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UK Autumn Statement: What are the Tax Implications for International Businesses?

The Chancellor, Rachel Reeves delivered the UK’s Autumn Statement on Wednesday 30 October 2024 and in our latest blog post, we’re taking a look at some of the key changes and what they mean from a business tax perspective for those businesses already operating within the UK or seeking to establish themselves within the jurisdiction.

In a budget aimed at raising substantial additional revenue, the UK government’s decision to keep the current corporation tax rate unchanged means that, for many businesses, the financial impact will likely come from other taxes they pay—such as employer’s national insurance—rather than from taxes on their profits.

Let’s take a look at some of the key updates in more detail below:

Corporation Tax Rates

The UK government has committed in its Corporate Tax Roadmap, to capping the main rate of corporation tax at 25 percent while maintaining the current small profits rate and marginal relief rates and thresholds for the duration of this Parliament.

Improving Tax Certainty

Plans are in place for the development and consultation on a process that will give investors in major projects increased certainty on the taxes that will apply.

Increases to Employers' National Insurance Costs

As expected, the headline change and biggest revenue raiser came in the form of changes to employers’ national insurance contributions (NIC). With effect from April 2025:

  • the rate of employers’ NIC will rise to 15% from the current 13.8%; and
  • the secondary threshold, above which employers’ NIC is payable will drop from £9,100 annually to £5,000, resulting in an additional £4,100 potentially subject to charge at the new higher rate.

Combined with the announcement of a 6.7 per cent increase in National Minimum Wage (NMW) rates, employers are faced with a twofold hit on their employment costs.

On a more positive note, an increase in employment allowance from £5,000 to £10,500 from April 2025 insulates smaller employers from these additional costs.

Capital Allowances

In the Corporate Tax Roadmap, the UK government has also committed to retaining full expensing relief for the duration of this Parliament, and to maintaining the £1 million annual investment allowance.

Research and Development (R&D) Tax Reliefs

In addition, the UK government has also committed to improving the effectiveness of the reliefs, looking at longer term simplification and intends to launch a consultation on the use of advance clearances for R&D reliefs in Spring 2025.

Transfer Pricing

Spring 2025 will see further consultation on changes to the UK’s transfer pricing, permanent establishments, and diverted profits tax regimes. Potential changes being trailed at this stage include:

  • reducing the existing thresholds of the small and medium sized enterprise (SME) exemption for transfer pricing, bringing more businesses within the scope of the transfer pricing rules;
  • simplification of the rules, including the potential removal of UK-UK transfer pricing; and
  • the introduction of a requirement for multinationals to report cross-border related party transactions to HMRC.

In addition, the government will review the transfer pricing treatment of cost contribution arrangements.

Multinational and Domestic Top-Up Tax (‘Pillar 2’)

As expected, the Chancellor confirmed that the government will legislate for the Undertaxed Profits Rule (UTPR) in the Finance Bill 2024-25. The UTPR is a key part of the G20-OECD Global Minimum Tax initiative and this builds on the UK’s adoption of the Income Inclusion Rule and Domestic Minimum Top-Up Tax which were enacted in 2023.

The UTPR will take effect for accounting periods beginning on or after 31 December 2024. This is in line with expectations with draft legislation having originally been published in July 2023 under the previous government.

Late Payment Interest

Late payment interest rate charged by HMRC on unpaid tax liabilities will be increased by 1.5 percent with effect from 6 April 2025.

Reporting Regimes

The UK has previously committed to implementing the OECD’s Crypto Asset Reporting Framework (CARF), which requires relevant providers to report details of their users and transactions to tax authorities. The OECD CARF regime is primarily aimed at collecting information on non-resident taxpayers for exchange between tax authorities, but the previous Government had consulted on implementing an expanded regime which also required domestic reporting in relation to UK residents.

Vantru is a regulated UK Corporate Service Provider and we specialise in helping foreign business organisations establish a presence in the UK; providing essential Corporate, Compliance and Advisory needs including assisting our clients with their Financial Reporting, Accounting and Tax requirements in the UK.

If you have any queries about what these updates will mean for your business, get in touch with our highly experienced team and let’s discuss the opportunities that these latest changes in tax law could present for your business.

Email: info@vantru.com or visit: www.vantru.com.