... STEPS FORWARD, NOT LOOKING BACK

Less than eight months since the Spring Budget and there’s a marked difference in the content and tone of the Autumn Budget and Spending Review. A clear move away from simply supporting businesses and the economy through Covid, to the longer-term return to growth and prosperity driven by investment in key areas by the Government.

The ‘build back better’ and ‘levelling up’ slogans (absent Boris’s puns!) were again present in the Budget detail, further enforcing the view that we’re now on the other side of Covid and firmly in the rebuild phase.

There’s again been substantial speculation in the run up to the event on the likelihood of tax increases to recoup the investments made over the last 18 months. This speculation was largely unfounded, with Capital Gains Tax (CGT) and Inheritance Tax remaining unchanged.

So, here’s a run through some of the key changes and announcements we’d expect to have the greatest impact on business and individuals.

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BUSINESS RATES

The Government’s review of business rates was published alongside the Budget with actions coming into effect.

There’s a freeze on the business rates multiplier for a second year, from 1 April 2022 until 31 March 2023, keeping the multipliers at 49.9p and 51.2p.

A new temporary business rates relief for eligible retail, hospitality and leisure properties for 2022-23. Eligible properties will receive 50% relief.

There’s to be a 100% improvement relief for business rates which’ll provide 12 months relief, starting 2023.

INNOVATION RELIEF

R&D tax reliefs will be reformed to:

• Support modern research methods by expanding qualifying expenditure to include data and cloud costs,
• More effectively capture the benefits of R&D funded by the reliefs through refocusing support towards innovation in the UK, and
• Target abuse and improve compliance.

Legislation will be contained in the Finance Bill 2022-23 and and be effective from April 2023.

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DIVIDEND TAX RATES

Following the announcement concerning the social care levy in September, legislation will be introduced in the Finance Bill 2021-22 to increase the rates of income tax applicable to dividend income by 1.25% from April 2022. The dividend ordinary rate will be set at 8.75%, the dividend upper rate will be set at 33.75% and the dividend additional rate will be set at 39.35%. The dividend trust rate will also increase to 39.35% to remain in line with the dividend additional rate.

BASIS PERIOD REFORM

The government will legislate in the Finance Bill 2021-22 to reform income tax basis periods so that, regardless of accounting year end, sole trader and partnership businesses’ profit or loss for a tax year will be the profit or loss arising in the tax year itself.

The transition to the new rules will take place in 2023-24 and the new rules will come into force from 6 April 2024.

Future students of tax will sadly miss out on the enjoyment of complex calculations to tax some profits twice in the first years of trading, and later undoing that work with overlap relief!

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capital gains tax: property payment window

From 27 October 2021, the deadline for residents and non-UK residents to report and pay CGT after selling UK residential property will increase from 30 days after the completion date to 60 days.

It’s a welcome change and should provide some much-needed breathing room to plan for the submission of the relevant returns and payment of tax to HMRC. The requirement to submit these returns and make payment’s a relatively recent change and still comes as a surprise to many individuals making disposals which fall within the remit of these rules.

capital allowances

The temporarily increased £1 million level of the Annual Investment Allowance has been further extended to 31 March 2023 and will continue to sit alongside the ‘Super Deduction’ until then, providing welcome relief on this substantial level of investment.

residential property developer tax (rpdt)

Following recent consultation, a new tax is to be introduced from April 2022 on the profits companies and corporate groups derive from UK residential property development. The tax will be charged at 4% on profits exceeding an annual allowance of £25 million.

Residential property development’s broadly defined and includes activities such as dealing in residential property, designing it, seeking planning permission in relation to it, constructing or adapting it, marketing it or managing it where the profit is made by a company that had or has any interest in the land on which the activities are carried out.

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high-skilled migration

The government’s implementing changes to the UK’s immigration system to attract highly-skilled people to the UK. This includes a new Scale-up Visa, launching in spring 2022, that will help the UK’s fastest-growing businesses to access overseas talent. The visa will be open to applicants who pass the language proficiency requirement and have a high-skilled job offer from an eligible business with a salary of at least £33,000.

national living wage (nlw) and national minimum wage (nmw)

Following the recommendations of the independent Low Pay Commission, the government will increase the NLW for individuals aged 23 and over by 6.6% from £8.91 to £9.50 an hour effective from 1 April 2022. There’s increases across the board to the NMW as well also effective from April 2022.

This is clearly a step in the right direction, but the timing may be questioned particularly by small business still struggling to get back on their feet due to Covid.

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recovery loan scheme

The Recovery Loan Scheme will be extended until 30 June 2022 to give lenders the confidence to lend to small and medium-sized businesses. Finance will be available up to a maximum of £2 million per business, supporting their recovery and growth following the pandemic. The government guarantee will be reduced from 80% to 70% to encourage the lending market to move towards normality as the economy continues to recover.

tonnage tax

The Tonnage Tax regime’s being reformed to attract more shipping companies base themselves in the UK. The reform’s to include measures:

• Removing any requirement for ships in the UK Tonnage Tax regime to fly the flag of any EU country now the UK has left the EU.
• Making it easier for shipping companies to participate in the Tonnage Tax regime by reducing the lock-in period from 10 years to 8 years.
• Raising from 10% to 15% the permitted limit for qualifying secondary income in HMRC practice guidance.