UK Autumn Statement 2023 - International
The UK’s Autumn Statement 2023, delivered on 22 November, doesn’t contain any outstanding updates to the UK’s business tax rules. Instead, not unlike the Spring Statement earlier this year, it looks to a raft of measures aimed at incentivising business investment and employment levels and intended to grow the economy, as well as reducing debt and supporting British business.
Business investment – “full expensing” made permanent
One of the key business incentives in the UK’s Spring Statement 2023 was the replacement of the “super-deduction” with “full expensing”, allowing companies to write off the full cost of qualifying plant and machinery expenditure on assets such as machines, computers, tools, vehicles (excluding cars) and office, construction and warehouse equipment in the year of investment.
As was indicated in the Spring Statement, that change (which was originally intended to apply to expenses incurred within a three-year period commencing 1 April 2023) will now become permanent, so that investments made by companies in such qualifying plant and machinery will continue to qualify for a 100% first-year allowance for main rate assets and a 50% first year allowance for special rate (including long life) assets.
Assets for leasing remain excluded from full expensing, but the government will continue to consider extending full expensing to leasing.
ORIP rules abolished from 31 December 2024
The Offshore Receipts in respect of Intangible Property (ORIP) rules are set to be abolished in respect of income arising from 31 December 2024. The ORIP rules were intended to discourage businesses from holding IP in low-tax jurisdictions without economic activity relating to the IP’s development and exploitation being based in those jurisdictions. However, it is intended that the forthcoming introduction of the Pillar 2 Undertaxed Profits Rule will discourage such multinational tax planning on a broader platform, such that the ORIP rules are no longer needed.
Pillar 2 update – Undertaxed Profits Rule
In the Spring Statement, the government confirmed that it would legislate to implement the globally agreed G20-OECD Pillar 2 framework in the UK. Pillar 2 is set to ensure that multinational enterprises will be subject to a minimum 15% effective tax rate in every jurisdiction in which they operate, helping to ensure that profits generated in the UK are also taxed in the UK. The government will introduce the Undertaxed Profits Rule, which is part of the Pillar 2 framework, in the UK for accounting periods beginning on or after 31 December 2024.
R&D relief schemes to be merged to simplify rules
The existing Research & Development Expenditure Credit and SME schemes are, after consultation, now due to be merged, with expenditure incurred in accounting periods beginning on or after 1 April 2024 to be claimed under the new merged scheme. This will be a significant overhaul to the existing R&D relief schemes, with the new rules intended to simplify use of the regime.
Incentives for workers
Among a number of measures intended to reduce tax on individual workers and incentivise entry into the labour market, employees’ national insurance contributions (NICs) will be reduced from a current rate of 12% down to 10% as of January 2024, with class 4 self-employment NICs also being reduced and class 2 self-employment NICs being abolished, each from April 2024.
Miscellaneous changes to increase competitiveness
In other updates, the government has announced that it will be extending the Growth Market Exemption relief from stamp duty and stamp duty reserve tax so that smaller, innovative growth markets will also benefit, and will be making amendments to the Real Estate Investment Trust (REIT) regime in order to enhance its competitiveness.
Should you have any queries on the Autumn Statement, please reach out to your usual UK tax contact or one of the following:
Ben Brown, Partner
Matt Davies, Partner
Keunyoung Oh, Partner
Clara Boyd, Legal Director
Elizabeth Emerson, Senior Associate