Autumn Statement 2023

The Autumn Statement 2023 was  delivered to Parliament on 22 November 2023. The Chancellor Jeremy Hunt used his Autumn Statement to deliver a series of tax cuts new investments into industry. This is a turn from the previous twelve months and is delivered as we run into an election year.

There were no rabbits pulled out of the hat (or rather his red case). There was no mention of the rumoured Inheritance tax changes, nor a reduction in income tax. Perhaps these will be saved for the 2024 budget in the spring.

Key announcements included cuts to national insurance, several R&D changes and making the full expensing capital allowance scheme permanent. Below we have outlined the key announcements that are likely to be relevant for you and your business.

What does the Autumn Statement 2023 mean for you?

If you would like Alexander & Co to review your businesses current situation or discuss how Autumn Statement 2023 could affect your plans, please contact us to discuss how we can assist you.

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Research and Development tax changes to go ahead following Autumn Statement 2023

The Chancellor confirmed that the Government will introduce legislation in the Autumn Finance Bill 2023 to merge the current RDEC and R&D SME schemes for accounting periods beginning on or after 1 April 2024. The Government believes this will improve and simplify the system.

The rate offered under the merged scheme will be 20%, which is the current RDEC rate. The notional tax rate applied to loss-makers in the merged scheme will be the small profit rate of 19%, rather than the 25% main rate currently set in the RDEC.

Also announced in the Spring Budget earlier this year, legislation will be introduced in the Autumn Finance Bill 2023 to implement enhanced support for R&D intensive SMEs. This will provide a higher rate of payable tax credit for eligible SMEs. Loss-making companies claiming the existing SME tax relief will be eligible for a higher payable credit rate if they meet the definition for R&D intensity.

Currently, companies are considered R&D intensive if their qualifying R&D expenditure constitutes at least 40% of total expenditure. This threshold is to be reduced from 40% to 30% (from 01.04.2024). A one-year grace period will also be introduced, for a company which has claimed successfully as R&D intensive, but which fails to meet the intensity threshold in the following period. This will allow them to continue to claim as R&D intensive for this period, provided it meets the other conditions for the relief.

R&D tax credits are an important relief and many businesses across a wide range of sectors are eligible. Please contact us to discuss how this could help your business.

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R&D tax reliefs – the restricting of nominations and assignments

The use of nominations for R&D tax credit payments is to be removed (with limited exceptions). This will stop payments to third parties and payments will instead go directly to claimants.

Legislation will also be introduced to prevent any new assignment of R&D credits. Payments will be withheld by HMRC until it is able to pay the claimant company directly.

Full expensing made permanent

Legislation is to be introduced in the Autumn Finance Bill 2023 to make temporary full expensing permanent.

Announced at Spring Budget 2023, this allows companies incurring qualifying expenditure on the provision of new plant and machinery on or after 01.04.2023 but before 10.04.2026 to claim:

100% first-year allowance for main rate expenditure (full expensing)

50% first-year allowance for special rate expenditure

The 01.04.2026 expiry date will be removed in the Autumn Finance Bill 2023. The Government is also launching a consultation on wider changes to further simplify the UK’s capital allowances legislation.

Expenditure on P&M for leasing will remain excluded from full expensing. The Government IS TO publish a technical consultation on the draft legislation in due course. This is to help it consider any potential extension to include plant and machinery for leasing, which is to be subject to future decision.

Enterprise management incentives (EMI) and Venture Capital Trust (VCT) time extensions

Previously announced at Budget 2023, legislation will be introduced in the Autumn Finance Bill 2023 extending the time limit to notify HMRC of a grant of EMI options. This will change from 92 days to the 6 July following the end of the tax year in which the relevant grant was made. This will apply to EMI options which are granted from 6 April 2024.

Also announced at Budget 2023, the Autumn Finance Bill 2023 will legislate to extend the sunset clauses for the EMI and VCT scheme from 06.04.2023 to 06.04.2035.

This continues the availability of income and CGT reliefs for investors in new shares issued before this date by EIS qualifying companies and Venture Capital Trusts.

IR35 – Off-payroll working calculation of PAYE liability for non-compliance

Legislation is being introduced in the Autumn Finance Bill 2023 enabling HMRC to reduce a deemed employers PAYE liability where that engagement was incorrectly treated as self-employed for tax purposes. This is to account for the tax and NI contributions already paid by a worker and their intermediary regarding payments received from an off-payroll working engagement. The changes will take effect from the 2024/25 tax year.

A response to the consultation launched in April 2023 has now been published by the Government.

Reform of audio-visual creative tax reliefs

Previously announced at the Spring Budget 2023, the Autumn Finance Bill 2023 will legislate to reform the film, TV and video games tax relief to refundable expenditure credits. Here, animated films, TV and children’s programmes will be eligible for a rate of 39%. These credits will be available from 01.01.2024.

Business Rates multipliers and reliefs following Autumn Statement 2023

For the next tax year, the small business multiplier will remain at 49.9p. This is the fourth consecutive year it will remain at this level. The standard multiplier is to be increased by CPI to 54.6p.

The current relief available for Retail, Hospitality and Leisure properties is being extended for the next tax year at its current rate of 75%. The Government claims that circa 230,000 properties in England will be able to receive this support (up to a maximum of £110,000 per business).

Four new investment zones including Greater Manchester announced in Autumn Statement 2023

In addition to the 12 new investment zones announced in the Budget earlier this year, a further four new investment zones were announced. Focusing on advanced manufacturing, this includes an additional investment zone in Greater Manchester. Existing investment zones in Greater Manchester are being extended for an additional five years to 2031. These are located at Airport City and the Oxford Rd Corridor.

Tougher consequences for promoters of tax avoidance

Announcement in the Spring Budget, legislation is to be introduced in the Autumn Finance Bill to bring this forward. This includes legislation making it a criminal offence for promoters of tax avoidance. This is when they continue promoting avoidance schemes after receiving a Stop Notice.

A new power which will enable HMRC to bring disqualification action against any company director involved in promoting tax avoidance. This also includes those who control or exercise influence over a company.

National Insurance cuts announced in Autumn Statement 2023

The main rate of primary Class 1 National Insurance contributions will be reduced by 2 percentage points from 12% to 10% from 6 January 2024. For the self-employed, the main rate of Class 4 National Insurance contributions will be reduced by 1 percentage point from 9% to 8% from 6 April 2024.

Additionally, from 6 April 2024, self-employed people with profits above £12,570 will no longer be required to pay Class 2 but will continue to receive access to contributory benefits including the state pension.

In addition, the Lower Earnings Limit (LEL) and the Small Profits Threshold (SPT) will be frozen at 2023/24 levels in 2024/25.

Where voluntary National Insurance is paid, Class 2 and Class 3 National Insurance contribution rates will be frozen at their 2023/24 levels in 2024/25. Also, the main Class 2 rate will remain at £3.45 per week, and the Class 3 rate will remain at £17.45 per week. This will not affect existing arrangements regarding payments of voluntary Class 2 or Class 3 National Insurance contributions which are connected to previous tax years.

Most National Insurance limits and thresholds will be maintained at 2023/24 levels, albeit until the 2027/28 tax year.

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Minimum Wage increased (again) in Autumn Statement 2023 to £11.44 per hour

In line with the Low Pay Commission recommendation, the national living wage is to increase for those aged 23 and over. This will increase from £10.42 an hour to £11.44 an hour from April 2024.

The Chancellor estimates this equates to a £1,800 annual pay rise for full-time workers on the national living wage.

Abolition of pensions lifetime allowance whilst pensions are confirmed to increase in line with the triple lock

As was the case last year, the triple lock to the state pension is to remain again this year. Because of this, the state pension will rise in line with average earnings, inflation or 2.5%, whichever is highest.

Consequently, the state pension will increase from £203.85 to £221.20 per week from April 2024. This is an increase of 8.5%, based on September’s rate of inflation.

It was confirmed that legislation will be introduced in the Autumn Finance Bill 2023 to remove the Lifetime Allowance. This will clarify the taxation of lump sums and lump sum death benefits, and consequently explain how protections are applied. The legislation will also explain the tax treatment for overseas pensions, reporting requirements and transitional arrangements. This is to take effect from the 2024/25 tax year.

Construction Industry Scheme (CIS) reform: reforms announced to the Gross Payment Status test

The Autumn Finance Bill 2023 will add compliance with VAT obligations to the Construction Industry Scheme Gross Payment Status compliance test. These changes will also expand HMRC’s powers to remove Gross Payment Status immediately in cases of serious non-compliance involving VAT, Income Tax Self-Assessment, Corporation Tax Self-Assessment and PAYE.

Regulations are to be laid setting out exceptions to VAT compliance obligations. they also remove most payments made by landlords to tenants from the scope of the scheme. The legislation will apply from the 2024/25 tax year.

Other tax increases through the freezing of thresholds that were not mentioned in Autumn Statement 2023

Again, most tax thresholds have already been frozen. Given that inflation remains high, this equates to tax increases in real terms. Thresholds again remain frozen until April 2028, these include:

• Income tax personal allowance
• Higher rate threshold
• Inheritance tax thresholds

In addition to the above, the VAT registration threshold will be maintained at £85,000 until at least March 2026.

Annual Tax on Envelope Dwellings (ATED)

The Annual Tax on Envelope Dwelling annual charges are to rise by 6.7% from 01.04.2024. This is in line with the September 2023 CPI. This is an annual tax mainly paid by companies that own UK residential property and are valued at more than £500,000.

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Permitted development to convert houses into flats

Surprisingly, was the proposal to bring in laws to allow permitted development to change a dwelling house into two flats. It will be interesting to see the details of this, including the requirements that will enable permitted development.

Alexander & Co – Expert tax and accountancy advice