Thoughts on the Autumn Budget 2023, by Mary Tierney, Tax Director
When I started in tax, on budget day we’d wait in the office for a motorcycle courier to arrive from London with the HMRC publications, and could only start to look at the detail from early evening. Many a pizza was eaten whilst reading and commenting on the tax detail in these notes. Now it’s all online and although I got very impatient as it took well over ¼ of an hour after the chancellor sat down before the tax papers appeared.
There was quite a bit in the detail of interest, and a lot of detailed reading ahead, and here are my personal first thoughts and these by no means covers all material points:
In the last full budget the Chancellor announced the abolition of the pension lifetime allowance, but we now have a lot of detail on how complicated this simplification is going to be. On quick scan, there look to be some complex transitional provisions to get our heads around, new jargon, Benefit Crystallisation Events (BCEs) are dead, long life RBCES – Relevant Benefit Crystallisation Events and what I suspect may be a very important point for us to consider with our clients, a new election for those with pension funds around and above the £1 million mark to consider.
A particular interest of mine is R&D tax credit relief, and we have had an interesting ride over the past couple of years with lots of legislative tinkering, changes in the reporting system and a definite change in approach by HMRC spearheaded by a number of enquiries issued at random. What has been unveiled now is a pretty substantive overhaul of the full R&D scheme. With effect for accounting periods beginning on or after 1 April 2024 there is to be a new scheme combining the current RDEC and SME schemes. Again, there is a lot of detail to digest, and whilst there are some “wins”, for example receiving a grant will no longer impact on the relief received, overall its likely to reduce the benefit of claiming R&D relief for many companies. Because of the amount of current, historic and future changes, and additional complexities already introduced, our approach will be to look at every company that we work with on R&D claims on a tailored basis to establish the impact of the changes over the next few years on them, to enable them to make an informed decision on the benefits or not, of continuing to claim the relief. It will still be a valuable relief for most companies, but unfortunately it’s likely that it will not be as beneficial as it has been historically.
Another area of interest to me are the venture capital reliefs, especially SEIS and EIS reliefs. The EIS scheme has been extended from April 2025 to April 2035, which is good news as it shows a real commitment to these very valuable schemes for entrepreneurial companies. In addition, there are a suite of documents evaluating the various Venture Capital Schemes, which are quite lengthy but I look forward to reading in detail to see the direction of travel.
Talking about direction of travel, there was a very interesting nugget hidden away in a note on HMRC data collection from 2025/26 that piqued my interest. To quote “ Firstly, employers will be required to provide more detailed information on employee hours paid via Real Time Information PAYE reporting. Secondly, shareholders in owner-managed businesses will be required to provide the amount of dividend income received from their own companies separately to other dividend income, and the percentage share they hold in their own companies via their Self Assessment return. Finally, the self-employed will be required to provide information on start and end dates of self-employment via their Self Assessment return.” Now maybe this is just to increase statistics held by HMRC, but it’s the second requirement where I suspect a hidden agenda. Owner managed businesses frequently have different classes of shares that pay dividends that are not pro-rata to the percentage share of the company held, could this be a step in the direction of HMRC looking to bring this practise to an end?
It’s not all bad though, there is what looks like a sensible relaxation on the use of cash basis for unincorporated businesses and partnerships from 2024/25. Currently, businesses are only able to join the cash basis if their cash basis turnover is less than £150,000, and are forced to leave in certain circumstances where their turnover exceeds £300,000. This restriction has been entirely removed as well as the current £500 interest deduction cap as once this measure is in place businesses that use the cash basis will be able to deduct any amount of interest as long as it is incurred wholly and exclusively for the purposes of the trade.
Of course, there is the much trumpeted full expensing of new plant and machinery for corporates, although in practice over the past few years, the amount spent by most companies I deal with has been below the 100% relief level in any case, so I don’t feel I’ll see a huge change here. If however a company is looking at a large capital build project, this could have a fundamental impact of the tax cost of the project.
Finally, the reduction in NIC. I noted that the abolition of class 2 NIC is not actually a complete abolition, as any self-employed person with profits under £6,725 will still have the option to choose to pay Class 2 voluntarily to get access to contributory benefits including the state pension.
Keep your eyes peeled as our detailed summary hits inboxes tomorrow morning.
