Autumn Budget 2021 Predictions - A measured technical affair

Autumn Budget 2021 Predictions - A measured technical affair

Given the headline grabbing tax rises already announced – the increase in the NICs rate from April 2022; the introduction of the new Health and Social Care Levy from 2023; and the rise in the Corporation Tax rate already legislated for in Finance Act 2021 due to take effect from 1 April 2023- the Budget is likely to be a measured technical affair.

The Chancellor will no doubt have to make tax rises in the future – indeed he said as much in his speech at the Conservative party conference – but he must be hoping to be able to put that off. There are many other potential changes he could announce to increase the tax revenues.  For example, changes to CGT or IHT – both of which are ripe for reform following the OTS's simplification reports (neither of which the government has responded to) – must surely be on his radar. Speculation has been rife for some time that Business Asset Disposal Relief (formerly Entrepreneurs' Relief) or indeed other CGT (or IHT) reliefs may be reduced or scrapped.  

Alongside tax rises, the chancellor will also want to increase confidence and stability for businesses and encourage investment, particularly in decarbonisation. Consequently he may announce further tax reliefs for investments that push the government's green agenda and may announce some green initiatives – such as incentives for electric vehicles and green homes. The time would seem particularly appropriate for such announcements with the COP26 climate change summit taking place in Glasgow in November.

In terms of increasing inbound investment, the government has already taken some positive steps. For example, this year's Finance Bill will introduce (with effect from April 2022) the new taxation regime for asset holding companies in alternative fund structures and will also relax some of the rules relating to the taxation of Real Estate Investment Vehicles (REITs). It is encouraging that the government is looking closely at the UK funds regime to enhance the UK's attractiveness as a location for investment funds and their management and we hope that at this Budget we will see the long overdue response to the government's consultation on the VAT treatment of fund management fees and, possibly, its response to the wider consultation on the UK funds regime.

Finally, we may also see the outcome of the call for evidence launched in July 2020 on the business rates system. One of the alternatives to business rates raised in that call for evidence was the introduction of an online sales tax on companies. Whilst this may need further consideration and would have to be looked against the backdrop of the OECD agreement on the taxation of the digital economy, the chancellor may comment on the government's direction of travel on the issue. 

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About the author:
Erika is a Partner as Osborne Clarke in the corporate tax practice and hears the International tax practice group. Erika has over 25 years' experience advising both UK and multinational clients on a broad range of tax issues. Erika is a member of the UK committee of the International Fiscal Association and is recognised as one of the "International Women in Tax Leaders" by International Tax Review