Mark Savage, Tax Director at BDO in Guernsey, has analysed today’s UK Budget announcement from Rishi Sunak, Chancellor of the Exchequer.
“Mr Sunak was optimistic as he presented the Autumn Budget, promising a plan to prepare for a post-COVID economy. But the economic backdrop is a stark one; the UK has had to borrow money at a huge rate – the largest levels outside of wartime – and needs to start paying that back.
“Of course, any Chancellor is always looking to balance the books by generating the income to meet spending commitments, and the COVID-19 pandemic has certainly increased the need to spend, with healthcare provision, business support, and the furlough scheme being three examples of extra commitments. In addition, the Treasury has already pledged an extra £5.9bn to the NHS, and an increase in spending on education.
“One way of generating revenue is raising taxes, and Mr Sunak has already done this by introducing a ‘health and social care levy’ and proposing an increase in the rate of corporation tax from 19% to 25%, both of which will apply from April 2023. With those policies already in place, it wasn’t surprising that there weren’t any headline-grabbing changes to tax rates in the Budget.
“Changes of note for Guernsey include Mr Sunak announcing cuts to the tax surcharge on bank profits, from 8% to 3%. Whilst not part of his speech, the Treasury also announced stamp duty reliefs on Insurance Linked Security (ILS) structures and a consultation on the possibility of allowing companies to formally redomicile to the UK. These measures are designed to keep the City of London competitive as an International Finance Centre, so will be of interest to our own financial services community.
“Further measures designed to keep London competitive in the funds market include a proposed simplification of the rules surrounding Real Estate Investment Trusts (REITs) and a new tax regime for asset holding companies in fund structures.
“Finally the Chancellor also announced a new lower domestic rate of Air Passenger Duty, paid by travellers flying in the UK, from 2023 and it will be interesting to Guernsey residents to see if this can be extended to flights to and from the Bailiwick.
“The Autumn Budget takes advantage of a sunnier outlook than expected for the economy as a whole to announce some significant spending commitments to aid economic recovery. But Mr Sunak has also laid some groundwork for a rebalancing further down the line.”