Mark Savage, Tax Director at BDO in Guernsey has shared his insight with Channel Eye on the UK Government’s autumn statement.
Mr Savage (pictured) explained: “The UK Chancellor was able to announce that UK inflation was falling, borrowing was predicted to be less than previously thought and economic growth higher than previously predicted.
“This enabled him to announce ‘110 measures’ to boost growth. Most of these measures were unrelated to tax; some were focussed on spending, and others on benefiting the income of individuals, such as maintaining the pensions ‘triple lock’ and raising the minimum wage.
“A major focus continued to be looking at ways to incentivise the ‘economically inactive’ to remain in, or rejoin, the UK’s workforce by ‘making work pay’. This is intended to be achieved through reforms to the benefits system as well as changes aimed at the lower paid such as maintaining the pensions ‘triple lock’ and raising the minimum wage.”
Inheritance Tax
“Despite speculation in the media in advance of the Autumn Statement, no major changes were announced to the UK Inheritance Tax rules.
Individuals who hold UK assets or otherwise remain subject to UK Inheritance Tax will note that the current tax-free threshold continues to be frozen at £325,000. The continued effect of inflation means that these frozen allowances may lead to an increased number of Guernsey residents facing UK tax liabilities.”
UK Business
“A notable change which may be of interest to Guernsey individuals with interests in UK businesses is the extension of full expensing regarding capital allowances. This was originally introduced in the Spring Budget earlier this year and was expected to last for the next three years but has now been made permanent. The effect is that companies incurring qualifying expenditure on the provision of new plant and machinery can claim an allowance at a rate of either 100% (main rate expenditure) or 50% (special rate expenditure).
“Non-incorporated businesses can continue to claim a first-year allowance of up to 100% (equivalent to full expensing) on plant and machinery purchases up to £1 million.”
National Insurance
“The Chancellor also introduced eye-catching measures affecting those who work, and are therefore potentially subject to National Insurance, in the UK. Employees will benefit from a 2% reduction in their contributions. Meanwhile the self-employed will similarly benefit from a 1% reduction, in addition to the abolition of the fixed weekly “Class 2” contributions.
“It should be noted, however, that this reduction in headline rates has been partly paid for by the freezing of lower income limits and allowances, which have not, therefore, kept pace with inflation. For some low earners this freezing of allowances and limits may offset the benefit of the rate reduction.”
Captive Insurance
“One potentially interesting future development amongst the non-tax measures announced by the Chancellor today is that there will be a Consultation on introducing a UK regime for captive insurance companies, launching in Spring 2024.
“Whilst this is an interesting development, it will be interesting to see if the UK will be able to compete against the well-established, well-regulated and potentially more tax-friendly jurisdictions such as Guernsey.”
The Isle of Man Treasury Minister Dr Alex Allinson MHK responded to the Chancellor’s Autumn Statement by reiterating his pledge, made earlier this month, to mirror the UK Government’s approach to the pensions triple lock.
The announcement follows UK Chancellor Jeremy Hunt’s commitment to increase the full new state pension by 8.5%.
Minister Allinson said: “Today’s news was not unexpected and I look forward to working with officers and building the triple lock commitment into next year’s Budget. Work has already taken place to support Manx pensioners as we plan for the forthcoming financial year, with further announcements being announced in the Budget at the February sitting of Tynwald.”
He added: “In relation to the changes to National Insurance paid by the self-employed — these will need to be considered in light of the Social Security agreement the Isle of Man has with the UK. Officers will be engaging on this issue with UK counterparts, following which I will be in a position to provide an update on what Treasury’s position will be concerning the possible application of these changes to the Island.”
In accordance with the Autumn Statement, the Isle of Man will increased duty rates for tobacco products from 6pm on 22nd November 2023.
The rates of most tobacco products will increase by Retail Price Index (RPI, UK) plus 2%, with the rate for hand-rolling tobacco increasing by RPI (UK) plus 12%. Alcohol duty rates will be frozen until 1 August 2024.
The UK Chancellor also announced changes to the VAT applied to the installation of energy-saving materials, to be implemented in February 2024, and the extension of the zero rate of VAT to women’s sanitary productions from 1 January 2024.
The Isle of Man Government will replicate these VAT changes with details being posted on the Customs and Excise area of the Isle of Man Government website in due course.
Minister Allinson added: “In terms of the wider UK economy, I note with interest the Chancellor identifying opportunities and committing funds for investment across a range of sectors. On a local level, the Economic Strategy and associated funds are playing a vital role in providing a framework for growth to support future generations. We are also starting to see movement on brownfield sites by private sector companies incentivised by the Island Infrastructure Scheme.”
