2023: A year in tax – The calm after the storm?

At the start of 2023, Jeremy Hunt had been in the Chancellor’s job for less than two months and the UK inflation rate exceeded 10%. Despite soaring inflation, and the debris of Kwasi Kwarteng’s ill-fated Mini Budget yet to be completely cleared away, there remained strong calls for tax cuts as the UK faced the highest tax burden since World War II. Despite this, Prime Minister Rishi Sunak and his Chancellor were defiant that halving inflation was the priority, and worth more than any tax cut.

One of the five former Chancellors of 2022 made the headlines, as Nadhim Zahawi’s personal tax affairs were under the public spotlight. Zahawi paid £3.7m to HM Revenue & Customs (HMRC) for Capital Gains Tax relating to the sale of shares in YouGov, a company which Zahawi co-founded, held through an offshore family trust.

Jeremy Hunt’s laboured Spring Budget in March was a non-event as he had very little to tell the country. Businesses facing a 6% increase in Corporation Tax (to 25%) were gifted an unlimited deduction for capital expenditure for a three-year period, but the fanfare was muted.

To find cost savings for HMRC, their phonelines were shut down during the summer months, forcing taxpayers to rely upon digital services and online chat functions. Even when HMRC’s phone lines reopened, it was reported that a third of taxpayers were unable to get through to an adviser. And you can expect more chaos with HMRC’s phone lines as we get closer to the 31 January 2024 Self-assessment tax return filing deadline

The prize for tax case of the year goes to McVitie’s Blissfuls, where the First Tier Tribunal ruled in favour of HMRC that the biscuits are liable for VAT. The critical issue for the Tribunal judge to assess was whether the product was wholly or partly covered with chocolate. The Blissfuls case is a throwback to previous VAT cases, including that of a Jaffa Cake being a cake rather than a biscuit because it went hard when stale rather than soft, and that modern flapjacks cannot be cakes as they were not something anyone could eat at ‘celebratory functions’.

Jeremy Hunt had survived over a year as Chancellor when he made his Autumn Statement in November and he celebrated with a generous £50bn package of National Insurance cuts. However, these were not as generous as hoped as most taxpayers would have preferred an inflationary increase to the personal allowance and tax thresholds, which will continue to be frozen until 2028.

Despite strong rumours in the run-up to the Autumn Statement that Inheritance Tax would be abolished, Jeremy Hunt only went as far as abolishing the £3.45 per week class 2 National Insurance for the self-employed; suffice to say the self-employed weren’t doing any cartwheels.

Mission accomplished for Messrs Sunak and Hunt in 2023 as inflation more than halved to 3.9%, but the Government knows it will need to do a lot more to win over voters next year. As 2023 draws to a close, the Government has called a slightly early Spring Budget on 6 March 2024 – more than likely to be Jeremy Hunt’s last hurrah as Chancellor, and the last before a General Election. Expect some tax fireworks – Inheritance Tax is likely to get a complete revamp or abolished altogether, Income Tax cuts are waiting in the wings and non-doms will be holding their breath.

So a ‘blissful’ 2023 in the world of tax. But 2023 is almost certainly the calm before the storm – more than two billion people across 50 countries head to the polls in 2024, and the UK will not let itself be overshadowed by world events. The present Government and the Labour opposition have already started to flex their muscles and tax will undoubtedly be a key battleground in eagerly anticipated 2024 manifestos.

2023 – the calm before and after the storm.