On Wednesday, Jeremy Hunt addressed the UK from Parliament and delivered the Autumn Statement, outlining a number of measures which will impact our business and clients.
The statement was, as a whole, positive, with Hunt demonstrating he knew his audience by introducing a number of crowd-pleasing measures aimed at fuelling economic growth, such as freezing alcohol duty increases once again. In a similar theme, he unveiled a reduction in national insurance from 12% to 10%, aimed at making life easier for individuals, small businesses, and the self-employed. For RCK and its clients, a number of additional measures were introduced, including amendments to Business Rates, Capital Allowances and R&D, each of which are examined in further detail below.
Business Rates:
A positive highlight in Hunt’s statement was the extension of Business Rates relief for a further year. This move freezes the small Business Rates multiplier, shielding businesses from potential real-terms cost increases. Hunt stated ‘all large businesses start as small businesses’, emphasizing the importance of nurturing small businesses and subsequently extended the 75% relief on business rates (up to £110k) for the retail, hospitality, and leisure sectors, further supporting sectors still recovering from the lingering effects of the pandemic. The higher rate multiplier hasn’t been frozen, but we should look to the positive that the small business multiplier has been frozen, impacting businesses who need the freeze most. Through this freeze the small rate multiplier will deliver a real time saving of £1.7bn to those who fall into this bracket and keeping the 75% RHL relief will benefit the sector to the tune of £2.35bn.
Capital Allowances:
A major win for businesses was announced on Capital Allowances. Hunt responded to calls by making full expensing a permanent fixture, which has been continued from its former expiry date in 2026. Prior to this, there was a strong pressure on the government to consider the adoption of full expensing or a similar initiative. The 100% upfront tax deduction for plant and machinery expenditure was hailed by Hunt as ‘the largest business tax cut in modern British history’ and this generous move simplifies the framework and brings about substantial cash flow advantages for investments in plant and machinery.
As full expensing is not going anywhere, it means that it is now more important than ever for companies to get their Capital Allowances claims correct, particularly where those companies are purchasing buildings and/or carrying our complex development schemes. When claiming, it is important to correctly classify the claim as either buildings or plant and machinery as through this differentiation the client tax relief saving has the ability to move from 3% to 100%.
R&D:
The formalization of the merge of the R&D SME scheme and the large business scheme planned for April 2024 was revelated in the Autumn Statement. Despite already being on the radar for those who closely followed the topic, this new tax relief format, which has amalgamated existing schemes, has now gained much wider attention. There is speculation that the launch of this merge will be delayed but so far all announcements speak to pacing towards that date as on target. At present we have been provided with high level guidance which is expected to increase the benefit that large companies are receiving, whilst also reducing the benefit that small companies are receiving, with the overall aim being simplification for both groups. We view this as likely to result in faster processing and hope that this will lead to a reduction in fraud and error, as this is mostly associated with the SME company scheme. Although a win, this is the fair and right thing to do and this moves legislation in line with common sense, rewarding R&D investment.
With this transition, a greater amount of companies are likely to see the benefit, especially businesses who are spending a significant amount of time doing R&D, making the scheme accessible to more companies. Ironically, the main objective of this integration was to simplify claiming R&D tax relief, however, in reality, the new format adds a layer of complexity and poses the opportunity for increased confusion from claimants regarding which scheme to claim under. If a company are on the borderline of the cut off from one scheme to another, for example, spending 31% on R&D, when the merge is onboarded, claims could be rejected due to incorrect scheme selection if entered in the more generous scheme without meeting the qualifying threshold. For example, companies may assume a spend in R&D of 31% and in reality spent 29%.
Former Chancellor, Lord Philip Hammond comments, “In a difficult fiscal situation, the Chancellor has rightly chosen to use some of his firepower to support businesses, and especially small businesses. The welcome announcement that the 100% expensing regime will be permanent, and the continuation of various rates reliefs, together with the signals that previously announced changes to the R&D tax credits scheme will go ahead, all point to increased need for good and accurate advice to ensure that businesses benefit from the reliefs that are intended for them.”
We look forward to seeing these schemes implemented and the opportunity to generate even more tax relief for our clients. Navigating the evolving landscape of tax and legislation is our expertise. It is for this reason and peace of mind, that we advise working together with an advisor, such as RCK, whose team are clued up on the intricacies of the schemes and also on the most up to date guidance from HMRC. Whether it’s R&D, Capital Allowances, Business Rates, or Claim Resolution Services, we are well-equipped to handle these changes.
Please reach out to utilise our expertise, and to speak to one of our team.
Read the full Autumn Statement announcement here.
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