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Last updated: 27 Oct 2021
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Autumn Statement 2021

In a barnstorming and upbeat speech, the Chancellor spoke at great length about the UK economy’s bounce back from the pandemic as well as the government’s plans for ‘levelling up’ and the creation of a high skill, high wage economy.

Much of the speech was a summary of the significant amounts set aside by government for a wide range of initiatives in these areas. As ever, how much is new money is a question for another time.

Important tax announcements to aid the recovery from the pandemic and/or to simplify or modernise the tax system included:

  • Significant reforms to business rates, including investment reliefs and the cancellation of the expected multiplier and a 50% discount for the retail, hospitality and leisure sectors;
  • Reform and simplification of the alcohol duty regime, more closely linking duty with alcoholic strength and providing reliefs for small producers and pubs;
  • Maintaining the £1m limit for the Annual Investment Allowance, which gives businesses 100% tax relief for certain capital expenditure, alongside the 130% Super Deduction for companies; and
  • Extending and enhancing the cultural tax relief regimes for theatres, orchestras, museums and galleries.

For the less well- off, the national living wage will be increased to £9.50 per hour and the universal credit taper will reduce from 63% to 55%.

Interestingly, given the proximity to COP26, the Chancellor used his speech to announce a reduction in Air Passenger Duty for internal flights, albeit with an increase for ultra-long-haul passengers, and a continued freeze of Fuel Duty. Is the Prime Minister winning the Downing Street battle for who will pay for the Net Zero Strategy?

There was also good news for those selling UK residential property. The tax rate remains unchanged, but the deadline for reporting and paying the liability will be extended to 60 days for disposals on or after Budget Day.

Little was said about the financial services industry, but the new tax regime for asset holding companies will be included in the forthcoming Finance Bill, while the review of the VAT treatment of fund management fees remains ongoing.

How these commitments will be paid for was not covered in any detail, although the main ’tax’ announcement was made last month with the Health and Social Care levy that will increase the rates of national insurance contributions and dividend tax by 1.25% from next April.

Previously announced increases in corporation tax, to 25% from 1 April 2023, and the freezing of income tax thresholds will also help the Treasury raise the necessary funds.

One new tax to be confirmed is a 4% Residential Property Developer tax for companies with profits above £25m.

Research and Development tax credits are also slated for reform to ensure that they are focused on R&D carried out in the UK, while recognising the importance of cloud computing and data costs for R&D.

Despite opposition, the proposed changes to basis periods for businesses other than companies will be introduced, with the transition year being 2023/24. Spreading the burden of the change over five years will be legislated for, but businesses will need to plan for increased tax payments over that spreading period.

For the first Budget Speech in some years, nothing was said about taxpayers paying their fair share or the fight against tax avoidance. However, various measures in these areas will be included in the forthcoming Finance Bill, including:

  • Further powers targeted at the promoters and enablers of tax avoidance schemes;
  • Notification to HMRC of uncertain tax positions by the largest companies; and
  • Confirmation of HMRC’s discovery powers in connection with the High Income Child Benefit Charge, Gift Aid charges where the donor has paid insufficient tax and in respect of various pension charges.

Another topic that was not addressed was the mooted Online Sales Tax, although this remains under review.

The UK’s tax take is projected to reach 36.2% of GDP, the highest since the early 1950s, but the Chancellor made no apology. However, he did make clear that he expected the situation to change before the end of this Parliament.

Having been told off by the Speaker and Deputy Speaker for pre-Budget leaks, this promise of a pre-election giveaway was made loud and clear to the House.

About the author

Alastair McQuater

+44 (0)20 7556 1427
mcquatera@buzzacott.co.uk

Much of the speech was a summary of the significant amounts set aside by government for a wide range of initiatives in these areas. As ever, how much is new money is a question for another time.

Important tax announcements to aid the recovery from the pandemic and/or to simplify or modernise the tax system included:

  • Significant reforms to business rates, including investment reliefs and the cancellation of the expected multiplier and a 50% discount for the retail, hospitality and leisure sectors;
  • Reform and simplification of the alcohol duty regime, more closely linking duty with alcoholic strength and providing reliefs for small producers and pubs;
  • Maintaining the £1m limit for the Annual Investment Allowance, which gives businesses 100% tax relief for certain capital expenditure, alongside the 130% Super Deduction for companies; and
  • Extending and enhancing the cultural tax relief regimes for theatres, orchestras, museums and galleries.

For the less well- off, the national living wage will be increased to £9.50 per hour and the universal credit taper will reduce from 63% to 55%.

Interestingly, given the proximity to COP26, the Chancellor used his speech to announce a reduction in Air Passenger Duty for internal flights, albeit with an increase for ultra-long-haul passengers, and a continued freeze of Fuel Duty. Is the Prime Minister winning the Downing Street battle for who will pay for the Net Zero Strategy?

There was also good news for those selling UK residential property. The tax rate remains unchanged, but the deadline for reporting and paying the liability will be extended to 60 days for disposals on or after Budget Day.

Little was said about the financial services industry, but the new tax regime for asset holding companies will be included in the forthcoming Finance Bill, while the review of the VAT treatment of fund management fees remains ongoing.

How these commitments will be paid for was not covered in any detail, although the main ’tax’ announcement was made last month with the Health and Social Care levy that will increase the rates of national insurance contributions and dividend tax by 1.25% from next April.

Previously announced increases in corporation tax, to 25% from 1 April 2023, and the freezing of income tax thresholds will also help the Treasury raise the necessary funds.

One new tax to be confirmed is a 4% Residential Property Developer tax for companies with profits above £25m.

Research and Development tax credits are also slated for reform to ensure that they are focused on R&D carried out in the UK, while recognising the importance of cloud computing and data costs for R&D.

Despite opposition, the proposed changes to basis periods for businesses other than companies will be introduced, with the transition year being 2023/24. Spreading the burden of the change over five years will be legislated for, but businesses will need to plan for increased tax payments over that spreading period.

For the first Budget Speech in some years, nothing was said about taxpayers paying their fair share or the fight against tax avoidance. However, various measures in these areas will be included in the forthcoming Finance Bill, including:

  • Further powers targeted at the promoters and enablers of tax avoidance schemes;
  • Notification to HMRC of uncertain tax positions by the largest companies; and
  • Confirmation of HMRC’s discovery powers in connection with the High Income Child Benefit Charge, Gift Aid charges where the donor has paid insufficient tax and in respect of various pension charges.

Another topic that was not addressed was the mooted Online Sales Tax, although this remains under review.

The UK’s tax take is projected to reach 36.2% of GDP, the highest since the early 1950s, but the Chancellor made no apology. However, he did make clear that he expected the situation to change before the end of this Parliament.

Having been told off by the Speaker and Deputy Speaker for pre-Budget leaks, this promise of a pre-election giveaway was made loud and clear to the House.

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