Key Announcements Aimed at Stimulating the Economy

Delivered in November by the Chancellor, Jeremy Hunt, the ‘Autumn Statement for Growth’ included a number of measures aimed at stimulating the economy.

What will these changes include?

• Full expensing for companies will be made permanent
• The removal of barriers to critical infrastructure by reforming the UK’s inefficient planning system and speeding up electricity grid connection times
• Making £4.5bn available in strategic manufacturing sectors such as auto, aerospace, life sciences and clean energy from 2025 for five years
• New investment zones
• From April 2024, firms bidding for government contracts over £5m will have to demonstrate that they pay their own invoices within an average of 55 days, tightening to 45 days in April 2025 and then 30 days in future years
• Changes to Research and Development Tax Relief.

What are the main tax changes for businesses?

The main tax changes affecting businesses can be summarised as follows:

• Capital Allowances: The full expensing rules were initially introduced for companies on a temporary basis in respect of expenditure incurred on or after April 1, 2023 but before April 1, 2026. Full expensing provides a 100% write-off on qualifying expenditure on most plant and machinery (excluding cars) as long as it is unused and not second-hand. Similar rules apply to integral features and long-life assets with a 50% write off on qualifying costs. The chancellor announced that full expensing will now be made permanent.

• Freeports and investment zones: Freeports and investment zones both allow businesses in specific locations to benefit from a number of reliefs including stamp duty land tax relief, enhanced capital allowances, structures and buildings allowances, and secondary Class 1 NIC relief for eligible employers. Both regimes were originally run for five years but will now be run for 10 years.

•  R&D tax relief: The existing Research and Development Expenditure Credit (RDEC) and SME schemes will be merged, with expenditure incurred in accounting periods beginning on or after April 1, 2024 being claimed under the merged scheme. The rate under this scheme will be set at the RDEC rate of 20%. This will be treated as an ‘above the line credit’ so the effective credit after deducting 25% corporation tax will be 15%. The notional tax rate applied when calculating repayable credits to loss-makers in the merged scheme will be lowered from 25% to 19% to result in an effective credit of 16.2%. However, a more generous ‘SME intensive scheme’ will remain available for SMEs whose R&D expenditure constitutes at least 40% (for expenditure incurred on or after April 1, 2023) or 30% (for accounting periods beginning on or after April 1, 2024) of total expenditure. Under this scheme companies will be able to claim an additional deduction from profits of 86% on qualifying expenditure. This results in an effective tax saving of 46.5% for profit making companies. Where the R&D expenditure and enhancement creates a loss then the loss related to the R&D claim can be surrendered for a 14.5% tax credit. This results in an effective tax credit of 26.9% for loss making companies.