The Budget 2018

Other Measures: Spring Statement

Cost of living support

As widely predicted, the Chancellor cut fuel duty
on petrol as a response to increases in the cost of living. From a range of possibilities, he chose to limit the reduction to one year from 6pm on 23 March 2022, set at 5p per litre. As VAT is charged on top of the duty, this should in total reduce the tax by 6p per litre. The price of fuel has already gone up by several times that amount since the start of the war in Ukraine, so this will only have a limited impact on overall costs. However, it is expected to save the average motorist about £100 a year, at a cost to the Exchequer of nearly £2.4 billion.

Mr Sunak made no changes to the measures announced in February to help people impacted by higher energy bills. These involve a £200 rebate on bills in the autumn, which will be recovered at £40 a year over the following 5 years, and a £150 rebate on Council tax bills for people with houses in Bands A to D. This rebate is not repayable. Local authorities will also be given funds to make grants to people who are in need but not eligible for the central government scheme. This is described as a ‘£9 billion support package’, but the majority of it is a loan rather than an outright grant.

Tax avoidance and evasion

Hidden in the government’s costings are significant extra amounts of money described as ‘HMRC: investment in compliance’ and ‘DWP: investment
in compliance’ (over £500 million in 2022/23, rising to over £1.2 billion in 2026/27). This ‘investment’ is expected to bring in £3 billion of extra tax over the next five years and savings in the benefits systemof a similar amount. The HMRC staff will ‘provide greater support to taxpayers seeking to pay off accrued tax debts’ and ‘tackle the most complex tax risks, ensuring large and mid-sized businesses pay the tax they owe’. The DWP effort will be directed at preventing and detecting fraud and error, and collecting more debt.

Other measures: already announced

Interest on overdue tax

The rates of interest on overdue tax are linked to the Bank of England base rate by a statutory formula. As the base rate has recently risen from 0.1% to 0.75%, the rates of interest on overdue tax will also rise. From 5 April 2022 the rate rises from 3% to 3.25%, and it is likely to rise further if interest rates continue to go up.

Making Tax Digital (MTD) for Income Tax

As announced on 23 September 2021, the government has decided to delay the requirement for sole traders and landlords with income over £10,000 to file income tax self assessment (ITSA) information using MTD until the tax year 2024/25. General partnerships will not be required to join the system until 6 April 2025.

At the same time that MTD for ITSA is introduced, new penalties for late filing and late payment will apply to those within the new system. 

Business rates

In the Autumn Budget, the government announced several measures to reduce the burden of business rates in England:• freeze the business rates multiplier for a second year, from 1 April 2022 to 31 March 2023

  • introduce a new temporary business rates relief

    for eligible retail, hospitality and leisure properties for 2022/23, giving 50% relief up to a £110,000 per business cap

  • extend transitional relief for small and medium- sized businesses, and the supporting small business scheme, for 1 year, restricting increases in rates bills, subject to subsidy control limits

The government will reform the system of business rates by increasing the frequency of revaluations from 5 years to 3 years, starting in 2023.

In October, the Chancellor announced an intention to introduce reliefs, also in 2023, where occupiers incur certain types of expenditure on improvements, including eligible plant and machinery used in onsite renewable energy generation and storage. In the Spring Statement, he announced that this would be brought forward by a year to April 2022. 

Recovery Loan Scheme

The Recovery Loan Scheme, which was introduced to help businesses recover from the impact of the pandemic, has been extended until 30 June 2022. The following changes apply to all offers made from 1 January 2022:

  • The scheme is only open to small and medium- sized enterprises
  • The maximum amount of finance available is £2 million per business

  • The guarantee coverage that the government will provide to lenders falls to 70% 

Universal Credit

The Autumn Budget included two measures that were intended to benefit Universal Credit recipients: reducing the taper rate at which extra earnings leads to a reduction in benefits (from 63% to 55%) and increasing the Work Allowance by £500 a year.

These measures are worth more to some claimants than the £20 per week that was temporarily granted during part of the pandemic and then cancelled, but not everyone will enjoy the same benefit. Some commentators predicted that the Spring Statement would include some measures on Universal Credit, but no further changes were announced.

Freeports

The March 2021 Budget outlined the introduction
of ‘Freeports’, areas in which a number of tax and other incentives will operate to encourage trade. The enhanced tax reliefs will include 10% Structures and Buildings Allowances (instead of 3%), 100% First Year Allowances for plant and machinery, full relief from Stamp Duty Land Tax, full Business Rates relief for five years, and relief from Employer’s NIC on some salaries. The reliefs will depend on designation as a ‘tax site’ within a Freeport and will run until 30 September 2026, with a possible extension to
April 2031.

The English Freeports announced so far are East Midlands Airport, Felixstowe & Harwich, Humber, Liverpool City Region, Plymouth and South Devon, Solent, Teesside and Thames.

The October Budget included further measures clarifying the VAT reliefs that will apply in free zones, and the detailed operation of these new ‘onshore tax havens’ is being developed as they begin to operate.

Anti-Money Laundering Levy

The Finance Act 2022 has introduced an Economic Crime (Anti-Money Laundering) Levy, which is expected to raise around £100m per annum to help fund anti-money laundering and economic crime reforms.

Any entity which is subject to Anti-Money Laundering regulations (such as credit institutions, financial institutions, auditors, insolvency practitioners, accountants, tax advisers, legal professionals, estate agents, trust or company service providers, high value dealers and casinos) will be impacted but it will not apply to small entities (those with under £10.2m of UK revenue).

There will be three charging bands: medium (turnover from £10.2m – £36m), large (£36m – £1bn) and very large (over £1bn). A flat rate charge will apply in each band, being £10,000, £36,000 and £250,000 respectively.

It will be first charged for the year from 1 April 2022 to 31 March 2023, but it will not be collected until after the year-end.