See the latest commentary from our team of tax experts on the UK Spring Budget 2024 below:
Marvin Rust on inflation forecasts: "Forecasts from the OBR show inflation as now falling below the MPC's target rate of 2% for each of the next 3 years. This implies that the MPC will be under more pressure, particularly as it is now mathematically almost certain that inflation falls to 2% in the second quarter of this year, to reduce interest rates to benefit individual borrowers, businesses and indeed the government, as gilt interest will also decline. In fact, REITs stocks have already risen today as analysts digest this news. For savers, however, interest rates might drop faster than anticipated. If this occurs quickly, we might see tax reductions announced in an Autumn Forecast, potentially ahead of a late-year General Election. This remains something to keep an eye on."
Kathie Haunton on R&D tax relief: "The sector had asked for a deferral of the introduction of the new merged R&D relief, however it was confirmed yesterday that the start date for the new regime will be accounting periods starting on or after 1 April 2024. This continues to cause concern for those managing R&D budgets who now have limited time to adapt. Many will welcome the establishment of a new expert advisory panel to support the administration of the R&D tax reliefs as an implied acceptance of the complaints about how the R&D tax relief is being managed by the compliance team at HMRC. It will be interesting to see how the output of this advisory panel will interact with the consultation of raising standards in the tax advice market, which is clearly in part aimed at substandard and unscrupulous tax advice from some specialist R&D agents, who are estimated to have costed HMRC over a £1bn in 2020-21."
Louise Jenkins on changes to the non-domicile tax regime: "Whilst the changes to the non-domicile tax regime primarily affect impact taxpayers, there will also be an impact and considerations for businesses with globally mobile employees. The proposed changes to Overseas Workday Relief will no longer restrict whether foreign earnings can be remitted to the UK, which will be a welcome simplification, however for businesses with fully tax equalised employees, or with those with employees who may need to return to work in the UK within 10 years, the changes may increase costs to the business or make the UK a less attractive destination to work."
Steve Smith on investment zones: "The recent Budget has shed light on the specific details for six Investment Zones, including Greater Manchester, Liverpool City Region, North East of England, South Yorkshire, and West Midlands and Tees Valley. These zones are set to benefit from generous tax reliefs, which are expected to stimulate an investment of £9.44 billion over the next decade. This investment will bolster regional expertise in sectors such as advanced manufacturing, life sciences, electric vehicles, battery technology, and offshore energy. In addition to this, the Budget has introduced an Investment Opportunity Fund, designed to support strategically important investments in both Investment Zones and Freeport areas. These initiatives are a welcome step towards driving growth and rewarding business investment in cutting edge industries that will generate a wider boost to key locations in the UK."
Mark McKay on changes to the VAT Terminal Markets Order: "The update announced by the Chancellor today opens the door to all trades in carbon credits being within the scope of VAT. This reform would benefit investment funds and other traders in non-regulated carbon credits ("voluntary credits") as it is expected to allow them to recover more VAT and also would deal with the uncertainty in the law between regulated and non-regulated trades."
Victoria Price on business investment in the UK: "Having watched the number of UK tech businesses list in the US it's no surprise that the Chancellor is alive to the fact that the international landscape offers attractive alternatives to their home market. Today's comments on unlocking pension capital are a starting point in stimulating greater funding depth and will be welcomed to increase global competitiveness."
Kersten Muller on multiple dwellings relief: "The removal of the multiple dwellings relief was announced largely as an anti-avoidance measure. Whilst this is understandable, the removal of that relief can again increase costs for owners of residential investment properties with these being passed on to occupiers."
Anthony Whatling on the non-dom regime updates: "The new regime, surprisingly, only applies to an individual's first four years in the UK, making it arguably more restrictive than what the Labour Party might have planned. While this new regime might seem more appealing than those requiring lump-sum payments, its four-year duration falls short when compared to the reliefs offered in Italy, Spain, France, and other major jurisdictions. Whether it will truly attract high net worth individuals to the UK hinges on whether the current government remains in power when the measure is set to take effect in April 2025, which seems unlikely. On the other hand, the transitional reliefs for non-doms already residing in the UK appear to be quite generous. The current rules, which can impose a potential tax rate of up to 45%, often deter funds from flowing into the UK. The new opportunity to bring in historical offshore income at a flat rate of 12% is likely to be highly attractive, potentially providing significant benefits to UK plc."
Mairead Warren de Burca on the increase in the VAT registration threshold: "If the Chancellor's aim is to support smaller or growing business with the surprising announcement of a VAT registration threshold increase to £90k, he is unlikely to succeed, given this is the first increase in seven years and well behind inflation. Historically, the VAT registration threshold would increase on an annual basis increasing from £48k in 1996, to £85k in April 2017, where it has remained static until today's announcement. However, it is still the highest VAT registration threshold in Europe, and there was some rumouring that it might even reduce so as to pull smaller businesses into the VAT regime so at least the Chancellor did not seek to do that. However, the "cliff edge" that is the VAT registration threshold remains in place meaning that whether a business decides to grow or remain static continues to be influenced by it."
Kersten Muller on holiday let reform and CGT: "At present furnished holiday lettings benefit from a more generous tax regime allowing them full relief for interest expenses. For investment properties this relief is restricted. There is a question as to whether this will increase supply of affordable rental properties – those used as homes by people – as this is what is needed. There is a concern that the changes increase costs and, even if the holiday homes are coming to the long-term rental market, hence rents charged. The reduction in the higher rate of capital gains tax on residential property is a partial sweetener for existing investors and second homeowners. It remains to be seen whether this encourages current owners to sell up."
Victoria Price on reduction to the CGT rate: "Mr Hunt made an unexpected move to reduce the CGT rate on residential properties sales from 28% to 24% with the Chancellor banking on the fact that a lower rate will stimulate more movement in the property market and ultimately increase taxes. A win-win for property owners and the treasury alike if this thesis plays out."
Claire Lambert on the lack of UK business incentives: "This was the weakest Budget for the UK plc I can remember, there was nothing in there to boost British businesses or the attractiveness of the UK to do business. The chancellor held up the tweak to full expensing as the big prize for UK businesses but in reality, this will have little impact. Whilst there were incentives for individuals, employees and the self-employed to invest in the UK this could be a missed opportunity to reduce the headline rate of corporate tax closer to the global minimum tax rate under Pillar 2 to attract multinationals to the UK."
Victoria Price on cuts to National Insurance: "Politically, the chancellor needed to cut something. From a Treasury perspective, a national insurance cut makes the most sense as it directly benefits workers and offers incentives for those earning a living." Financial Times
Kersten Muller on the levelling-up agenda: "The budget heralded a few announcements in relation to investment into various parts of the UK, under the levelling up agenda. Notable points from my perspective are the Euston Housing Delivery Group getting £4m to unlock new homes, the long-term funding for Cambridge for housing and laboratories, notably that Astra Zeneca has recently announced an expansion of space there, alongside new vaccine facilities in Liverpool. Also of interest was the announcement of additional funding for Cambridge Biomedical Campus to improve local transport connections and significant funding for Canary Wharf to repurpose (life sciences hub was mentioned) and create 8,000 new homes."
Victoria Price on full-expensing measures: "Introducing full expensing on leased assets will be welcomed by many businesses as it was seen as an anomaly when the announcement was first made. Many businesses simply can't afford the outlay of expensive equipment up front. Leasing is a cost effective way for UK businesses to acquire assets. This will also allow flexibility to ensure that UK businesses can keep upgrading to cutting edge technology and green technology without having to buy assets outright so could pave the way to keep us on the front foot in that regard also."
Mairéad Warren De Búrca on the fuel duty freeze: "The freeze on fuel duty and an extension of the temporary 5p cut will surprise no one, when no chancellor was realistically going to touch it. Fuel duty generates £24.3bn, with the current level at 52.95p/l. If the reduction were to be lifted, it would increase to 57.95p/l, however in a budget with few giveaways, the chancellor doesn't want to risk the political consequences of raising it back to its normal rate. The question was not whether the chancellor would raise fuel duty but whether the chancellor who will raise fuel duty has been born yet?" Birmingham Mail
Originally published by 06 March, 2024
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