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But it is only worth over £10 billion a year in the short term. Per the OBR’s calculations, the steady state benefit is likely to be around £3 billion a year as the cost to the Treasury of giving tax relief upfront is offset by the benefit of not having to give 18% writing down allowances in future. It is the benefit of a tax saving today against a tax saving spread over a number of years in a higher interest rate environment. And also worth remembering that it comes only a few years after the biggest business tax rise in modern British history (not how then Chancellor Rishi Sunak described it of course), namely raising the headline corporation tax rate from 19% to 25%, which was forecast to cost businesses significantly more than £10 billion a year.
That said, making full expensing (and the 50% first year allowances for special rate expenditure) permanent is clearly a sensible move. Most of the benefit from the temporary measure – it was originally due to expire by 1 April, 2026 – was always likely to flow mostly to existing planned investment rather than encouraging new investment. Also welcome is the fact that the Government has announced both that it is considering whether full expensing could be expanded to include assets used for leasing and that this paves the way for a technical consultation on wider changes to simplify the UK’s capital allowance regime. Although somewhat disappointingly that consultation appears to be limited to plant and machinery allowances and will not extend to other allowances such as structures and buildings allowances.
Simplification is also one of the stated aims of some of the announced changes to R&D reliefs, including merging the existing RDEC and SME schemes. As to which multinational groups with intangible property in certain offshore territories will be pleased to know that the ORIP (Offshore Receipts in respect of Intangible Property) rules will be repealed from 1 January, 2025 when the UK’s Pillar Two Undertaxed Profits Rule (sometimes referred to as the Undertaxed Payments Rule) comes into force so at least they will not have to grapple with both regimes at the same time.
On the subject of Pillar Two, a long list of amendments to the Multinational Top-up Tax (MTT) and Domestic Top Up Tax (DTT) legislation in Finance (No. 2) Act 2023 were announced with a view to ensuring that the UK legislation remains consistent with the agreed Global Anti-Base Erosion (GloBE) Rules, commentary and administrative guidance. There are over thirty different amendments listed and in the main they look like the typical sorts of points that emerge, and need resolving, as taxpayers and their advisers look to apply high level international rules to specific detailed fact patterns ahead of implementation. In light of which perhaps the most important amendments will be those “to the power which permits amendments to the legislation to ensure consistency with the GloBE rules, to increase flexibility as to its use”! The Autumn Statement “green book” estimates the UK tax take from the Multinational Top-up Tax, Domestic Minimum Tax and Undertaxed Profits rule at roughly £12.7bn in total over the next 6 years. It will be interesting to see how accurate that estimate turns out to be.