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Autumn Budget 2021 predictions: Corporate Tax

Corporate Tax Partner Heather Self outlines five key predictions for what the Chancellor could, should and shouldn’t include in his Autumn Budget on Wednesday 27 October.

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  1. With a significant rise in Corporation Tax announced last time, we would very much hope not to see any further rises – a quiet budget would be best for business. The increased rate of 25% applies from 2023, so it’s possible it may come back down again before then – but we would expect that to be a piece of ‘good news’ in a 2022 Budget, perhaps in the lead up to the next election.
  2. The long-awaited OECD deal on taxing multinationals is expected to be announced very shortly [NB this could be pre-Budget] so we would expect the Chancellor to welcome it and to say how it will be implemented. This only affects the biggest businesses and is likely to be at least a two-year project – it’s complicated. We do not expect the net impact for the UK to be all that significant overall – perhaps about £2bn (out of £60bn per annum Corporation Tax/£700bn per annum total taxes), and the current Digital Services Tax will be withdrawn meaning the net raised will be close to zero. There is no magic wand that the Chancellor can wave to make multinationals pay more tax in the UK.
  3. Taxes on employment have also gone up with the announcement of the Health and Social Care Levy, which effectively puts up both employees’ and employers’ National Insurance Contributions by 1.25% from April 2022. With business doing its best to reset after the pandemic, any further increases would be a nasty surprise.
  4. In his last Budget, the Chancellor improved loss relief by allowing a carry back for three years – we would welcome this measure being extended so that it applies to losses after 31 March 2022 – we think it will take businesses longer to recover.
  5. The apprenticeship levy, at 0.5%, is a continuing cost to larger businesses. We recognise that improving the skills of the workforce is important, so want the Chancellor to make the most of the money raised by broadening the ways in which employers can apply for funds from the levy pot, for additional training – a lot of valuable training does not qualify at present [seehttps://www.gov.uk/government/news/key-facts-you-should-know-about-the-apprenticeship-levy].
A quiet budget would be best for business. 

Budget alert: Statement on Digital Services Taxes in transition to new ‘Pillar 1’ rules

It is good news that a compromise has been reached, and that the US has pulled back from its threats to impose sanctions.

But it is worth remembering that the Digital Services Tax (DST) is only expected to raise about £500m per annum – see https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/752172/DST_web.pdf – which in the context of total tax revenues of about £700b, and Corporation Tax of about £60b, is a very small sum – around 1% of total Corporation Tax and not even 0.1% of total taxes.

DST will now continue until 2023, but where it exceeds the Pillar 1 amount in 2022, the excess can be credited against Corporation Tax.  For those (relatively small number) of companies who are affected, this will mean yet more complex calculations during the transition period.

Would you like to know more?

If you would like to discuss the above or how it may affect you and your business, please get in touch with your usual Blick Rothenberg contact or Heather Self, using the details on this page.

For press enquiries, please contact David Barzilay using the details on this page.

For more information and predictions please visit our Autumn Budget 2021 hub.