OTS and IR35 given the push as Chancellor confirms sweeping tax cuts

The details in this story – including the cancellation of IR35 – were rendered out-of-date by later announcements. For a more up-to-date picture can be found here.

The Chancellor of the Exchequer today announced details of what the Government is calling ‘The Growth Plan’, setting out a series of measures intended to boost economic growth in light of the deteriorating economic and international landscape.

The statement is not a formal Budget, and has not therefore been accompanied by the formal OBR forecasts required by law. However a 30-page document accompanying today’s statement has been published here.

Many of the announcements had been anticipated in the media, with the Chancellor himself confirming yesterday afternoon that the planned increase to National Insurance announced by Rishi Sunak earlier this year, will not now be going ahead. As had been widely expected, tax cuts sit at the heart of the announcements.

Here are the key measures:

Tax

• The planned increase in corporation tax will be cancelled. The rate will instead remain at 19%.
• Bank corporation tax surcharge increase will also be cancelled.
• Amendments to the super-deduction rules will be made in light of the above to ensure it continues to operate as intended.
• Cancelling the increase in Diverted Profits Tax – maintaining the rate at 25%.
• The Office for Tax Simplification is to be wound down.
• Legislation will automatically sunset EU regulations by December 2023.
• The 2017 and 2021 reforms to the IR35 off-payroll working rules will be repealed from 6 April 2023. From this date, workers providing their services via an intermediary will be responsible for determining their employment status and paying the appropriate amount of tax and NICs.
• VAT-free shopping will be introduced for overseas visitors.
• The planned increases in all alcohol duties will be cancelled.
• The planned rises in National Insurance, including the Health and Care Levy will be cancelled. NHS and social care funding will be maintained at the same level.
• Stamp Duty will be cut – the threshold for all buyers will increase to £250k; and for first time buyers this will increase to £425k. These changes take effect immediately.
• The Government will abolish the 45p rate of tax – 40p will now be the higher rate. The basic rate of income tax will be cut to 19% in April 2023 (one year early than planned).
• A reversal of the 1.25 percentage point increase in dividend tax rates applying UK-wide from 6 April 2023. The ordinary and upper rates of dividend tax will be reduced to 2021-22 levels of 7.5% and 32.5% respectively.

Private Sector Investment

• Increases in the generosity and availability of the Seed Enterprise Investment Scheme and the Company Share Option Plan.
• The temporary £1 million level of the Annual Investment Allowance will instead be made permanent, rather than it falling to £200,000 after 31 March 2023.
• The banker’s bonuses cap will be removed.
• Removal of well-designed performance fees from the occupational defined contribution pension charge cap.
• Launch of the Long-term Investment for Technology & Science (LIFTS) competition, providing up to £500 million to support new funds designed by institutional investors and fund managers.
• New investment zones, with liberalised planning rules and tax reliefs for businesses, will be available in those designated sites.

Other measures

• Union reforms to ensure minimum service levels and to require pay offers to be put to members.
• New legislation (the Planning and Infrastructure Bill) to accelerate priority major infrastructure projects across England.
• New incentives for the public sector to sell surplus land.
• Increasing support and incentives for those on Universal Credit (UC) across Great Britain by increasing the Administrative Earnings Threshold to 15 hours a week at National Living Wage for an individual claimant (and 24 hours a week for couples) from January 2023.
• New measures to reduce benefits if people do not fulfil their job search commitments, and new requirements for UC claimants to take active steps to take more and better-paid work or have benefits reduced.
• A new Energy Price Guarantee to cap the unit price that consumers pay for electricity and gas in Great Britain and Northern Ireland.
• A new Energy Markets Financing Scheme (EMFS) to help to address extraordinary liquidity requirements faced by energy firms from high and volatile energy prices.
• New legislation to implement new obligations on energy suppliers to help customers take action to reduce their energy bills.
• New temporary six-month Energy Bill Relief Scheme (EBRS) for non-domestic users to protect businesses and other non-domestic energy users from rising energy bills this winter by providing a discount on wholesale gas and electricity prices.

Much of the above had been anticipated, although the abolition of the additional rate of income tax came as a surprise to many commentators and some MPs.

AAT will be commenting on the statement in due course.

AAT Comment offers news and opinion on the world of business and finance from the Association of Accounting Technicians.