From the desk of Suzie Brooks, Managing Director
On Wednesday 27th October I sat poised and ready, with pen and paper in hand, watching the Autumn Budget.
Normally writing frantically, to report the numerous up and coming changes to our clients, yesterday I came away with a small, uninspiring page of notes.
Whilst there was some good news for businesses and the economy, there actually isn’t much to report of any significance to our clients.
On tax measures, the Budget was extremely light. Perhaps this is understandable given the major reforms that were announced earlier this year (increases to rates of corporation tax, NI, dividends).
Here are the overall budget highlights:
Business Rate Concessions
The reforms announced didn’t go as far as many hoped.
- The business rates multiplier will be frozen for a second year from 1 April 2022 until 31 March 2023, keeping the multipliers at 49.9p and 51.2p.
- An additional 50% business rates relief will be available for retail, hospitality and leisure properties for 2022-23 up to a cap of £110,000 per business.
- A 100% improvement relief for business rates will exempt occupiers from paying extra rates where improvements increase the property’s rateable value. The improvement relief will take effect in 2023 and be reviewed in 2028.
- 100% business rate exemptions for onsite renewable energy generation and storage equipment, and a 100% relief for eligible heat networks – one of the few Budget measures to support the decarbonisation of non-domestic buildings.
- Starting in 2023, business rates revaluations will take place every three years instead of every five. This will make the regime more responsive to economic changes, the Treasury said.
R&D Tax Relief Changes
Firstly, the list of eligible expenditures will be amended to include data and cloud computing costs.
Second, the rules will be amended to ensure that relief is only given for R&D activity undertaken in the UK.
Data and Cloud Computing Costs
Whilst it is clearly good news that the government will be including these items as eligible expenditure, it is not clear at this stage how exactly these items will be defined for these purposes.
Limiting relief to UK based R&D
Now that the UK has left the EU, the government has clearly decided that the time is right to limit relief to work undertaken in the UK.
Again, the details of the proposal are not yet known but it is probably safe to assume that activity will need to be undertaken within the UK, possibly even by businesses or self-employed individuals that are within the charge to UK tax.
The logic for this proposed change is pretty clear, the UK is paying out relief for work that is actually being undertaken overseas. Although the benefit of the R&D will arise in a UK business, the relief is still subsidising skills development outside the UK.
By restricting the relief to UK activity, the government will be hoping that some of those skills will be imported into the UK. Obviously, there will also be a benefit of a reduction in the cost of the R&D relief.
My worry is that some businesses will find the cost of their R&D activity rising as they struggle to find the required expertise for specialist elements of their R&D within the UK.
Annual Investment Allowance
Remaining on the theme of encouraging investment, the Chancellor announced that the current amount of £1m tax allowance for investing in equipment, would continue past December 21, when it was set to reduce to £200,000. This reduction will be delayed until April 2023, in line with the end of the current 130% super-deduction, announced in March.
Capital Gains Tax on UK property
The deadline for UK residents to report and pay capital gains tax on the sale of UK residential property increases from 30 days to 60 days after completion.
Air Passenger Duty
Plans were announced to introduce a new APD rate of £6.50 per flight on domestic routes, thereby reducing the duty on these flights.
Residential Property Developer Tax
There will be an extra 4% charged on corporation tax for companies earning profits of more than £25m from UK residential property development.
Tonnage Tax
Tonnage tax reforms will reward shipping companies that register in the UK and fly the Red Ensign.
Universal Credit
Encouraging more people out to work, which is good news for some small businesses struggling to find staff, changes to the rate at which UC is lost when working will be reduced.
Alcohol Duty
Currently using 16 different tax bands, the alcohol industry was given some good news of a tax reform limiting it to only 4 bands, based on the volume of alcohol.
Other alcohol-related changes:
- A new small producer relief for smaller/artisanal producers of alcohol products with an ABV below 8.5% with the aim to encourage innovation in products from smaller producers.
- A 5% cut in duty for draft beer to support the role pubs play within the community. The cut will be introduced for draft beer and cider kegs of 40 litres or more to target the savings at pubs and restaurants rather than home drinkers.