Spring Budget: Spring Budget: Some big bangs as the Chancellor hunts for growth
Discover what’s in play for the Finance Bill 2023, published 23 March.
March’s Spring Budget was an upbeat speech from a Chancellor, buoyed by the Office for Budget Responsibility’s forecast of a technical recession avoided in 2023, growth of 1.8% in 2024 and a 3% reduction in the UK’s debt over the next five years. It was still steady and sensible overall but there was some loosening of the shackles and a turning of attention to growth and a looming election.
Much of what was announced had been heavily trailed – long gone are the days of a pre-Budget purdah. One complication with reporting on the Budget documentation is establishing what is genuinely new and what has already been announced at least once before. This is never straightforward but the fiscal shilly-shallying of recent times makes it particularly difficult. I have therefore focused on new announcements, but recommend our status of announced legislation table for picking up everything in play for the Finance Bill 2023.
It was perhaps the least tax-orientated Budget speech I can remember, but that was because there was so much tax in the Autumn Statement (really Mr Hunt’s first Budget) and, as always, the bedevilled detail was confined to the documentation. That being said, the Chancellor announced several important new measures for both businesses and individuals which clearly mark his intention to switch his focus from stability to growth. This article summarises these but please refer to the News highlights part of this issue for more detailed analysis.
The super deduction regime for companies was due to close for expenditure from 1 April 2023 and there was a degree of speculation as to what would replace it. We now have the answer. First year allowances (FYAs) allowing companies to fully expense their main rate capital expenditure (and 50% FYAs for their special rate capital expenditure) for at least the next three years. Clearly good news for companies but they would have preferred more notice. Annual Investment Allowance will still be available for expenditure on qualifying additions up to the £1 million permanent limit, which will benefit unincorporated businesses.
The Chancellor also announced the introduction of 12 new investment zones – far fewer than the 200 or so Liz Truss wanted last year. Each zone will have access to £80m of ‘interventions’ over five years, which will include SDLT relief, enhanced capital allowances and structures and buildings allowances and some relief from secondary Class 1 National Insurance contributions.
Other important announcements include:
- enhancements to the research and development credit for small and medium-sized enterprises;
- extension of the higher rates of theatre, orchestra and museums and galleries exhibitions tax reliefs;
- removal of EEA expenditure in theatre, orchestra and museums and galleries exhibitions tax reliefs;
- reform of film, TV and video games tax reliefs;
- the Government will simplify the process for granting enterprise management incentive options;
- changes to the corporate interest restriction rules;
- the patent box deduction formula to be amended;
- amendments to the genuine diversity of ownership condition in the qualifying asset holding companies and real estate investment trusts; and
- the Government to consult on ways to increase the number of businesses eligible for and using the cash basis.
Any hope among the Tory backbenchers that the rise in corporation tax main rate to 25% from 1 April 2023 would be withdrawn was quashed.
Legislation will also be introduced to ensure that from 15 March 2023 (with transitional rules) UK charity tax reliefs and exemptions are restricted to UK charities and community amateur sports clubs.
As regards individuals, the major surprise was the abolition of pensions lifetime allowance (and the significant increase in annual allowance from £40k to £60k). A significant increase in the former had been rumoured but I am not aware of anyone predicting its disappearance. Both changes are clearly targeted at getting those thinking of retiring (particularly at senior levels in the NHS) to think again. We won’t be able to measure its success for a while.
The starting rate for savings band and the individual savings account, junior individual savings account and child trusts funds limits remain unchanged in 2023–24. Community investment tax relief limits are to expand but social investment tax relief withnew investments closing from 6 April 2023.
With effect from 6 April 2024, the Government intends to simplify how income tax applies to trusts, estates and their beneficiaries.
Effective 6 April 2024, inheritance tax, legislation is to be introduced to restrict the scope of agricultural property relief and woodland relief on UK property.
Value added tax
The following announcements were made:
- technical changes to late payment interest, late payment penalties and repayments interest rules;
- simplification of the VAT treatment of deposits charged under a drink container deposit scheme;
- zero rating to be extended to medicines supplied through patient group directions;
- exemption to be extended to services carried out by staff supervised by registered pharmacists in the UK; and
- digitisation of the DIY housebuilders scheme.
Other indirect taxes
The following announcements were made:
- fuel duty frozen for a further 12 months;
- alcohol duty rates, tobacco duty rates, air passenger duty and vehicle excise duty are to increase from 1 April 2023;
- rates of landfill tax and plastic packaging tax to rise from 1 April 2023 and climate change levy from 1 April 2024;
- HGV levy and aggregates levy to be reformed and new bands for air passenger duty added;
- the gross gaming yield bandings used to determine rate of gaming duty are frozen from 1 April 2023; and
- the duty structure for alcohol products to change with effect from 1 August 2023.
Finally, promoters of tax avoidance schemes are to be further targeted and the maximum sentence for tax fraud is to increase from 7 to 14 years. There are to be a series of measures to help HMRC better manage outstanding debts.
The big winners in terms of investment (under the Chancellor’s four pillars: enterprise, employment, education and everywhere) were childcare, disability benefits and ‘returnaships’ – apprenticeships for the over 50s. All of these share the common aim of getting some of the seven million adults of working age in the UK who are not in work to fill the one million current vacancies. Many of the spending announcements relate to England, so it will be interesting to see whether the devolved nations follow suit.
Other areas to do well were:
- carbon capture and storage;
- nuclear power;
- leisure centres and pools;
- the medical and medical technology industries;
- the artificial intelligence industry; and
Also noteworthy is the extension of the energy price guarantee (at £2,500) for a further three months until 31 July 2023.
Find all the new rates and allowances.
You can track how all these announcements are reflected in our online services by going to our Budgets quick link.
Document downloaded on 16-03-2023 from Croner-i Navigate, the UK’s leading online research service for tax, audit and accounting professionals. Find out more at www.croneri.co.uk or call 0800 231 5199.
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