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Chancellor’s statement on the Medium-Term Fiscal Plan

  • United Kingdom
  • Tax planning and consultancy


In a further attempt to calm financial markets following September’s mini-budget, new chancellor Jeremy Hunt has today announced a significant number of tax and spending measures, two weeks in advance of the anticipated announcement of the government’s Medium-Term Fiscal Plan.

Prior to today’s statement, the government had already reversed its plans to scrap the increase in corporation tax to 25% from April 2023 and to remove the 45% additional rate of income tax. In a further move designed to provide “confidence and stability”, the chancellor has now dramatically announced that he will reverse almost all the tax measures from the mini-budget that have not started Parliamentary legislation.

The UK Tax and Incentives teams at Eversheds Sutherland consider what the tax announcements in the emergency statement might mean for businesses.

Investment: Ben Jones, Co-Head of Global Tax, comments: “With the reversal of nearly all of the tax policy changes announced by the Truss Government under a month ago, it is difficult to know whether to laugh or cry at UK tax policy presently. The reversals are the right move for the UK, even though the tax burden for business will be higher. While tax cuts are nice, they are better suited to sunnier economic climates. What business really needs (particularly multinationals investing into the UK) is stability and predictability, and this is where the damage has been done and will not be so quick to reverse. For international investors looking at the UK, the fear is that by layering the tax debacles of this last month on top of the additional complications brought about by Brexit, the UK will unfortunately look like quite an unattractive investment destination right now. My hope for the foreseeable future is that we see no further mini-budgets, ‘unbudgets’ or other material business tax policy changes, giving businesses the opportunity to navigate the choppy waters ahead without the tides of tax policy changing all around them.”

Energy: Ben Jones, Co-Head of Global Tax, comments: “The chancellor announced there will be a Treasury-led review into how the government supports energy bills beyond April 2023, with support for businesses targeted to those most affected by rising energy costs. This announcement, which fails to give any substantive indication of the government’s plans, will be of little comfort for those non-domestic energy users in the UK which do not have fixed energy deals.”

Investment Zones: Ben Jones, Co-Head of Global Tax, comments: “It is interesting to note the areas which were not dealt with in the chancellor’s statement. There was no mention of the broad programme of Investment Zones tax incentives, which were announced in the mini-budget. This may mean that the government intends to continue with at least a version of this programme, which may prove helpful in bolstering investment across the country.”

IR35: David Jervis, Tax Partner, comments: “The government will no longer proceed with the repeal, with effect from 6 April 2023, of the reforms to the IR35 off-payroll working rules in 2017 and 2021. Having got to grips with IR35 compliance, many larger businesses should not be too concerned about the proposed IR35 changes in the mini-budget being reversed, although the government’s U-turn may be disappointing to some businesses, which may have welcomed a reduction in their IR35 compliance burden. In any event, careful consideration of the tax treatment of contractors is required regardless of whether the proposed IR35 changes are implemented or not, given concerns about reputational risk and other issues, such as the corporate criminal offence of failure to prevent the facilitation of tax evasion and HMRC’s potentially wide application of the agency rules.”

VAT-free shopping: Ed Griffiths, Tax Associate, comments: “The government will no longer proceed with the new VAT-free shopping scheme for non-UK visitors. This will be disappointing news for British retailers, which had hoped the new scheme would boost their competitiveness in attracting international custom.”

CSOP: Mathew Gorringe, Partner, Head of Share Incentives, comments: “The chancellor’s statement did not mention the changes announced in the mini-budget to the Company Share Option Plan (CSOP) regime. This suggests the government may be planning to continue with the planned increase in the statutory limit on the value of shares which may be subject to CSOP options held by any individual, and the removal of the previous restrictions which prevented many companies that have more than one class of share from implementing a CSOP. If the government does continue with the proposed CSOP changes, this will be a welcome development for businesses. The proposed changes would make CSOP options a much more attractive incentive for mid-tier executives where the previous £30,000 limit was insufficient for delivering an appropriate level of incentive and reward, and a suitable alternative to Enterprise Management Incentive options for companies which may be unable to grant such options by virtue of not meeting the statutory conditions.”

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