announced reforms of the tonnage tax and air passenger duty regimes, such reforms now being possible due to Brexit. A key tonnage tax reform is that companies whose ships fly the UK flag may be eligible to participate. The air passenger duty reform is intended to encourage domestic air travel by way of a 50% cut in duty (although query whether this creates any tension between the Government’s strategy for “levelling up” Britain on the one hand, and its “building back greener” strategy and hosting of COP26 on the other), and also introduces a new, higher band for ultra-long distance journeys.
- Amendments will be made to the group relief rules for losses, which will prevent UK companies from claiming group relief for losses incurred by an EEA company.
- Property taxes:
- Effective from today, the time limit for filing a capital gains tax return in respect of a disposal of UK land by an individual, trustee or personal representative of deceased persons, has been increased from 30 to 60 days.
- From 1 April 2022, residential property developers will be liable to pay a 4% levy on profits in excess of £25 million. The levy is intended to contribute to the costs associated with removing unsafe cladding, which has been heavily reported in the press in recent months.
*Bradley Lindsay is a Trainee Solicitor in our London office.