“As a professional body representing SME accountants who work with SME business clients, we have a keen eye focused on the Autumn Statement,” says Jonathan Barber, executive director – UK from The Institute of Financial Accountants (IFA). “It is clear that this statement will be challenging for the Chancellor, seeking to balance the continued control of inflation with the needs of cash-strapped businesses and individuals. We want to see a statement that prioritises clarity for businesses, and which streamlines bureaucratic red tape so that businesses can focus on success and growth in challenging economic times. This is essential for the UK economy and will help assure the stability and continued success of SME businesses. It is also essential that the government clarify the roll-out for a number of ongoing initiatives that are currently pending review in order that businesses are able to prioritise compliance activities.”
- Tax cuts
Deep concern amongst small businesses during the cost-of-living crisis is growing, with many feeling its impact. The pressure is on the Chancellor to lower taxes ahead of the general election next year and in a bid to boost growth. Initial indications however, highlight a government prioritising a reduction in inflation, refusing to commit to tax cuts until inflation is “tamed”.
- Review into smaller businesses’ needs
Following last December’s government announcement that MTD for income tax is now being phased in from April 2026, rather than April 2024, HMRC also announced a review into the needs of smaller businesses, and particularly those under the £30,000 income threshold.
The review was to consider whether MTD for income tax could be shaped to meet the needs of these smaller businesses and the best way for them to fulfil their income tax obligations. The Autumn Statement may prove to be the ideal outlet for an update on this initiative.
- Tax Administration Framework Review (TAFR)
Following its 2021 launch, the TAFR was established as part of the government’s 10-year Tax Administration Strategy to ensure the legislation, guidance and processes surrounding tax administration are suitable to deliver the tax system the UK will require in the future.
Another call for evidence this summer welcomed views on HMRC’s information and data gathering powers and taxpayer safeguards, amongst other topics. It will be interesting to see whether we are updated on this hot topic on 22 November.
- Expanding the cash basis for the self-employed
Following this summer’s consultation, HMRC is currently assessing all feedback. Some parts of the sector have warned that the proposed changes will make little difference unless the restrictions around interest deductions and loss claims are amended, with others airing concerns that expanding the cash basis to a wider population of taxpayers could compromise its objective of encouraging businesses to improve the accuracy of their accounting records. Either way, the general consensus is that changes are needed.
Whether any expansion means increasing turnover thresholds or the limit on interest deductions, remains to be seen. Or it could mean either relaxing the restrictions on loss relief or setting the cash-basis as the default for more businesses.
Whilst the cash-basis may be inappropriate for a proportion of businesses, many will no doubt welcome confirmation of any relaxations. Hopefully the Chancellor can address this in November.
- Making Tax Digital for Income Tax (MTD ITSA)
Having been postponed several times already, MTD ITSA may see further delays, with a highly critical report by the National Audit Office (NAO) and a subsequent Public Accounts Committee Inquiry potentially driving more changes to the scheme.
Its “value for money” report shared a number of MTD failings, including unrealistic timeframes from the outset, further hampered by HMRC simultaneously trying to replace its own legacy systems. Other criticisms included significant overspend against the original budget and a lack of clarity across many areas, calling for the need for more collaboration and transparency.
With further concerns raised by professional bodies, it’s a question of “watch this space” to ascertain whether the currently planned start date of April 2026 will be put back yet again.
- Construction Industry Scheme Reform (CIS)
The government’s consultation announced in April sought views on possible changes to strengthen and simplify the CIS, and its responses are also currently being analysed by HMRC. While an update would be welcomed in the Autumn Statement, it could involve major reform which requires more time to iron out.
It is widely anticipated that the ‘triple lock’ on pensions will remain the same for the time being, with state pensions getting roughly an 8% rise. Outside of this, we’re not expecting to hear any other significant announcements around pensions and benefits, unless there are any sudden, unforeseen changes.
- Research and Development (R&D) corporation tax relief reform changes
On 18 July, HMRC published draft measures for a new R&D scheme that would merge the current RDEC and SME schemes. The SME scheme is for eligible small and medium-sized firms, and RDEC is for large companies and SMEs otherwise ineligible for the SME scheme.
Should the plans be given the go-ahead, from 1 April 2024 there will be one single R&D scheme for all companies, incorporating the PAYE/NIC-related cap that is currently part of the SME scheme. The proposed legislation would work alongside the additional relief for loss-making R&D-intensive SMEs.
Although the implementation date is rapidly approaching, the Government has clarified it has not yet committed to it, so we envisage that the Chancellor will be giving confirmation one way or another.
The increased regulatory focus on digital assets has resulted in this summer’s consultation on the taxation of decentralised finance involving the lending and staking of cryptoassets, so it is likely that via the Autumn Statement we will hear about the possible introduction of legislative framework to clear up the uncertainty around this issue.
- Umbrella companies
In June, HMRC announced proposals to create minimum standards for umbrella companies to comply. Its consultation sought industry views on regulation, addressing employment rights issues in the market, and targeting tax avoidance, in particular abuse of the employment allowance and the VAT flat rate scheme. It is thought that next month will serve as a timely platform for Hunt to roll out new policies to tackle non-compliance.