With the UK corporate tax rate set to rise 25 percent from April 2023, the UK Government has announced various tax proposals that are intended to support businesses and the UK economy, in the newly released 2022 Budget.
Significant reliefs have been announced in the area of business rates, the UK's commercial property tax regime. The Government says it intends to reduce the burden of business rates in England by over GBP7bn over the next five years. Specifically, the Government has said it will freeze the business rates multiplier in 2022-23, cutting companies' tax bills by GBP4.6bn over the next five years.
Targetted relief worth GBP1.7bn will be provided next year to up to 400,000 retail, hospitality, and leisure properties, the Government said. In addition, from 2023, a new business rates relief will support investment in property improvements so that no business will face higher business rates bills for 12 months after making qualifying improvements to a property they occupy.
Among other changes, the Government will make it easier for shipping companies to participate in the Tonnage Tax regime by reducing the lock-in period from 10 years to 8 years to align more closely with shipping cycles. HMRC will be given more discretion to admit companies into the regime outside of the initial window of opportunity where there is a good reason. HMRC will also review guidance on which vessels and operations qualify for the regime, with the stated aim of taking account "developments in technology and the shipping market since the tax was introduced."
The Government is planning changes for the aviation industry, too. Following consultation, the Government will introduce a new domestic band for APD set at GBP6.50. The rate will apply to all flights between airports in England, Scotland, Wales and Northern Ireland (excluding private jets). In addition, the Government is increasing the number of international distance bands from two to three, with the new distance bands set at 0-2,000 miles; 2,000-5,500 miles and 5,500 miles plus. The rates will be GBP13, GBP87, and GBP91, respectively, for economy passengers.
The Government has also said, from 2023, it will introduce exemptions for eligible plant and machinery used in onsite renewable energy generation and storage, and a new 100 percent relief for eligible heat networks, to support the decarbonization of buildings.
Budget 2022 also announced that the eligibility criteria for research and development tax breaks will be broadened to include data and cloud computing costs, and the temporary GBP1m level of the Annual Investment Allowance will be extended to March 31, 2023.
The Budget also announced that the Government intends to continue to freeze Vehicle Excise Duty (VED) for heavy goods vehicles (HGVs) in 2022-23 and suspend the HGV Road User Levy for another 12 months from August 2022. The Budget also includes a freeze on fuel duty.
The Budget also confirms duty freezes for beer, cider, wine, and spirits, and a five percent cut in duty for draft beer and cider. The Budget also includes major changes to the alcohol tax system. Under the changes, drinks will be taxed in proportion to their alcohol content and the number of main rates will be reduced from 15 to 6.
All tax categories (for beer, wine, etc.) will move to a standardized set of bands, with rates for products between 1.2-3.4 percent alcohol by volume (ABV), 3.5-8.4 percent ABV, 8.5-22 percent ABV, and above 22 percent ABV. Above 8.5 percent ABV, all products across all categories will pay the same rate of duty if they have the same proportion of alcohol content. The government will also simplify the way businesses register and pay for duty, ending the practice where individual products have different administrative rules.
Last, to partially counteract the incoming six-percent hike to the headline corporate tax rate, the Budget announces that the rate of Bank Surcharge will be lowered to three percent from April 2023, from eight percent. In addition, the annual allowance within the surcharge will be raised to GBP100m.
The Budget also says the Government will soon launch a consultation on its proposals for a UK-wide Online Sales Tax, to fund reductions to business rates for retailers.