Autumn Budget 2021 - What could be in store?

United Kingdom

The 2021 Autumn Budget takes place against a challenging economic and political backdrop. According to the National Audit Office the pandemic has cost around £370 billion so far. With further Covid-related uncertainties ahead, during what may be a difficult winter, and against a backdrop of patchy economic recovery to date, there are difficult choices for the Chancellor to make in order to balance the prospects for economic recovery and the need for sustainable public finances.

So far, the usual rumours of new revenue-raising measures seem relatively muted. However various headline revenue-raising measures have already been announced:  the increase in corporation tax rates to 25 per cent. already scheduled for April 2023; the increase in NICs from April 2022; and the introduction of the Health and Social Care Levy from 2023. Against this backdrop, our overall expectation is that the Budget may amount to a series of measured, technical announcements.   

COP26 is due to start imminently. It may be that this will result in either a ‘green’ element to the Budget or, perhaps, to deferral of some announcements until after COP26.

International tax reform may well feature. A commitment to implement the OECD’s two-pillar plan into UK domestic law may be given. Indeed the UK, France, Italy, Spain and Austria have agreed to withdraw their digital services tax once Pillar 1 is implemented and the US has agreed not to proceed with trade sanctions against these countries.

Further developments may be announced in a number of areas of tax law which are already the subject of existing consultation, or on which draft legislation has been published but not yet enacted. These include the following (with links to our previous articles on these topics):

  • Further developments in relation to residential property developer tax;

  • Next steps in the development of the asset holding company regime and amendments to the REITs regime;

  • Further development of the forthcoming regime for notification of uncertain tax treatment by large businesses;

  • Confirmation of some previously published amendments to the hybrid mismatches rules;

  • The UK’s future rules for notification of some cross-border tax arrangements following the UK’s restricted implementation of the EU DAC 6 rules following Brexit.

More wide-ranging reform could include:

  • a modernisation of stamp duty and stamp duty reserve tax;

  • a review of the rules relating to employment status, including perhaps an increase in NICs for the self-employed;

  • an increase in the effective rate of capital gains tax, particularly  on employee shares and carried interest in investment funds;

  • a response to consultations on various aspects of the VAT regime including the elective regime for VAT on commercial property; and

  • a review of the tax administration framework.

The CMS tax team will report on interesting announcements shortly after the Budget. The Chancellor may well unveil some surprises!