Following last week’s Autumn Statement, the Autumn Finance Bill 2023 has been published setting out key tax changes
Measures in the Bill back British business by cutting and simplifying tax to help them invest for less, making full expensing permanent – an effective £11bn a year corporate tax cut.
It also simplifies R&D and extends the Enterprise Investment Scheme and Venture Capital Trust schemes by an extra 10 years each to 2035, ensuring younger companies can attract finance.
The majority of tax changes in the Bill will take effect from April 2024.
The cuts to National Insurance, which will take effect on 6 January 2024 for employees and 6 April for self-employed people, is being legislated through a separate Bill to the Autumn Finance Bill 2023.
Permanent full expensing effectively cuts corporation tax by £11bn per year and is expected to result in an extra £20bn of investment per year by the end of the decade.
Permanent full expensing helps companies to invest for less by allowing them to deduct 100% of the cost of a wide range of plant and machinery – such as lorries, drills and office chairs – from their profits before tax. For every pound a company invests in plant or machinery, their taxes are cut by up to 25p. The measure replaces the super deduction introduced during the pandemic.
As well as reforms to capital allowances, the Chancellor Jeremy Hunt announced other measures that are also featured in the Bill to cut and simplify tax to boost investment and get the economy growing. These include:
• changes worth £280m a year to simplify and improve R&D tax reliefs. The government will merge the current R&D Expenditure Credit and SME schemes.
• legislating for more generous support for loss-making R&D intensive SMEs as announced in spring.
• extending the sunset clause for the Enterprise Investment Scheme and the Venture Capital Trust scheme to 6 April 2035.
• for the creative sector, reforming the film, TV and video games tax reliefs to refundable expenditure credit.
• expanding the cash basis – a simplified way for over four million smaller, growing sole traders to use a simpler method of calculating their profits and paying income tax.
The Bill received its first reading in parliament on Monday 27 November 2023. It will now follow the normal passage through parliament.
Financial secretary to the Treasury, Nigel Huddleston, said: ‘This Bill marks our next step in making the UK into the best place in the world to do business – and that’s the way we grow our economy and drive up living standards for all.
‘We have the lowest rate of corporation tax in the G7, and full expensing effectively cuts it further by £11bn a year – the biggest British business tax cut in modern British history to help firms invest for less.’