Tax has been very much in the headlines recently. At a domestic level, we even have two new taxes to look forward to next year (being the health and social care levy (see our briefing) and residential property developer tax (RPDT)), whilst, at international level, agreement has been reached on most of the key features of significant two-pillar reform programme for global corporate tax rules (BEPS 2.0) (see our briefing).
So, does that mean we can expect further eye-catching new tax measures to be announced in the Autumn Budget?
Typically, it is tax rises or cuts that attract the most attention and, given the state of the Covid-ravaged public finances, the former cannot be entirely ruled out. However, with a significant increase in corporation tax to 25% already pencilled in for April 2023 and dividend tax rates to increase by 1.25% points next April alongside the new health and social care levy, it may be that the government considers that it has limited scope for explicit tax increases without either endangering the fragile economic recovery or adversely impacting its public support. That may also mean that moves to increase the national insurance contributions of the self-employed, so that they are more aligned with those for employees, will also not be on the agenda, despite Chancellor Sunak having strongly hinted at such a measure back in March 2020 when unveiling covid support measures for the self-employed.
So, if the government does introduce measures to increase tax revenues, these may be via technical amendments to existing rules, for example, by following up on an idea in the Office of Tax Simplification's reports on capital gains tax and reducing the annual allowance (currently £12,300 per annum). However, as yet, we have not received any specific hints from the government on what, if any, revenue-raising measures to expect in the Budget.
This may, therefore, point towards an Autumn Budget containing more detail on previously announced measures (for example, the rate of RPDT and the amount of its annual allowance), updates on issues where there have been prior consultations (such as reform of the enterprise management incentive (EMI) scheme following on from a call for evidence earlier this year) and administrative measures.
Indeed, a relatively low-key budget (in terms of tax measures) may well be welcomed by many (including tax advisors), as businesses and, indeed, HMRC, are likely to need time to plan for the significant tax changes already scheduled to come into force. As well the new taxes discussed above, important measures include the introduction, next April, of a new tax-privileged regime for qualifying asset holding companies (for which, so far, we only have partial draft legislation) and of the requirements for large businesses to notify HMRC if they have adopted a tax treatment that is uncertain.
In addition, it is likely that the UK's implementation of the extensive BEPS 2.0 reforms will require significant changes to the corporation tax rules applying to large multinational enterprises, with equivalent issues arising in the other adopting jurisdictions (currently 136 countries have agreed to the key components of the programme). As the final details of the measures have yet to be internationally agreed, it is unlikely that we will get anything on this in the Budget (perhaps apart from a reiteration of the government's support for the reform). However, given the ambitious timetable for implementation, with most measures coming into force in 2023, draft UK implementing rules may well follow hot on the heels of international agreement next year.
A bit of calm at Budget time may therefore go down well.
