22 October, 2021 - 11:52

Autumn Budget 2021 – Corporate Tax predictions

Having already given one set of Budget predictions in 2021, back in March, I had thought that my writing for Business Weekly was done for the year, writes Katie Varney, Partner with Ensors Chartered Accountants

Indeed, following a Spring Budget packed with tax announcements (at least from a corporate and business tax perspective), many expected Rishi Sunak’s second ‘big’ speech of 2021 to revert to the format of the traditional Autumn Statement, providing an economic update and spending review, but stopping short of a full Budget speech. 

However, having announced this Autumn speech as a full Budget and having brought the date forward from its usual late November/early December slot, I suspect the Chancellor may still have plenty up his sleeve in terms of changes to tax policy as the Government attempts to rebuild public finances in the wake of the Coronavirus pandemic. 

All that said, I would be surprised if we see any more substantive increases to headline rates of tax, particularly following the impending rises to National Insurance and Corporation Tax already announced. Instead, what I suspect we’ll see is the introduction of a raft of ‘simplification’ measures, marketed as changes to the tax system designed to help taxpayers remain compliant with their obligations, but what are, in reality, methods of accelerating tax revenues for the Exchequer. 

One such example of this is the proposed reform to basis periods for the self-employed, which has been badged as a simplification to the system of allocating trading income to tax years that should aid sole traders and partnerships with the move to Making Tax Digital for Income Tax. 

However, the reality is that in the year of transition to this new regime, many businesses will see their profits and corresponding tax liabilities accelerated, with a potentially significant impact on cash flow.

Other areas that are ripe for ‘simplification’ are Capital Gains Tax and Inheritance Tax, particularly with regard to the availability of Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) and Business Property Relief respectively, so we may also see announcements that increase future revenues without raising the headline rates of tax in these areas. 

I also expect the Chancellor to continue to target aggressive tax avoidance and evasion, particularly in the context of pandemic support measures, and, given the revenue raising success of previous HMRC campaigns, it’s possible that we may see a specific disclosure facility launched to deal with ‘errors and mistakes’ made by businesses that took advantage of the various Coronavirus grants, loans and the furlough scheme. 

Finally, I expect climate measures to be high on the agenda ahead of COP26 and the Government’s pledge to make the country carbon neutral by 2050.

Whilst the idea of some form of ‘carbon tax’ has been mooted for certain carbon-intensive industries, I suspect any climate-related announcements are more likely to take the form of new and enhanced tax incentives for green technologies and initiatives.

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