Today’s Autumn Budget tinkered at the edges of the UK tax regime with announcements on the annual investment allowance limit, the new residential property developers tax, R&D tax relief, creative sector reliefs and various duties. Northern Ireland specific matters are also featured in today’s announcements. We also understand that the Government will bring forward a further set of tax administration and maintenance announcements later in the autumn. This follows a similar set of announcements on 23 March 2021 after the Spring Budget.
There were no changes to capital gains tax (“CGT”) rates despite the Office of Tax Simplification’s (“OTS”) November 2020 report nor did any changes on inheritance tax materialise as potentially expected following another OTS review. Green taxes also did not feature on the day and there were no tax increases in other areas. However readers are reminded of the changes to national insurance and dividend tax rates announced last month which will take effect from April 2022.
Annual investment allowance limit
At the Spring Budget the Chancellor confirmed that the annual investment allowance limit for expenditure on plant and machinery and integral features would remain at £1 million until 31 December 2021 after which it would fall to £200,000. Today’s Autumn Budget announced that there will be no reduction from 1 January 2022 and that the limit will remain at £1 million until 31 March 2023.
It should be noted that the AIA is available to both companies and unincorporated businesses however the super-deduction and 50% first year allowance announced at the Spring Budget which are available until 31 March 2023 are only available to companies.
Residential property developer tax
More information was provided on the new residential property developers tax (“RPDT”) announced in February 2021 for which draft legislation was published last month. The tax will be charged at 4 percent on profits exceeding an annual allowance of £25 million. The RPDT applies to profits arising in accounting periods ending on or after 1 April 2022.
R&D tax relief
Following consultation and as recommended by this Institute, the categories of qualifying expenditure for R&D tax relief purposes are to be expanded to include data and cloud costs.
The budget documents also confirm that reforms will be implemented “to more effectively capture the benefits of R&D funded by the reliefs through refocusing support towards innovation in the UK, and to target abuse and improve compliance.” The Chancellor’s speech referred to this as focusing R&D tax reliefs on domestic activity taking place in the UK.
These changes will be legislated for in Finance Bill 2022/23 and will take effect from April 2023. Further details of these changes and next steps will be set out as part of the Government’s further tax administration and maintenance announcements later in the autumn.
Creative sector reliefs
A number of changes were announced to the various creative sector tax reliefs. The museums, galleries and exhibitions tax relief (“MGETR”) which had a sunset clause of 31 March 2022 is now extended a further two years and will now end on 31 March 2024.
From 27 October 2021, the headline rates of relief for theatre tax relief (“TTR”), orchestra tax relief (“OTR”) and MGETR will temporarily increase from 20 percent (for non-touring productions) and 25 percent (for touring productions) to 45 percent and 50 percent, respectively.
From 1 April 2023, the rates will be reduced to 30 percent and 35 percent and will return to 20 percent and 25 percent on 1 April 2024. For MGETR, the relief will expire on 1 April 2024 and no expenditure from this date will be eligible for relief.
Also from 27 October 2021, OTR rates will temporarily increase from 25 percent to 50 percent, reducing to 35 percent from 1 April 2023 and returning to 25 percent on 1 April 2024.
And from 1 April 2022, “changes will be made to better target MGETR, TTR and OTR and ensure that they continue to be safeguarded from abuse.”
Cross-border group relief
Now that the UK has left the EU, Finance Bill 2021/22 will abolish cross-border group relief and other related loss reliefs from 27 October 2021. These reliefs were introduced as a result of the CJEU case Marks and Spencer v Halsey which is heralded as being responsible for the introduction of cross-border group relief in various countries across the EU including the UK which introduced its provisions in Finance Act 2006.
CGT UK residential property disposals
The time limit for making a CGT return and the associated CGT payment on a disposal of UK land and property is now extended from 30 days to 60 days. This takes into consideration feedback from stakeholders, including this Institute, in respect of problems experienced with the 30 day reporting and payment system.
This means that taxpayers with a completion date on or after 27 October 2021 now have 60 days to report and pay any tax due on the disposal The reporting and payment date remains at 30 days for transactions completed up to 27 October 2021.
Additionally, changes have been made to the legislation to help clarify the mixed use property rules. This is to ensure that where a gain arises to UK residents in relation to a mixed use property, that only the portion of the gain that is the residential property gain is to be reported and paid in line with these deadlines.
More detail on the tax measures in today’s Budget will feature in Monday’s edition of Chartered Accountants Tax News. Further information on today’s announcements is also available on the HM Treasury and HMRC websites.
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