Autumn Statement 2023: the tax takeaways

In this briefing, our tax solicitor Michael Fluss summarises and comments on key corporate tax measures announced by the Chancellor in the Autumn Statement 2023.

Individuals/employment

National Insurance Contributions (NICs)

• Class 4 self-employment NICs are to be reduced from 9% (currently payable on profits between £12,570 and £50,270) to 8% and Class 2 self-employment NICs (currently £3.45 per week) are to be abolished with effect from 6 April 2024 (total saving where earnings are £50,270 or more would be approximately £556).
• Class 1 employee NICs are to be reduced from 12% to 10% with effect from 6 January 2023 (generating a saving of up to approximately £750).

ISAs – enhancement of choice

• Multiple subscriptions to ISAs of the same type in any year (up to an annual total of £20k) and partial transfers of ISA funds in-year between providers are to be allowed from April 2024.

lR35/PAYE – “smoothing” of tax collection mechanics where PAYE is not accounted for in the case of mistaken self-employment determination, but tax is paid by worker (deemed employee)

• Following a detailed consultation, HMRC has announced the introduction of a measure to address the potential over-collection of tax where an employer has incorrectly determined that an employee is outside IR35 (i.e. has determined that the worker is self-employed) when the worker was in fact within IR35 (i.e. was deemed employed). In these circumstances, under current law the employer remains liable for and so bears the full cost of the tax and NICs on the worker’s income not accounted for by PAYE, and the worker/intermediary may be entitled to reclaim any tax/NICs which they have overpaid. The new measure will instead reduce a deemed employer’s PAYE liability by the tax that HMRC estimate the worker/intermediary has paid on the income and tax paid by workers will be set against the PAYE liability instead of being repaid to them.

Real estate

Real estate investment trusts (REITs) – targeted changes to improve attractiveness

Changes introduced include the following:

• Tracing through intermediate holding companies where the Ultimate Beneficial Owner (UBO) is an institutional investor (e.g. authorised unit trust, OEIC, pension scheme, charity and, from Royal Assent to Finance Bill 2023, Co-ownership Authorised Contractual Schemes (CoACS)): this has retrospective effect, although certain classes of institutional investors now need to satisfy genuine diversity of ownership/non-close test;
• Insurance companies being allowed to hold 75% interest in group UK REIT;
• Clarification that property financing costs taken into account for the purposes of REIT leveraging thresholds are those referable to a REIT’s UK property rental business;
• The extension of the exemption on sale by UK REITs of property rich companies to the disposal by REITs of interests in UK property-rich COACs.

Construction Industry Scheme (CIS) – landlord/tenant payments to be largely excluded/tightening of compliance requirements for gross payment registration

Helpfully, the majority of payments by landlord to tenants are to be taken outside the scope of CIS, presumably without having to meet the strict tax definition of “reverse premium”. This would appear likely to assist the drafting and negotiation of agreements for lease and works as there has been uncertainty for some time as to whether payments made by landlords to tenants in cases where incoming tenants undertake works on the property being leased to them are caught by the CIS.

The tax compliance test which a sub-contractor must satisfy to be registered to receive payment gross for undertaking construction work will be tightened by the inclusion of:

• a condition that the sub-contractor has complied with VAT filing and payment obligations;
• a right for HMRC to withdraw gross payment registration where the sub-contractor has failed to comply with VAT, PAYE or self-assessment (income tax or corporation tax) requirements.

Plant and machinery (real estate fixtures) capital allowances – “full expensing” made permanent

• The upfront full or 50% deduction (depending on the nature of the asset) for capital spend incurred on unused, non-second-hand plant and machinery for trading or property rental business (and other qualifying) purposes (which previously was to have expired in April 2026) is made permanent. In relation to property sale agreements, this may, over time, reduce the frequency and/or significance of section 198 elections (which by definition apply to used or second-hand plant and machinery), given that, in general, any residual expenditure on plant and machinery fixtures on a sale of property in respect of which first-year allowances have been claimed will, as a result of this writing down, be either zero (in the case where the first-year allowances were 100%) or more limited (where the first-year allowances were 50%).
• A government consultation is to be launched on wider changes to simplify the capital allowances legislation.

Stamp duty/SDRT growth market exemption – access widened

• The market capitalisation condition for a recognised stock exchange to qualify as a recognised growth market (e.g. AIM, Euronext Growth Dublin and The AQSE Growth Market of AQUIS Stock Exchange) on which trades in (non-listed) securities/shares are exempt from stamp duty and SDRT is to be relaxed. With effect from 1 January 2024, that condition will be satisfied where the market capitalisations of the majority of the companies admitted to trading on the exchange are less than £450 million (rather than £170m, the case currently). The measure is stated to be aimed at ensuring the growth market exemption works fairly and increasing competition in the market leading to greater choice for small and medium enterprises seeking to access finance.

Corporate

Enterprise Investment Scheme (EIS) / Enterprise Management Incentives (EMI) – income tax relief to continue to be available for further ten years/extension of deadline for notification of EMI options

• Income tax relief, which previously, would have ceased to be available in respect of shares issued on or after 6 April 2025, will be available for a further ten years. The shares will need to be issued on or before 6 April 2035.
• The time limit for a company to notify HMRC of the grant of EMI options is extended from 92 days to 6 July immediately following the tax year in which the grant was made.

Multinational top-up tax and domestic top-up tax – applicable to groups with annual global revenues exceeding €750m and having business activities in UK

• Numerous amends to ensure UK legislation remains consistent with administrative guidance to the Global Anti-Base Erosion Rules agreed by the UK and other members of G20/OECD Inclusive Framework (part of reform of international framework having as its purpose the introduction of a 15% global minimum tax).

Tax avoidance – introduction of criminal penalties/disqualification orders

• A new criminal offence is to be introduced for those promoting tax avoidance schemes after receiving a notice requiring them to stop.
• HMRC is to be given the power to apply to the court for a disqualification order against directors of companies and other individuals controlling or exercising influence over companies involved in promoting tax avoidance.

R&D – rationalisation/simplification of basis for claiming tax reliefs

• The Research and Development Expenditure Credit (RDEC) and the small or medium enterprise (SME) R&D relief (two separate R&D reliefs which operate in different ways in both how relief is claimed and what can be claimed for) are to be merged with effect from accounting periods beginning on or after 1 April 2024.

If you have questions about the tax measures outlined in the Autumn Statement, please contact Michael Fluss.