Autumn Statement 2023: Private Equity

Despite much speculation in the weeks running up to the Autumn Statement surrounding changes to be made to the current tax landscape, ranging from Inheritance Tax to the non-dom regime, there was little major change in today’s announcement for the Private Equity industry.

Some of the key takeaways and quick reactions for the sector to be aware of are:

Private Equity executives - Individuals

There will be a reduction in National Insurance Contributions (NIC) rates for:

• Partners
  • class 2 NIC will be abolished from April 2024, generating a saving of £192 a year.
  • class 4 NIC main rate (NIC on trading profits) will be reduced from 9% to 8% from April 2024. This 1% reduction only impacts profits between £12,570 and £50,270, thus saving a maximum of £377 a year.
• Employees
  • class 1 employee NIC main rate (NIC on renumeration from employment) will be reduced from 12% to 10% from 6 January 2024. This 2% reduction only impacts profits between £12,570 and £50,270, saving a maximum of £754 a year.
• ISA allowance remains at £20,000 but with more flexibility in how funds are invested (such as in long-term asset funds and open-ended property funds) and how amounts transfer between ISA providers.
• Individuals with income taxed only through PAYE will no longer be required to file a self-assessment tax return from April 2024, no matter their level of income (previous threshold income of £150,000).
• Tax breaks for those investing in EIS & VCT qualifying companies to be available until 6 April 2035 (previously schemes due to end on 6 April 2025).

Private Equity houses & portfolio companies

• Firms should be wary of the in-year class 1 employee NIC change and check with their payroll providers that systems are in place to update accordingly.
• Full expensing has been made permanent, meaning companies will continue to receive 100% relief on expenditure of new qualifying plant and machinery. However, full expensing is only available to companies. LLPs and partnerships will need to continue relying on the £1 million Annual Investment Allowance (AIA). Although if an LLP or partnership has a corporate member, full expensing is available to the corporate member if appropriate.
• R&D tax schemes to be merged into one scheme resulting in the notional tax rate on loss making companies decreasing from 25% to 19%. As a reminder R&D relief is not available to LLPs or partnerships, unless such expenditure is incurred via a subsidiary “service” company.

For further information, get in touch with Alex Conway or your usual Crowe contact.