The UK Autumn Statement 2023, delivered on 22 November, presented a series of measures designed to bolster business investment, employment, and overall economic growth, while also focusing on reducing national debt and supporting British businesses. Notably, these updates did not introduce major changes to the UK’s business tax rules but instead reinforced and extended several existing policies.
Permanent Full Expensing for Business Investment
A pivotal move in the Autumn Statement was the permanent adoption of “full expensing” for business investments. This policy, which replaced the “super-deduction” in the Spring Statement 2023, enables companies to fully write off the cost of qualifying plant and machinery in the year of investment. The range of eligible assets includes machines, computers, tools, vehicles (excluding cars), and various types of equipment used in offices, construction, and warehouses.
Initially proposed as a temporary measure for a three-year period beginning 1 April 2023, the government has now decided to make this policy permanent. It offers a 100% first-year allowance for main rate assets and a 50% allowance for special rate assets. However, assets used for leasing are currently excluded, with potential extensions to this policy under consideration.
Abolishment of ORIP Rules
The Autumn Statement also announced the abolishment of the Offshore Receipts in respect of Intangible Property (ORIP) rules from 31 December 2024. These rules were initially designed to discourage businesses from holding intellectual property (IP) in low-tax jurisdictions without corresponding economic activity. The introduction of the Pillar 2 Undertaxed Profits Rule, which targets broader multinational tax planning, has rendered the ORIP rules redundant.
Pillar 2 Update and Undertaxed Profits Rule
The UK government reaffirmed its commitment to the G20-OECD Pillar 2 framework, aiming to ensure that multinational enterprises are subject to a minimum 15% effective tax rate in every jurisdiction they operate. This framework is part of a global effort to prevent profit shifting and ensure fair taxation of profits. The Undertaxed Profits Rule, a component of this framework, will be implemented in the UK for accounting periods beginning on or after 31 December 2024.
Merging of R&D Relief Schemes
The government plans to merge the existing Research & Development Expenditure Credit and SME schemes, with the merger taking effect for expenditures incurred in accounting periods beginning on or after 1 April 2024. This consolidation is intended to simplify the R&D tax relief process, making it more accessible and easier to use for businesses involved in research and development.
Incentives for Workers
In an effort to reduce the tax burden on individual workers and encourage workforce participation, the Autumn Statement includes a reduction in employees’ national insurance contributions (NICs) from 12% to 10%, effective January 2024. Additionally, there will be reductions in class 4 self-employment NICs and the abolition of class 2 self-employment NICs, effective April 2024.
Miscellaneous Changes for Competitiveness
Other notable announcements include the extension of the Growth Market Exemption relief from stamp duty and stamp duty reserve tax, which will now benefit smaller, innovative growth markets. Amendments to the Real Estate Investment Trust (REIT) regime are also planned to enhance its competitiveness.
Conclusion
The UK Autumn Statement 2023 reflects a strategic focus on sustaining and stimulating economic growth, supporting businesses, and ensuring fair taxation practices, particularly for multinational entities. These measures, though not introducing drastic changes, reinforce the UK’s commitment to creating a stable and competitive business environment. Stakeholders, especially multinational enterprises and those involved in R&D, should closely monitor these developments to understand their potential impacts and opportunities.
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