Spring Budget 2023

The Chancellor’s Budget contained some important changes in particular relating to Pensions and R&D tax relief.  There were a raft of smaller changes that may be important to specific sectors. However, the key issue that eclipses all of these remains the significant increase in corporation tax confirmed in the Autumn Statement.

The Pension changes have attracted most media attention and are briefly summarised below

• The Lifetime Allowance (LTA) has been scrapped. This was introduced on the 6th April 2006 as part of a “simplification” at a level of £1,800,000 to increase in line with inflation. Since then it has been reduced to £1,073,000 rather than increased. The combined effect of this and low interest rates, affecting actuarial estimations was that many public sector workers were taxed into an early retirement.
• The Annual Allowance has been increased from £40,000 to £60,000. The old rate of £40,000 was often not sufficient where well paid workers in a final salary scheme achieved pay increases resulting in a tax bill encouraging them to retire early.
• Whilst most outside the public sector will not see any benefit it should reduce the number of workers forced into an early retirement. Given the cost involved many will feel this is not money well spent.

The Research and Development changes are in addition to those made in the Autumn Statement and apply from 1st April 2023. Briefly they are as follows:

• All future claims must be digital and include an additional information form.
• The claim will need to be endorsed by a senior company officer.
• New claimants must notify HMRC of the intention to claim 6 months before the end of the relevant accounting period.
• Full Agent disclosure will be needed to cut down on the fraud in the system.
• Relaxation of rules for the SME scheme moving to the RDEC scheme.
• The reduction of SME credit from 14.5% to 10% from 1st April 2023 will not apply to SME Credit claimants where they spend more than 40% on R&D. As this is not yet legislated it may be preferable to delay a claim until the legislation is in place. Alternatively a claim at 10% could be made and then amended to achieve the14.5% rate once legislation is enacted.

There were also other changes as follows:

• Relief for draught beers.
• Support for energy bills extended to the end of June.
• Some relaxation of the rules for SEIS, CSOP and EMI investment schemes are also welcome.
• 100% capital allowances were extended for most.
• AI Sandbox and IP recommendations were approved which should allow this sector to move forward faster.
• Simplification of Trust and Estate administration.

As ever there are steps that can be taken to reduce exposure to many of the increases, but no steps should be taken on the above without seeking advice.