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Budget Spring 2023
Publication date: 24 Mar 2023 (updated 30 Nov 2023)
uk In brief UK2023-08
On Wednesday 15 March 2023, the Chancellor Jeremy Hunt delivered his Spring Budget 2023. Amongst other measures, the key impacts on businesses are:
- As already enacted, the Chancellor confirmed that the main corporation tax rate will increase to 25% from 1 April 2023.
- The super-deduction regime will end on 31 March 2023 and be replaced with ‘full expensing’, that is, 100% capital allowances on qualifying spend, for 3 years.
- A higher rate of relief for loss-making R&D intensive SMEs will be introduced. The Government is also considering merging the RDEC and SME schemes.
- 12 Investment Zones have been announced which will give businesses enhanced Capital Allowance, Structure and Buildings Allowance, and relief from Stamp Duty Land Tax, Business Rates and Employer National Insurance Contributions.
- The Government also re-affirmed their intent to implement a) the OECD Pillar 2 rules for a global minimum corporation tax rate for financial years beginning on or after 31 December 2023, and b) an Electricity Generator Levy of 45% on ‘extraordinary returns’.
What is the issue?
The important date for tax reporting purposes is the date of ‘substantive enactment’. For financial reporting purposes under IFRS and UK GAAP, taxation balances are only adjusted for a change in tax law if the change has been substantively enacted by the balance sheet date. However, the effects of the change in tax law must be disclosed if the change is announced before the accounts are signed and the effects are significant.
What is the impact and for whom?
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). The planned increase in the corporation tax rate has 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 Spring Budget does not constitute substantive enactment of the other measures noted above. These will only become substantively enacted for IFRS or UK GAAP purposes either after the 3rd reading in the House of Commons or the passage of a resolution under the Provisional Collection of Taxes Act. For US GAAP they will be enacted when they receive Royal Assent.
Where do I get more details?
For more information contact Dave Walters or Steve Moseley.
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