Autumn Budget: Solicitors’ leader examines key takeaways for legal profession
The UK government’s Autumn Budget 2021 included much-needed investment for the justice system, also including measures on levelling up, homes and cladding, economic crime and tax, areas which affect the Law Society’s members and their clients.
Levelling up
Law Society of England and Wales president I. Stephanie Boyce said:
“In its levelling up agenda, which was announced before the Budget, the UK government pledged £1.4 billion to ensure small and medium-sized enterprises (SMEs) can access finance across the UK through a range of programmes.
“This is welcome for our members working in small and medium-sized towns who support SMEs by ensuring the validity of their contracts, advising on the day-to-day work of businesses as well as dealing with serious legal problems on their behalf.”
The government has also allocated £196 million in 2024-2025 for the Help to Grow Schemes – which aim to enable more than 100,000 SMEs to access training and tools to boost their productivity and performance.
Homes and cladding
The government has previously committed more than £5 billion, including £3 billion over the spending review period, which runs until 2024-2025, to remove unsafe cladding from the highest-risk buildings, supported by revenues raised from the new Residential Property Developer Tax.
The government hopes this tax will generate £2 billion over 10 years to fund the removal and replacement of combustible cladding. However, the full cost of cladding remediation is estimated at as much as £15 billion.
I. Stephanie Boyce said:
“We have called on the UK government to provide additional financial support to leaseholders to help cover the costs associated with managing and rectifying the dangerous cladding on their homes and it is disappointing that no new money was found in the Budget to assist long leaseholders in unsafe properties.
“In addition to the financial and emotional burden on some leaseholders, the concerns about unsafe flats are impacting on flat sales in the wider property and lending markets.”
Economic crime
An investment of £18 million in 2022-23 and £12 million per year in 2023-2024 and 2024-2025 has been allocated to deliver reforms in the economic crime plan and tackling fraud. The economic crime levy was also referenced and will be used to tackle economic crime.
I. Stephanie Boyce said:
“We strongly oppose the imposition of the levy on principle and are disappointed the UK government has decided to move forward with it.
“The levy effectively represents a tax on the provision of legal services, undermining the competitiveness of a key British industry at a time when the sector should be championed.”
Basis period reform
The Budget confirmed the income tax basis period rules are to be reformed. These rules allocate the profits of unincorporated trading businesses to tax years, and apply to a range of taxpayers from the self-employed to large international partnerships, including many law firms. The transition to the new rules will take place from April 2023.
I. Stephanie Boyce said:
“We are not convinced the case has yet been made for this reform. It will create onerous compliance complications for some law firms and other businesses that operate as partnerships within the income tax regime. It will also accelerate some £1.7 billion in tax liabilities, according to newly published estimates, affecting firms’ cash flow and working capital needs.
“We understand that some changes to the proposed reform have been made following the consultation this summer. The details and practical implications of the amended proposals, which we expect to see when the Finance Bill is published next week, will therefore require scrutiny.”
Business rates review
In our pre-Budget submission, we argued that the conclusions of the Business Rate Review should support law firms and other businesses on our high street, and should also take into account the overall burden of tax on legal businesses.
I. Stephanie Boyce said:
“In this vein, we are pleased the Budget will freeze the business rates multiplier for an additional year. New reliefs and more frequent evaluations were also announced, but this is not a fundamental re-think of the rates system.
“Neither is there any immediate fundamental shift from taxing bricks to clicks in the form of the mooted online sales tax. Instead, the government will publish a consultation to continue to explore the arguments for and against such a UK-wide online sales tax.”
Progress on UK funds reform
I. Stephanie Boyce said:
“The Law Society has engaged closely with the government’s UK funds review, including the development of the proposed asset holding company regime and the new regulatory regime for long-term asset funds, as well as changes to the Real Estate Investment Trust rules.
“It is heartening to see progress with these packages of measures, as well as the government’s reiteration of its commitment to the wider ongoing UK funds regime review.
“The funds review should continue to seek to provide the competitive frameworks to help enable the UK’s asset management sector to reach its full potential as a valued part of our economy.”
Kindly shared by The Law Society of England and Wales
Main photo courtesy of Pixabay
