McDermott Comment | Autumn Statement: Windfall Tax and Income Tax
Shah Jahan Khandokar, partner at McDermott’s London office, commented:
“Whilst there is always rhetoric about investment in renewable energy being deterred by windfall taxes, the level of certainty which comes from the announcement this afternoon will be welcomed, as opposed to a blanket revenue cap (which was contemplated by former PM, Liz Truss). However, renewable energy investors will raise an eyebrow or two at the lack of an investment allowance, which their oil & gas peers are still able to enjoy.”
Sarah Gabbai, McDermott’s tax lawyer, also in London, commented on the potential impact of freezing income tax rate bands, saying:
“While the “fiscal drag” technique of freezing basic and higher income tax rate bands is a more politically palatable way of raising taxes than rate increases, the consequential National Insurance cost to employers will be made even more significant than in previous Budgets since employers will feel pressure to increase earnings to keep pace with inflation, which currently stands at 11.1% – the highest we’ve seen in the last decade or so. Today’s announcements will therefore exacerbate the existing fault line in the tax system between employment income and other forms of income and gains, thereby driving employers to seek alternative forms of engagement outside of the employer-employee model, many of which pose a significant enquiry risk”.