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Spring Budget 2023 - Main Tax Announcements

16 March 2023. Published by Ben Roberts, Partner

This blog discusses some of the key tax changes announced in this week's Spring Budget.

The Chancellor, Jeremy Hunt, delivered his first Spring Budget on Wednesday.

The main business and personal tax announcements made by the Chancellor are summarised below. Some of these had been expected (as they had been announced either at last year's 'mini' Budget by Kwasi Kwarteng, or subsequently as a result of the reversal of some of those announcements, or as part of the 2022 Autumn Statement delivered by the current Chancellor). Some of these are brand new measures.

Corporate taxes

1. As expected, the main rate of corporation tax from 1 April 2023 will increase from 19% to 25%.

2. For large groups with over EUR750mn global revenue, for accounting periods beginning on or after 31 December 2023 (and to implement the G20 / OECD's 'Pillar 2' international tax proposals):

  • UK-headquartered multinational groups will be required to pay a 'top-up' tax where their foreign operations have a local effective tax rate of less than 15%.
  • A domestic 'top-up' tax will be introduced where UK operations have an effective tax rate of less than 15%.

3. As previously announced, a new (temporary) 45% Electricity Generator Levy applies from 1 January 2023 to exceptional electricity generation receipts arising to corporate groups with more than 50,000 MWh of in-scope generation per annum. It applies to wholesale receipts for electricity in excess of a benchmark price of £75 per MWh.

4. Capital allowances: full expensing. Companies incurring qualifying expenditure on the provision of new plant and machinery on or after 1 April 2023 but before 1 April 2026 will be able to claim one of two temporary first-year allowances. These allowances are:

  • a 100% first-year allowance for main rate expenditure – known as 'full expensing'; and
  • a 50% first-year allowance for special rate expenditure.

5. The 'temporary' annual investment allowance (AIA) of £1m for qualifying plant and machinery expenditure has been made permanent (it was due to revert to £200,000 in April 2023). The AIA provides for 100% tax relief by way of capital allowances.

Share schemes

6. From 6 April 2023, qualifying companies will be able to issue up to £60k of tax-qualifying company share option plan (CSOP) options to employees, double the current £30k limit.

7. From 6 April 2023, measures will take effect to 'simplify' the EMI scheme legislation. They relate to the contents of the EMI option agreement document:

  • The requirement to set out the details of any 'restrictions' on the shares under option, is being removed.
  • The requirement to declare that the employee has signed a working time declaration, is being removed (note that the working time requirement itself is not being removed).

8. From 6 April 2024, the grant of EMI options will no longer need to be notified to HMRC within 92 days (instead, the deadline for notification will be 6 July following the end of the tax year in which the options are granted).

Pensions 

9. The pension Annual Allowance (the maximum amount of pensions savings that an individual can make each year with tax relief without incurring a tax charge) will be increased from £40k to £60k, from 6 April 2023.

10. The pension standard Lifetime Allowance (the maximum amount of tax relievable pension savings an individual can benefit from over the course of their lifetime) charge will be abolished from 6 April 2023 and the Lifetime Allowance will itself be abolished in due course.

Other measures

11. Investment zones: the government will establish 12 Investment Zones across the UK, subject to successful proposals. Each zone will have access to interventions of £80 million over 5 years. Once designated, 'special tax sites' in or connected with these zones will benefit from a package of tax reliefs including SDLT relief, enhanced capital allowances for plant and machinery, enhanced structures and buildings allowances, and secondary Class 1 National Insurance contributions (NICs) relief. The reliefs will be time limited with the exact end date confirmed at a future date.

12. From 6 April 2023 the amount of investment that companies will be able to raise under the SEIS scheme will increase from £150k to £250k. To enable more companies to use the SEIS scheme, the gross asset limit will be increased from £200k to £350k and the age limit on a qualifying trade from 2 to 3 years. To support these increases, the annual investor limit will be doubled to £200k.

13. From 6 April 2023, the REIT rules will be relaxed. The amendments will relax the requirement for a REIT to own at least three properties where a REIT owns at least one commercial property worth £20 million or more; and amend the rule for disposals of property within three years of significant development work.

14. As expected, it was confirmed that the Office for Tax Simplification is to be abolished, after 12 years of mixed results. The stated intention is for tax simplification to be "embedded" into the institutions of government.