Katten UK has provided some Autumn Budget predictions

Charlotte Sallabank, tax partner at Katten UK LLC, has provided some Autumn Budget predictions, which takes place on 17 November.

The Autumn Statement is fast approaching, taking place on Thursday 17 November. It has been reported that the Chancellor is seeking to raise £50 billion through a mixture of spending cuts and tax rises.

In the 2021 Spring Budget, Sunak announced a freeze on the income tax and personal allowance thresholds which would last until April 2026. However, there are now reports that the new Chancellor, Jeremy Hunt, will extend the freeze until April 2028. Unless wages are increased to take into account this freeze, an ordinary ‘cost of living’ pay rise will lead to a higher effective tax rate for taxpayers.

These freezes are often described as a ‘stealth tax’. Whilst these freezes have the potential to raise over £30bn over the next six years, the consequent burden for individual taxpayers will not be well received amid the current cost of living crisis and the uncertainty in energy prices. However, the freezes are likely to be less controversial than an immediate rise in income tax rates.

When Rishi Sunak was Chancellor, a number of tax consultations were introduced with the intention of making changes to tax legislation in the future.

It is possible that the Autumn Statement will deal with some of these changes:

- The reform of sovereign immunity from direct taxation – this consultation aimed to limit the scope of sovereign immunity from direct taxes. This would mean sovereign wealth funds and other sovereign persons would be liable to pay direct tax in some situations. Whilst this would increase tax revenues, it is a change that might concern current sovereign investors and possibly be seen as a deterrent to UK investment.
- The introduction of the online sales tax – this consultation considered introducing an online sales tax in response to the expansion of the online retail industry. In light of this, the intention of the online sales tax is that the revenues would be used to reduce business rates and therefore rebalance the tax obligations of the market. Although this will be beneficial for retailers with physical premises, there are various practical considerations to determine if the introduction of an online sales tax would be appropriate.
- The reform of business rates – this consultation aimed to review and reduce the current business rates which have been described as burdensome by businesses. Separately, the consultation addressed various measures to support businesses, for example, a temporary relief for the retail industry and investment in green plant and machinery.
- The introduction of a corporate re-domiciliation regime – this consultation considered introducing re-domiciliation which would facilitate simpler relocation to the UK. This aims to attract international business and encourage investment in the UK.
- The expansion of Investment Transactions List for the Investment Management Exemption and other fund tax regimes – the government announced its intention to expand the Investment Transaction List (ITL) to include crypto-assets. This consultation seeks opinion on the scope of the extension including how ‘crypto-assets’ should be defined and whether crypto-assets should be included within the ITL only for the purposes of the Investment Manager Exemption. It is expected that draft legislation will be published this autumn.
- The reform of SDLT in respect of mixed-property purchases and multiple dwellings relief – this consultation aimed to reform and create a fairer system for SDLT calculations on mixed-property purchases and multiple dwellings relief for purchases of two or more dwellings. This would reduce incorrect and abusive claims by some purchasers and ensure the appropriate SDLT is paid.
- The introduction of OECD Pillar 2 – draft legislation was published in summer this year and comments on the draft legislation had to be submitted by September. It is likely that this legislation will be further progressed during the Autumn Statement.
- The simplification of the VAT rules for land and property – this consultation aimed to simplify the current complex land and property VAT exemptions and explore solutions to assist with the practical application for UK businesses.
- The introduction of further obligations relating to transfer pricing documentation – as a result of this consultation, the largest businesses are now required to maintain a master file, local file and a supporting summary audit trail. Nothing has been released about an International Dealing Schedule, however, this could possibly be addressed in the Autumn Statement.