A few short weeks ago, the-then Chancellor of the Exchequer, Kwasi Kwarteng, delivered an emergency budget on 23 September entitled ‘The Growth Plan 2022’ in the House of Commons. Its contents – which we summarised at the time in a blog post – triggered market volatility, unprecedented warnings from the IMF and upheaval within the Conservative Party. It is therefore perhaps unsurprising that it has just been announced that almost all of the tax proposals contained in the Growth Plan have now been reversed.
At the time of writing, where do things stand?
Personnel changes: On 14 October, Kwarteng was replaced as Chancellor of the Exchequer by Jeremy Hunt. On the same day, Chris Philp was replaced as Chief Secretary to the Treasury by Edward Argar. He was moved to Argar’s previous position of Paymaster General and minister for the Cabinet Office.
National insurance contributions (NICs) and the Health and Social Care Levy: The emergency budget reversed the 1.25 per cent increase in NICs announced earlier this year, with effect from 6 November 2022, as well as scrapping the Health and Social Care Levy which had been due to come into force in April 2023. With legislation to enact these proposals now close to coming into force, this is one of the few proposals to remain unchanged following today’s announcements.
SDLT: The doubling of the nil rate band for SDLT on residential property and the changes to the SDLT regime for first-time buyers which came into effect on 23 September will similarly remain in force. (The approach to Land Transaction Tax in Wales and Land and Buildings Transaction Tax in Scotland are yet to be confirmed by the relevant devolved administrations.)
Capital allowances: The other piece being retained from the emergency budget is that the £1m annual investment allowance for qualifying expenditure on plant and machinery, which had been due to revert to £200,000 in April 2023, is indeed being made permanent. This was confirmed today by the Chancellor in his speech to the Commons.
Corporation tax: The emergency budget had proposed cancelling the planned increase to the main rate of corporation tax from 19 per cent to 25 per cent, which had been due to take effect from April 2023. Hunt, on 14 October, reversed the position on this such that the main rate of corporation tax will increase from April 2023. As this corporation tax rate increase has already been enacted, no further legislative action is required to achieve this (and companies must assess their deferred tax positions using the higher rate accordingly).
Income tax: The abolition of the 45 per cent additional rate of income tax from April 2023 which the emergency budget had (unexpectedly) announced was cancelled on 3 October (and so this 45 per cent rate will remain in place). The emergency budget had also included: (a) the reduction of the basic rate of income tax from 20 per cent to 19 per cent from April 2023, and (b) a reversal of this year’s 1.25 per cent increase to income tax on dividends with effect from April 2023. Neither of these proposals will now go ahead following the most recent announcements.
IR35: The emergency budget (also unexpectedly) included the reversal of the IR35 reforms relating to off-payroll working, such that ‘end clients’ in both the public and private sector would no longer be required to formally assess via a ‘status determination statement’ whether off-payroll workers would be employees had they been directly engaged, nor, if that were the case, to include such workers on their payroll and account to HMRC for income tax and NICs. This proposal has also been reversed today, such that IR35 reforms remain in force.
New Economic Advisory Council: In his statement to the Commons, the Chancellor also announced he is establishing a new Economic Advisory Council to provide independent expert advice to the government.
Other policies: There have so far been no statements on some of the other key policies announced as part of the Growth Plan, including whether the new “Investment Zones” will now go ahead and whether some of the changes that were complementary to the corporation tax changes, such as those relating to the Diverted Profits Tax rate will be amended accordingly.
The scale of the U-turns on the emergency budget tax measures is unprecedented. With a medium term fiscal plan still due to be published on 31 October alongside an official OBR forecast, and ongoing turmoil at Downing Street, it would not be surprising if there were further changes still to come. For now, all taxpayers from across the spectrum can do is wait and see – and maybe consign The Growth Plan 2022 to the history books.