We have packaged together the highlights we have taken from the budget that might impact you.

 

  • From 1 April 2023 until 31 March 2026 investments made by companies in qualifying plant and machinery will qualify for a 100% first-year allowance for main rate assets. This means companies across the UK will be able to write off the full cost in the year of investment, known as full expensing. Companies investing in special rate (including long life) assets will also benefit from a 50% first-year allowance in the year of investment. Expenditure on plant or machinery for leasing is excluded from first -year capital allowances due to longstanding concerns about abuse and wide scope for error.  In short, the Chancellor is trying to take the sting out of the increase in the headline Corporation tax rate, by offering tax incentives for investment.  In our experience good businesses invest because the want to, and these tax incentives have a modest impact.

 

  • Timing of Capital Gains – Legislation to be introduced in Finance Bill 2023 so that the relevant notification periods and assessment and claim time limits will operate by reference to the tax year or accounting period when an asset is conveyed or transferred rather than the tax year or period in which the contract for the disposal was made.

    These modifications will apply for CGT where the conveyance or transfer of an asset takes place after the date six months after the end of the tax year in which the disposal is treated as taking place; and for corporation tax the date one year after the end of the accounting period for the disposal.  A quite technical change, which will affect some involved in very long term capital projects.  Construction and development projects may see tax bills arising before money has changed hands, something for those clients to watch carefully.

 

  • Doubling maximum sentences for tax fraud – The government will double the maximum sentences for the most egregious forms of tax fraud from 7 to 14 years.

 

  • Promotion of Tax Avoidance schemes – will be a criminal activity.  We have no sympathy for those using or promoting tax evasion schemes. Over many years we have seen all sorts of dubious ‘schemes’ promoted to clients directly, or often via accounting firms.  They purport to be compliant and checked by a barrister etc.  but the test is actually whether the actions have been undertaken to avoid tax as one of the prime reasons.   This step may remove some of the worst ones from the market. Our frustration is that HMRC rules are often not clear, or applied correctly or consistently.  If you want to punish those at the margins of legitimate tax advice you need to give confidence that the rest of the tax rules are understood and applied properly by HMRC.

 

  • Alcohol duties – Duty rates of all alcoholic products produced in, or imported into, the UK will increase in line with RPI. Draught Relief will increase from 5% to 9.2% for beer and cider draught products and from 20% to 23% for wine, spirits based and other fermented draught products. These changes will take effect from 1 August 2023.

 

  • Alcohol duty reform – The government will legislate to make changes to the duty structure for alcoholic products, creating standardised tax bands based on alcohol by volume. The government will also introduce two new reliefs and transitional arrangements for certain wine products. These changes will take effect from 1 August 2023. So if things aren’t hard enough, it now costs even more to drown your sorrows.

 

  • Pensions – The government will increase the Annual Allowance from £40,000 to £60,000 from 6 April 2023. Individuals will continue to be able to carry forward unused Annual Allowances from the 3 previous tax years.

    The adjusted income threshold for the Tapered Annual The adjusted income threshold for the Tapered Annual Allowance will also be increased from £240,000 to £260,000 from 6 April 2023. The government will also remove the Lifetime Allowance charge from 6 April 2023, before fully abolishing the Lifetime Allowance in a future Finance Bill. The maximum Pension Commencement Lump Sum for those without protections will be retained at its current level of £268,275 and will be frozen thereafter Allowance will also be increased from £240,000 to £260,000 from 6 April 2023.

    This appears to be an incentive to get those who have retired prematurely because they were being ‘penalised’ by the pension limits, or prevent more from leaving the work force for these reasons,  to re-enter the workforce.  In particular senior NHS employees, Helpful to the wealthiest people, and great for Inheritance tax planning, but seems to be a sledge hammer to crack that particular nut.

 

If you have any questions about how the budget affects your plans, give us a call on 01752 220979.