Autumn Statement 2023: what business tax measures can the UK expect?

The UK chancellor, Jeremy Hunt, will deliver his penultimate (or perhaps his last) Autumn Statement of this Parliament on 22 November 2023. It will be accompanied by an economic and fiscal forecast by the Office of Budget Responsibility.

The chancellor's scope for new tax measures is expected to be limited but, with the general election looming, the statement could pave the way for more detailed tax announcements to be made in the last Budget of this Parliament in spring next year  or the Conservative's election manifesto.

Tax cuts unlikely

While the UK tax burden is at its highest level for decades (with an increase in corporation tax, a reduction in allowances, and personal tax thresholds frozen until 2028), immediate tax cuts are not expected.

The chancellor has consistently said that his primary aim is to bring down inflation. Although he has previously ruled out tax cuts, he may use the Autumn Statement to set out his path for future tax-cutting measures. There are rumours that he may look to cut (or make improvements to) inheritance tax – although any headline grabbing rate cut may be left for the Spring Budget or perhaps the Conservative's manifesto for the next general election.

Boosting business investment

Capital allowances

The chancellor announced in this year's Spring Budget that the government would make permanent the new capital allowances regime "when fiscal conditions allow". The new regime introduced a 100% first-year allowance for main rate expenditure on the provision of new plant and machinery – known as full expensing (or a 50% first-year allowance for special rate expenditure for qualifying expenditure) for three years (until April 2026).

The current fiscal conditions may not be strong enough to make the measure permanent but any announcement would help businesses with their longer-term strategic investments in the knowledge that the measure would extend beyond April 2026.

EIS and VCT relief

One measure that the government is expected to bring forward is the extension of the sunset clauses under the Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) Schemes, which limit the relief to qualifying share subscriptions made before 6 April 2025. The government said that it will provide further details of the schemes beyond 2025 at a fiscal event, which could well be the Autumn Statement.

The government has commented (in its response to the Treasury Committee's report on venture capital that was published in the summer) that it does not, however, agree that extending EIS and VCT company age limits and funding limits is the best way for the government to support regional and scale up investment, so immediate changes are not expected in that area.

Enhanced relief for AI

Leading technology firms have, via the UK's technology trade association techUK, written to the chancellor ahead of the Autumn Statement to encourage the government to support investment in digitalisation by offering enhanced tax reliefs for expenditure on digital services for small and medium-sized enterprises (SMEs). The letter recommends an enhanced support of 140% on the first £50,000 of expenditure on productivity enhancing digital services.

Hot on the heels of the AI summit at Bletchley Park and the desire for Britain to be "the next Silicon Valley", the chancellor would need to weigh this option against the backdrop of a generous full-expensing capital allowance regime already in place and the tax incentives for research and development (R&D) expenditure already available for SMEs.

R&D

In relation to R&D more generally, there may be an announcement on whether the government will go ahead with a single scheme for R&D (merging the current two schemes). Draft legislation was published in July on the proposed design of a merged scheme for technical consultation and there may be confirmation of whether the merged scheme will take effect from April 2024 or not.  

Green tax measures

The chancellor may announce some green tax measures, which could help regain ground lost following the government's recent announcements pushing back the timescale of some of its net-zero commitments.

There are rumours that the chancellor may introduce a "green" stamp duty land tax (SDLT) measure, which would give an SDLT rebate to buyers who improve the energy efficiency of their home within two years of its purchase.  

The government may also respond to its consultation (which closed in the summer) on expanding VAT energy savings materials (ESMs) relief. The consultation proposed including additional technologies (for example, electrical battery storage) within the relief and reintroducing the relief for installations of ESMs in buildings intended solely for a relevant charitable purpose.

Reponses to recent consultations

The outcome of a range of other consultations that closed over the course of this year are still to be delivered. The chancellor may give an update on some of these policy consultations.

• Reform of the Construction Industry Scheme. Osborne Clarke responded to the consultation that looked at strengthening the tests for Gross Payment Status (GPS) and excluding landlord contributions from the UK Construction Industry Scheme.
• Proposals to modernise stamp taxes on shares. HMRC has consulted on proposals including whether to have a single tax on securities
• Reform of VAT on fund management. Despite the government confirming in the Spring Budget 2023 that it would publish is response to the consultation on proposed reform of the VAT rules on fund management "in the coming months", the response is still awaited.
• Improving and simplifying tax-advantaged save as you earn (SAYE) schemes and share incentive plans. Osborne Clarke responded to the call for evidence on all-employee share plans. It is hoped that the responses will lead to continued cross-governmental support for these important and much-valued plans, along with simplifications to make them easier for companies to operate.
• Proposals for targeted reform of the tax treatment of Employee Ownership Trusts and Employee Benefit Trusts. Osborne Clarke responded to the consultation, generally supporting the proposals put forward by HMRC for targeted reform of the employee ownership trust tax regime and employee benefit trusts.  
• Proposals to regulate and tackle non-compliance in the 'umbrella' company marke The UK government has consulted on "umbrella" arrangements in the UK and how to attain better compliance and regulation in the temporary workers market.
• Reform of Diverted Profits Tax, Transfer Pricing and Permanent Establishments. This is a huge topic area in which further consultation is expected to be undertaken.
• Proposals to introduce new type of investment fund – the Reserved Investor Fund. The government is looking at the introduction of a new UK-based unauthorised contractual scheme to enhance the UK’s existing funds regime. 
• Reform of the tax treatment of crypto-asset transactions in Decentralised Finance (DeFi) lending and staking. Osborne Clarke responded to the consultation, welcoming the reform by HMRC of the tax treatment of lending and staking tokens in the UK.

Osborne Clarke comment

The Autumn Statement will be challenging for the chancellor. With the UK still in a difficult economic position, he is unlikely to be able to announce any immediate tax cuts or generous giveaways. With Labour waiting in the wings and with Rachel Reeves already having given an indication of her and a potential future Labour government's tax measures, the chancellor will no doubt wish, with a general election looming, he had more at his disposal.