'This was supposed to be another unexciting budget' says Eloise Walker of Pinsent Masons

This was supposed to be another unexciting Budget, and at first sight it did not disappoint—except for some additional coronavirus (COVID-19) inspired reliefs for the entertainment and hospitality sector, actual news for corporates appeared from the Chancellor’s speech to be thin on the ground unless you were in very focused sectors like alcohol duty (to be reformed) or tonnage tax (to be simplified). However, once we got to the overview of tax legislation and rates (OOTLAR) document there was (as always) a bit more meat on the bones than was immediately evident. In general good news, smaller corporates will have welcomed an extension of the higher annual investment allowance deadline to 2023, giving them a further 15 months to benefit. Also welcome will be the much demanded overhaul of business rates—sadly not abolished but at least they are to be reformed.

Less widely welcome will be the promised overhaul of R&D. While cloud and other computing sub-sectors will rejoice in a called-for expansion of the regime, this good news is overwhelmed by a worrying intention on the part of the Chancellor to incentivise UK based R&D by dis-incentivising its offshore counterparts. That will be deeply worrying for a range of sectors but none more than pharmaceuticals where the reliefs are crucial to enabling UK companies to develop new therapies and attract much needed additional investment. It is to be expected that various industry bodies will be lobbying about the negative impact of trying to kill off overseas R&D and it is to be hoped that HM Treasury will listen.

In other developments of an international flavour, now we have left the EU we can see HMRC starting to flex its muscles. The abolition of cross-border group relief was a given. More unexpected was the slightly underhanded neutralisation of Vitol Aviation on the interaction of the diverted profits tax (DPT) with closure notices which just oh-so-happens to apply to any application for a corporation tax closure notice made on or after 27 September 2021 (the date of the Vitol Aviation decision) and means in practice that once a DPT review is underway the taxpayer is under a stronger incentive to kowtow to HMRC, adjust their pricing and settle their dispute, rather than fight on.

Note as well the online sales tax consultation. We might have expected this to have formulated proposals by now, given consultation with certain industry bodies behind the scenes for a while now. Hopefully (but don’t hold your breath) the upcoming consultation on this will be a proper public consultation that takes on board comments from the wider community. Let us not fear that, as seen elsewhere recently in tax developments, it is a token event that results in fully formulated proposals appearing just after the ‘public consultation’ closes.

Other developments were even more sector specific. Those in asset-finance will desire a good outcome from HMRC’s new powers around stamp duty in securitisation arrangements. Elsewhere in the financial services sector, while banks will be gloomily resigned to see the unpopular banking surcharge continue, and increase, smaller banks will be happy to see their allowance increase to £100m to stimulate growth. Various consultations are proceeding including the VAT treatment of fund management, as are legislative proposals around the residential property developer tax and the (very popular, much lobbied against but hopefully now less burdensome) uncertain tax treatment notification requirements.