Autumn Statement preview 2023

The Autumn Statement represents one of the final opportunities for the UK government to win back the support of businesses ahead of the upcoming general election.

The statement last year provided much drama in the wake of former prime minister Liz Truss and former chancellor Kwasi Kwarteng’s short-term stint at the helm of British politics.

Experts this year predict the upcoming statement will produce far less headlines, with Jeremy Hunt adamant that there will be no short-term tax cuts announced.

October corporate insolvencies saw an increase of 18.5% compared to October 2022’s figure of 1,954 and businesses will be hoping for some positive news from the government on November 22.

Corporation taxes

Since April 2023 the corporation tax main rate is 25%. Flora Barnes, corporate tax director for RSM UK says she does not expect the rate to be altered.

“Businesses are only just now starting to really feel the pinch of that, it’s only the large businesses who are really fitting that in their cash flows now. And smaller businesses will only start filling it in 2024. So that’s already a really big drain on businesses resources.”

A key challenge for the government will be to try and stimulate business growth said Katharine Arthur, head of private client at haysmacintyre. She stated that “with the tax burden at its highest since World War II, lowering taxes and simplifying corporation tax would be a prudent way to do this. However, with high interest rates high and the country’s finances stretched, this needs to be done in a sustainable way.”

This is echoed by Robert Marchant, partner and national head of tax at Crowe UK who stated that businesses require consistency, and the government must consider the long-term implications of making changes to the tax system.

Tinkering” in successive budgets and autumn statements, together with changes in political direction (such as the changes to HS2), has made it difficult for businesses to plan as they are having to second guess fiscal policy,” Marchant added.

Will the statement include IR35?   

The IR35 off-payroll legislation faced significant upheaval during the 2022 Autumn Statement, as it was initially repealed by Kwarteng. However, Chancellor Hunt later overturned this decision.

In October, veteran Conservative MP Sir John Redwood unveiled his budget proposal, which advocated for the reversal of the IR35 legislation—a suggestion that garnered support from many.

Anne-Marie Welch, tax partner at RSM says that while IR35 may not be mentioned directly, there is offset legislation planned for April 2024.

“That effectively is about tax credits. So, for instance, if an engager within a passport service company has not been correctly assessed, to tax and National Insurance,” she says.

“Potentially there is a new offset that will enable those credits paid by, for instance, the personal service company to be offset against the income and national insurance contribution liability arising.”

General election on the horizon

Arthur suggests that Hunt might consider implementing tax cuts if feasible, or he might choose to delay until the Spring Budget next year.

“Having previously claimed there was no scope to cut taxes, positioning itself as having cleverly discovered a way to offer one could be a strategy to attempt to win back taxpayer’s favour. Otherwise, it may use this as an opportunity to lay the groundwork, hinting at the possibility of one in the near future.”

Caroline Fleet, Crowe UK’s head of Real Estate, stated: “Given where the UK is in respect of its political timetable and a general election on the horizon, any tax cuts are likely to be aimed at short term ‘boosters’ rather than longer term reform as public borrowing has increased, and inflation remains high.”

However, RSM predict that the tax burden on individuals and businesses will be at its highest level on record and Chris Etherington, private client partner at RSM believes this may compel the chancellor to make a “headline grabbing” tax measure.

“This will seek to capture the public’s imagination while still trying to give himself some wiggle room for spending in the spring budget. And in later, election manifesto pledges,” he adds.