Crowe reacts to Chancellor's Autumn Statement

22 Nov 2023

Published in: Member News

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Partners' commentary on Jeremy Hunt's announcements

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Richard Bull, tax partner at Crowe’s Midlands office, said: “The 2% cut to NIC for employees is larger than anticipated, and much more of a crowd pleaser than the rumoured inheritance tax reform. The Chancellor was silent on this along with capital gains tax and non doms. Has this been kicked down the road until we get closer to an election? There were still no changes to the personal allowance and income tax bands, meaning that we will still see the continuing impact of fiscal drag. This loosening of fiscal policy could also prevent any further reductions to interest rates. Any benefit of tax cuts could therefore be removed pretty swiftly for those families with mortgage payments to make.”

Paul Cox, corporate tax partner, said: "While the statement provided support for the self-employed with Class 2 NI being abolished and Class 4 being reduced by 1% - it did not provide enough support to the majority of the owner-managed and mid-tier businesses in the UK. The Autumn Statement does not go far enough to act as a catalyst for companies to invest, innovate and grow. The Chancellor should have been bold and reduced the main rate of Corporation Tax. It is a real shame that the Chancellor did not provide incentives to encourage further investment in green initiatives. We need to radically change our approach to environmental and sustainability matters. The Chancellor seems to have completely ignored these areas in his Statement."

He added: “Keeping the cliff edge. No change to the £85,000 VAT registration threshold. Keeping it at this level is most likely the worst of both worlds. An increase could have encouraged small businesses to grow, whereas a reduction would have meant an adjustment period for small businesses after which the threshold would no longer act as a barrier to continued growth.

“The hospitality and leisure sector seemed to particularly benefit today but it was disappointing that Crowe UK’s call for a reduced VAT rate for the sector was not taken up. While the sector will benefit from business rates savings, it faces higher costs, for example, through increases to salaries, so a reduction in VAT would have helped to reduce prices and/or aid profitability.”

Johnathan Dudley, Midlands & South West Managing Partner and Head of Manufacturing Business, said: “The much-anticipated extension of full expensing may not directly benefit SMEs, but it at least confirms full tax deduction in the future... unless, of course, another chancellor reverses it.

“The measures for R&D need close examination, but when referring to life sciences, seem ominous for a manufacturing sector already struggling with a more robust R&D regime, and one which our research implies is disincentivising investment in innovation in the sector.”

Rob Marchant, Head of Tax at Crowe UK, said: “On closer inspection of the Budget documents, it seems we are keeping the cliff edge, with no change to the £85k VAT registration threshold. Keeping it at this level is most likely the worst of both worlds. An increase could have encouraged small businesses to grow, whereas a reduction would have meant an adjustment period for small businesses after which the threshold would no longer act as a barrier to continued growth.

“The hospitality and leisure sector seemed to particularly benefit today but it was disappointing that Crowe UK’s call for a reduced VAT rate for the sector was not taken up. While the sector will benefit from business rates savings, it faces higher costs, for example through increases to salaries, so a reduction in VAT would have helped to reduce prices and aid profitability.”

He added: “Tax cuts, or just a smaller tax rise when viewed over a longer period? Fiscal drag and high inflation have meant more people and businesses paying more tax more quickly than may have been expected. Fiscal drag drags on. It was disappointing that no steps were taken to reduce its impact. A freezing of tax thresholds at a time of increased inflation has led to an increase in government tax receipts and additional tax complexity for many.”

Phil Smithyes, partner and Head of Financial Planning, said: “The one pension pot for life came as a welcome surprise with employees having the ‘legal right to require a new employer to pay pension contributions into their existing pensions pot’.

“There was a focus on UK growth resulting in the biggest tax cuts for businesses that the UK has ever seen resulting in the UK having the lowest corporation tax in the G7 with another £20bn announced for investments into UK businesses. Surprisingly, IHT, ISA’s, JISA’s and LISA allowances have remained untouched despite initial rumours which the government will likely suffer some criticism for.”

And Paul Cox, corporate tax partner, added: “The government has repeated its desire to tackle what it sees as unacceptably high levels of non-compliance with R&D reliefs. It will be interesting to see HMRC’s promised compliance action plan, but we are disappointed that the Chancellor did not announce an expansion of the existing restrictive advanced approval process to all companies.

“Obtaining prior approval that the R&D activity qualifies would reduce the barriers that uncertainty and cost represent for businesses claiming reliefs.”