On Tax…John Toon, Tax partner at DWF, comments on the tax announcements. He said:
"Taxation is the art of plucking the goose with the least amount of hissing": an apt quote for Jeremy Hunt's autumn statement, which is designed to ensure that the burden of significant increases in tax take is borne most obviously and immediately by middle and higher income earners, and those with investment income and capital gains, through the reduction in the additional rate threshold from £150k to £125,140, and phased reductions in the dividend allowance and capital gains tax annual exempt amount.
"Freezing the income tax personal allowance, the higher rate threshold and the secondary NICs threshold, coupled with inflation expected to be persistently above recent levels for the next three years and an increase in the living wage (and its knock-on effect on wage inflation generally) will mean more individuals brought into tax and more at the higher rate, with businesses bearing the additional NICs cost – far less obvious, with the pain being borne over time, but generally much more cash generative for the Exchequer. Politically astute in circumstances of limited freedom of movement."
On the electricity generator's levy…Darren Walsh, Co-Head of the Energy sector at DWF, comments on the energy announcements. He said:
"Focusing on the Energy sector appears to have been the order of the day for the Chancellor's Autumn Statement. He blames the energy crisis on the war in Ukraine and energy supply shortages, particularly gas in Continental Europe, for the huge spikes in gas and electricity costs to commercial and domestic consumers.
"While we do not disagree with this root cause, the impact of the further development of low and zero emissions energy generation and storage may be adversely affected by the introduction of the electricity generator's levy.
"The levy will be introduced from 1 January 2023 and will apply to corporate groups or standalone generators connected to the national transmission network or to local distribution networks; and to those entities generating more than 100 Giga-watt hours of electricity per annum. Essentially, the levy will amount to a 45% tax charge on revenue which exceeds the Benchmark Price of £75 per MWh.
"To put this into context, it would take approximately three million solar panels to generate one Giga watt of electricity and one Giga-watt of electricity would provide electricity to around 725,000 homes.
"Whist the electricity generator's levy will hit large-scale generators hard, it may be that smaller generators, developers, sponsors and funders will be less affected. We have seen a significant increase in sub 100 Mega-watt hour generation and storage projects in recent years and we would hope that there remains the same degree of enthusiasm and opportunity for these projects to continue to grow."
On electric vehicle tax…"Vehicle excise duty being introduced from 2025 for electric vehicles seems opportunistic and counter-intuitive, given the drive to convince people to move away from traditional vehicles; as well as range-anxiety and the lack of sufficient EV charging infrastructure still in many parts of the UK.
"This seems to be a further justification for people to be less incentivised to make the shift away from their diesel and petrol cars. Many of our clients are investing in electric vehicle charging infrastructure, whether for their employees, customers or use by the general public. These investments are in good faith and with a view to enhancing the UK's EV charging infrastructure.
"Despite the imposition of vehicle excise duty in 2025, with the public's awareness of the energy crisis and the climate emergency, we would hope that this introduction will not have an adverse impact on the continued 150% increase in EV car purchases in the UK and the move towards electrified or hydrogen fuelled mobility."
On new nuclear build project…"Confirmation of the UK Government's support and proposed investment in the Sizewell C new nuclear build project is welcomed; but until investment agreements are concluded under the Regulated Asset Base Model, the Chancellor's announcement was not really new.
"That said, further confirmation that the Government remains behind this important zero carbon energy generation project is welcomed.
"Sizewell C will generate around 7% of the UK's electricity needs and will further enhance, when commissioned, the UK's resilience and the provision of vital baseload electricity supply. The UK used to benefit from a baseload energy supply from nuclear of around 20% and this has steadily fallen as older generating stations have been taken off the bars and decommissioning commenced.
"The UK's nuclear heritage is significant and stems back from the 1950s. We have a wealth of technical excellence in this field and this new project will further support the retention and development of a skilled workforce in the UK.
"We would hope that similar Government support will be given to the small modular reactor opportunities that are currently being developed in the UK."