What can we expect in the Chancellor’s Autumn Statement?

As expected, there was little mention of tax in the King’s Speech on 7 November 2023. The speech mentioned tackling inflation by “taking responsible decisions on spending and borrowing” and signalled a desire to reduce public sector debt.

After multiple fiscal events and u-turns in 2022, this Autumn Statement is hard to predict which much speculation. The Chancellor will want to reassure the markets that the UK still has fiscal credibility and can fulfil its financial obligations following the strong reaction to the mini budget in September 2022.

Revisiting tax thresholds

Everyone seems to agree that the Chancellor has limited room for manoeuvre right now and he’s likely to save any tax cut announcements for a pre-election spring Budget. The 2022 Autumn Statement announced the freezing of various tax thresholds including the income tax personal allowance and the inheritance tax nil rate band until April 2028 and the VAT registration threshold until April 2026. But with a UK General Election to take place before January 2025 at the latest, it’s possible that the Chancellor could revisit the timescales for the thresholds to be reviewed.

MTD ITSA small business review

When the delay in the mandating of Making Tax Digital for Income Tax Self Assessment (MTD ITSA) was announced in December 2022, the government announced a review into how MTD ITSA would affect small businesses. It’s possible that the government might respond as part of the Autumn Statement.

Alongside our response we said this was the ideal opportunity to consider a fresh approach to the quarterly reporting requirements of MTD ITSA. In the summer, we called for a fresh approach to the quarterly reporting requirements of MTD ITSA, not just for unincorporated businesses with income of under £30,000 but for businesses with income below the VAT registration threshold (currently £85,000). We support digital interaction with HMRC but we’re not fully convinced that the benefits of quarterly reporting outweigh the costs of doing so, particularly for the smallest of businesses. Businesses who are VAT registered will already be used to the requirements of MTD for VAT, so the additional requirements of quarterly reporting under MTD ITSA may be less onerous on them.

A new merged scheme for research and development tax relief

We would welcome confirmation that a simplified merged scheme for R&D tax relief will go ahead. We set out our support for this in our recent evidence to the House of Lords Finance Bill Sub-Committee inquiry into the draft Finance Bill. However, we would like to see the proposed start date of April 2024 delayed, to allow time for further consultation on the details.

Following a consultation earlier in the year, draft legislation to introduce a merged, single scheme for research and development (R&D) tax relief for companies was published, with changes due to take place from April 2024. However, important issues (such as the complex issues around subsidised expenditure and contracting) on how a single merged scheme would operate remain unresolved, and no final decision has been made on whether the merged scheme will go ahead.

Reforms to inheritance tax

There has been media speculation that inheritance tax could be reformed, either to increase more tax (perhaps by reducing or removing some existing reliefs) or by abolishing the tax completely, which the Institute for Fiscal Studies estimates would cost £7 billion. Given that most estates do not currently pay inheritance tax, abolition would only affect the wealthiest of families in the UK so that seems less likely. But with increasing property values (particularly in the South of England), it’s certainly possible that the Chancellor could give an indication on how inheritance tax will apply in the longer term.

Improving standards in the tax advice market – possible tax regulation

Work on improving standards in the tax advice market has been in progress since 2020, with several consultations taking place. This year, we welcomed the introduction of measures to protect consumers who use tax repayment agents and the publication of the updated HMRC standard for agents.

However, the promised consultation on options for regulation of the tax advice market and a definition of tax advice hasn’t been published and nothing was announced in the spring Budget.

We want the Chancellor to announce proposals which mean that anyone acting as a tax agent has to be qualified and belong to one of the main professional bodies that subscribe to Professional Conduct in Relation to Taxation (PCRT).

HMRC resources

ICAS calls for HMRC to be adequately resourced to support voluntary tax compliance and a business-friendly environment for the UK. Our members continue to tell us of their ongoing frustrations with long waiting times when calling HMRC, and HMRC’s digital services are currently not good enough to enable taxpayers and their agents to self-serve.

It’s vital that HMRC has enough resources to get service levels back to acceptable levels for all taxpayers, following a significant deterioration during the pandemic – and to maintain those service levels. Poor service from HMRC causes delays, frustrations and difficulties for taxpayers, businesses and advisers.

We have raised our concerns about service levels several times and most recently after the announcement at the Conservative Party conference about reduced civil service numbers, particularly if this impacts on HMRC services.

HMRC’s Chief Executive Jim Harra recently gave oral evidence to the Treasury Committee and stated that demand to HMRC’s call centres would need to reduce by about 30% by the end of next year to enable HMRC to provide an acceptable level of service. If the expected HMRC staffing reduction is not accompanied by a consequential investment in technology, HMRC service levels will suffer even further to the detriment of our members.

Achieving greater certainty

ICAS wants to see full expensing for companies (providing them with upfront tax relief on the investment made in certain kinds of new and unused plant and machinery) apply on a permanent basis. This would give companies greater confidence of the tax relief that they can expect to receive on planned capital spending.

The Chancellor introduced full expensing for companies in his spring Budget, but this is only available for expenditure incurred until 31 March 2026. Given that full expensing predominately benefits larger companies, who will be making longer term decisions, and that some expenditure may have longer lead times, this would allow for better planning.

Businesses need stability, certainty and significantly fewer changes to the UK tax system. By having greater certainty in the tax system, they can plan their investment decisions. Having a clear picture of the long term fiscal framework would have a positive impact on business confidence.

Ensuring tax simplification

We want the Chancellor to use the Autumn Statement to take steps to help reduce, rather than increase, complexities in the UK tax system.

ICAS strongly supports measures to simplify the tax system, because we believe that complexity increases costs and time spent for everyone engaging with the tax system. Complex tax law is reflected in complex tax administration systems which are difficult to use and do not help compliance. Complex tax systems also hinder transparency.

Where there is unnecessary complexity in the tax system, HMRC and taxpayer resources are diverted into dealing with corrections, appeals and disputes. Increased digitalisation has the capacity to improve tax administration but without simplification of the underlying rules, the full benefits will not be realised.

Tax and net zero

We would like the government to publish an environmental tax strategy – or road map to help businesses plan ahead. We’ve previously called for this as, without it, individuals and businesses will find it difficult to plan ahead for the tax changes and costs which will arise as part of the implementation of net zero strategies.

Whatever the Chancellor announces, the ICAS Tax team will be reviewing the details to identify the impact on our members and their clients.

We welcome your views, which help inform our work on consultations or other tax-related matters. ICAS responds to many tax calls for evidence and consultations, as well as producing tax policy papers and reports. We also regularly attend meetings with HMRC at which service levels, delays and other issues are discussed, and we raise problems being encountered by members.