Apex Group Budget Briefing - Spring Statement 2023
UK Chancellor, Jeremy Hunt today announced to MP’s that the British economy is “proving the doubters wrong”, and the OBR is now forecasting there will be no recession following projections made in the autumn budget. Here are some of the tax changes we will see.
- The Government are maintaining the decision to increase the headline rate of Corporation Tax to 25% as from April 2023. The Corporation Tax main rate of 25% will typically apply if taxable profits are over £250,000 per annum, with “marginal relief” available where the profits are between these £50,000 and £250,000. Businesses with profits of less than £50,000 will see no change and they will continue to pay corporation tax at a rate of 19%
- The decision as per the Autumn Statement 2022 to permanently set the Annual Investment Allowance at £1 million will go ahead, meaning 99% of businesses will receive 100% tax relief on their qualifying plant and machinery investments in the year of investment
- The Government is also now introducing full expensing, a 100% First Year Allowance, from 1 April, 2023, up until 31 March, 2026. This means that companies across the UK will be able to write off the full cost of qualifying main rate plant and machinery investment in the year of investment. Companies investing in special rate (including long life) assets will also benefit from a 50% first-year allowance during this period. Moving to full expensing means the UK’s plant and machinery allowances will be joint first in the Organisation for Economic Co-operation and Development (“OECD”) in Net Present Value terms
- At the Autumn Statement 2022, the Government announced that as from 1 April, 2023, the rate of the Research & Development Expenditure Credit (“RDEC”) would be increased from 13% to 20%
- The Government also committed to considering the case for further support for R&D intensive SMEs and the Government will introduce an increased rate of relief for loss-making R&D intensive Small and Medium size Enterprises (“SMEs”). SME companies for which qualifying R&D expenditure constitutes at least 40% of total expenditure will be able to claim a higher payable credit rate of 14.5% for qualifying R&D Expenditure, essentially receiving £27 from HMRC for every £100 of R&D investment
- The Government will be making several modifications in connection with the Corporate Interest Restriction rules in order to remove unfair outcomes and reduce administrative burdens for businesses. In most cases, these will take effect for periods of account commencing on or after 1 April, 2023
- Amendments will be made to the REIT regime to enhance its competitiveness. These will address unnecessary barriers to entry and ensure the rules are operating as intended. The Government will also reduce administrative burdens for certain partnerships investing in REITs. The changes will variously apply as from 1 April, 2023, and Royal Assent of the Spring Finance Bill 2023
- Following the successful introduction of the new Qualifying Asset Holding Company (“QAHC”) tax regime as from April 2022, the Government will legislate to make a number of targeted changes so that the regime is more widely available to investment fund structures which fall within its intended scope and the rules better achieve their intended effect. This will further enhance the attractiveness of the United Kingdom as a location for establishing asset holding companies by allowing more relevant companies to make use of the UK regime. Changes will variously take effect from Royal Assent of the Spring Finance Bill 2023, 20 July, 2022, and 15 March, 2023, or are deemed to have always had effect.
- No changes to income tax rates, bands and allowances were announced
- The pension annual allowance will increase from £40,000 to £60,000 per annum as from 6 April, 2023. The Money Purchase Annual Allowance and the minimum Tapered Annual Allowance (“TAA”) will both be increased from £4,000 to £10,000, while the adjusted income threshold for the TAA will also be increased from £240,000 to £260,000. The Government will also legislate to remove the Lifetime Allowance (“LTA”) charge for 2023 and 2024 in the Spring Finance Bill 2023 and will deliver the technical changes necessary to abolish the LTA from April 2024 in a future Finance Bill
- 30 hours of free childcare will be introduced for every child over the age of 9 months with working parents, with support being phased in until every eligible working parent of children under 5-years of age to get this support by September, 2025. This will be introduced in phases, with 15 hours of free childcare for working parents of 2-year-olds coming into effect in April 2024 and 15 hours of free childcare for working parents of children aged 9 months to 3 years in September 2024
- The Government will legislate in the Spring Finance Bill 2023 to provide a new elective accruals basis of taxation for carried interest that is charged to Capital Gains Tax (“CGT”). This will allow UK resident investment managers to accelerate their tax liabilities to align their timing with the position in other jurisdictions, where they may obtain double taxation relief. The measure will apply retrospectively as from 6 April, 2022, allowing investment managers to elect for their carried interest to be taxed on the accruals basis rather than when it arises. The election will be voluntary and irrevocable
- Following the consultation on proposed reform of the VAT rules on fund management to improve legal clarity and certainty, which closed in February, the Government is considering the responses and will continue to discuss the proposals with interested stakeholders. The Government will publish its response to the consultation for this in the coming months
- The Government will continue working with industry stakeholders to consider possible reforms to simplify the VAT treatment of financial services, with the aim of reducing inconsistencies and providing businesses with greater clarity and certainty
- In an effort to simplifying the process, the Government aims to grant options under the Enterprise Management Incentives (“EMI”) scheme as from April 2023, the requirement for a company to set out details of share restrictions within the option agreement and the requirement for a company to declare an employee has signed a working time declaration will be removed. As from April 2024, there will be an extension to the deadline for a company to notify HMRC of the grant of an EMI option from 92 days following the grant, up until 6 July, 2023, following the end of the tax year
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