Overview

In a bid to stabilise financial markets, new Chancellor, Jeremy Hunt, has released an Emergency Statement which makes several changes to the plans announced in Kwasi Kwarteng’s September Mini-Budget (see our briefing dated 23.09.2022 here).

This briefing outlines which of the key tax measures announced in Kwarteng’s September Mini-Budget have been retained, which have been scrapped and which have not been commented on.

Corporate and Business Taxes

Corporation Tax cut: SCRAPPED

In Kwarteng’s September Mini-Budget, it was announced that the planned rise in the Corporation Tax rate to 25% would be abolished and the corporation tax rate would remain at 19%.

However, this measure has been scrapped and the corporation tax rate will rise to 25% from April 2023, as previously planned.

Introduction of Investment Zones: TBC

Hunt has not commented on the proposed introduction of Investment Zones, but it seems likely that this measure will go ahead.

Enterprise Investment Scheme, Venture Capital Trusts and Seed Enterprise Investment Scheme: RETAINED

The enhancements to the Seed Enterprise Investment Scheme (SEIS) which were announced in the September Mini-Budget have been retained.

No further announcements were made in relation to the extension of the EIS and VCT legislation.

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Annual Investment Allowance: RETAINED

The 100% capital allowance for qualifying expenditure on plant and machinery was made permanent in the September Mini-Budget. This measure has been retained.

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Diverted Profits Tax cut: TBC

Hunt is yet to comment on Kwarteng’s cancellation of the planned increase in Diverted Profits Tax. However, our assumption is that the increase will go ahead, given that the rise in Corporation Tax has been confirmed.

Employment Taxes

Income Tax cuts: SCRAPPED

The September Mini-Budget announced that a 1% cut to the basic rate of income tax from 20% to 19% would be brought forward to April 2023. This cut to the basic rate has been scrapped: it will remain at 20%.

This follows the Government’s U-turn on its announcement in September that there would be a single higher rate of income tax of 40%, rather than an additional 45% rate for those earning over £150,000.

Reversing the Health and Social Care Levy: RETAINED

As announced in September, the 1.25% increase in NICs will still be reversed from 6 November and the planned introduction of a 1.25% Health and Social Care Levy as a separate tax from April 2023 will still be cancelled.

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Repeal of the off-payroll working rules (also known as IR35): SCRAPPED

In September, Kwarteng unexpectedly announced the repeal of both the 2017 (public sector) and 2021 (private sector) off-payroll working rules from 6 April 2023 due to their complexity and the burden they imposed on businesses.

However, this measure has been scrapped. The IR35 and off-payroll working rules will remain in their current form.

Company Share Option Plan (CSOP) limits: RETAINED

The increase in the number of CSOP options that can be issued to employees, announced in September, has been retained.

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Real Estate Taxes

Stamp Duty Land Tax (“SDLT”): RETAINED

The changes to SDLT residential rates which were announced in the September Mini-Budget have been retained.

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Other notable announcements

Dividend Tax Rates: SCRAPPED

In the September Mini-Budget, the planned 1.25% increase in Dividend Tax rates as of April 2023 was cancelled in an attempt to support entrepreneurs and investors to drive economic growth. This measure has now been scrapped – Dividend Tax rates will not be reduced next April.

Alcohol duty reform: SCRAPPED

Kwarteng announced that, due to high inflation rates, the government would freeze the duty rates from 1 February 2023. Jeremy Hunt has scrapped this measure – the duty rates will not be frozen.

VAT-free shopping for non-UK visitors: SCRAPPED

The plan to introduce a modern, digital scheme for VAT-free shopping for overseas visitors has also been scrapped.

New Economic Advisory Council

Jeremy Hunt announced the formation of a new economic advisory council to provide the Chancellor with independent expert advice.

The Abolition of the Office of Tax Simplification: TBC

No specific statement was made by Jeremy Hunt, but we assume that the plan to abolish the Office of Tax Simplification and embed tax simplification into the institutions of government will go ahead.

If you would like further information in relation to any of these measures, please contact a member of our tax team.