Autumn Budget 2021 – some initial impressions

Andrew Hubbard, Editor-In-Chief, Taxation Magazine

In normal times (remember them?) the introduction of a brand-new tax to fund health and social care would have formed the centrepiece of a Budget statement. But of course, the Prime Minister pre-empted that – some might say he shot the Chancellor’s Fox – with the announcement of the new Health and Social Care Levy on 7 September. Then the Chancellor came close to shooting his own fox by the extensive briefing of the highlights of the speech, for which he was roundly condemned by the Speaker and again today by his deputy.

So, what was there left for him to do? Would he confirm the tax rates for next year, which have already been announced, tinker a bit round the edges of the system and then sit down and gives us an easy afternoon? Or would he want to make his mark with major announcements of his own? Much of the speech (more than usual) was taken up with spending commitments – these were delivered at a breath-taking pace, and it was difficult to get a handle on exactly how much of this was new and how much was repackaged. No doubt over the next few days we will get some much-needed clarity here. But most readers will be interested in what he had to say about taxation.

One thing I was looking out for was some sort of post-Brexit tax dividend. Would the Chancellor use the freedom that Brexit had brought to the UK to set rates be reflected in the speech? Early speculation had been that VAT on fuel would be reduced but nothing came of this. But we did get announcements about reforms to Tonnage Tax (for Shipping) which will now be focussed more on UK activity, Air Passenger Duty for internal UK flights, and (discussed below) the alcohol changes. Given the central importance of Brexit to the government’s whole economic and social agenda this was hardly a surprise and perhaps he might have gone even further. Have we already moved into the Post-Post-Brexit era?

The tax reforms covering the alcohol industry, another post-Brexit measure, were widely predicted and seem to have been broadly supported by trade bodies, though there may be some unhappiness that they don’t all take effect immediately – waiting until after Christmas 2022 to reduce some drink prices may risk the Chancellor’s carefully honed image taking a knock as he becomes “Mr Scrooge”.

Inevitably, with COP 26 just around the corner, I was expecting more emphasis on the green agenda but other than a mention of aviation fuel there was nothing announced which seemed particularly ground-breaking. Indeed, the immediate reaction of one of my colleagues was that the air passenger duty cuts would encourage more air travel: that doesn’t seem particularly green.

When the Chancellor started to talk about corporate tax, I thought that he was softening us up for further changes, but all that we got was a modest extension to the 100% annual investment allowance until 31 March 2023. R&D tax credits came in for a couple of changes. The scope of the relief will be extended to cover cloud computing and data costs, but perhaps more significant is that from April 2023 tax relief will only be available on activity based in the UK. This is a response to the apparent problem that UK taxpayers are subsidising activity which brings no benefit to the UK.

When the Covid support measures were first announced the Chancellor told us that he would be looking at the disparity between the way that employed and self-employed individuals are taxed. This has been a perennial structural problem, not helped by the existence of worker status for employment law which muddies the waters, because there is no such concept for tax, but nothing was said today. It may be that this has got put back in the ‘too difficult’ box and we will all have to continue to struggle with the current unsatisfactory system, on the basis of the old adage always keep a-hold of nurse for fear of finding something worse.

There are a few other specific announcements which are worthy of note. Some of the cultural reliefs have been extended and increased and the rate of new residential property developer tax applying to businesses with profits over £25m pa has been confirmed at 4%.

As ever it is worth touching on matters which the Chancellor did not mention. Pensions relief is always tipped for changes, but we got nothing there. Similarly, we haven’t heard anything on capital gains tax reform, other than a welcome minor change to the reporting deadlines for property disposals.  The delay to Making Tax Digital and Basis Period reforms, which had previously been announced, were confirmed and we now have some modified proposals which will require further study.

So, this is not going to go down as a major tax reforming Budget. The Chancellor clearly feels uncomfortable about presiding over tax rises and he went out of his way to stress that his long-term agenda is as a low tax reformer. Perhaps we will see the evidence of this in coming years.

Even as I write this my colleagues are ploughing their way through hundreds of pages of the small print to pull together a comprehensive analysis of all of the key tax measures, including those which didn’t hit the speech itself. Bookmark now so when you log on tomorrow you can bring yourself up to date gently over your morning coffee.