On Thursday 17 November 2022, the Chancellor Jeremy Hunt delivered his Autumn Statement 2022. Amongst other measures, the key impacts on businesses are:

Entities will need to consider the impact of the announcement on their tax disclosures.

Entities will need to consider the impact of the announcements on their tax accounting and tax disclosures.

UK GAAP and IFRS accounts are drawn up based on tax rates which are substantively enacted at a balance sheet date (or enacted for US GAAP). Therefore, it is important to determine the point at which any announced changes are substantively enacted (or enacted for US GAAP) as entities will then need to adjust the measurement of its deferred tax balances.

The planned increase in the corporation tax rate (and the decrease in the Bank Corporation Tax Surcharge) have already been enacted. As such the valuation of any deferred tax assets or liabilities on the balance sheet will therefore currently reflect the 25% rate from 1 April 2023, taking into account expectations around the timing in which they will unwind.

The Autumn Statement does not constitute substantive enactment of the Energy Profits Levy changes, Electricity Generator Levy, the OECD Pillar 2 rules or the reforms to the R&D tax reliefs, so entities should not measure deferred tax assets or liabilities based on the Autumn statement. These will only become substantively enacted for IFRS or UK GAAP purposes either after the 3rd reading of the Finance Bill in the House of Commons or the passage of a resolution under the Provisional Collection of Taxes Act. Finance Bill Autumn 2022 had its third reading on 30 November 2022. Therefore, the Energy and Profit Levy and R&D tax relief changes are now substantively enacted. For US GAAP they will be enacted when they receive Royal Assent.

However, where there is an announced change in tax rates or laws before the accounts are signed, entities impacted by the change may need to disclose the impact if it is material to the accounts (IAS 10 para 22(h), IAS 12 para 88, FRS 102 para 32.11(h)). If it is not practicable to estimate the impact of the change, entities should disclose that fact.

For the Electricity Generator Levy, we are waiting for the detailed draft legislation to be released to appropriately determine whether the tax is within the scope of IAS 12. We also note that the deferred tax implications of the OECD Pillar 2 rules are currently being considered by the IASB.

For more information contact Dave Walters and Steve Moseley.