Spring Budget 2023:Business changes
Capital investment
With the annual super-deduction due to end before the start of the new tax year, the Chancellor has announced that the Government will introduce a “full expensing” scheme to encourage companies to invest in plant, machinery and technology.
From 1 April 2023 until 31 March 2026, companies across the country will be able to claim back 100% of their qualifying costs. For the next three years, the Government says 99% of companies will be able to immediately reclaim every pound invested.
The Chancellor also said the Government plans to make this measure permanent (if the economy allows) post-2026, adding that the policy will make the UK’s capital allowance regime “the joint most generous” of any advanced economy.
He said: “If the super-deduction was allowed to end without a replacement, we would have fallen down the international league tables for tax competitiveness and damaged growth. I could not allow that to happen.”
R&D tax relief
During the Autumn Statement in 2022, the Chancellor announced measures to reduce fraudulent research and development claims by lowering the amount SMEs can claim in R&D expenditure.
In the Spring Budget, however, Hunt said the Government will introduce a new scheme for loss-making, “R&D intensive” SMEs. Companies that spend at least 40% of their total expenditure on R&D will be considered R&D intensive.
These R&D-focused SMEs will be able to claim a higher payable credit rate of 14.5% rather than the reduced 10% announced in the Autumn Statement.
In practice, this means they’ll be eligible to claim back £27 for every £100 they spend.
The changes are part of a £1.8bn support package for development and investment in the UK’s tech-pioneering companies.
Consultations into the merging of the R&D expenditure credit (RDEC) and SME R&D schemes have now closed and all responses are currently under consideration. The Government says this may still be a possibility come April 2024.
Investment zones
The Chancellor followed up with more details on the investment zones announced in November’s Autumn Statement.
The refocused investment zones programme will focus on 12 growth clusters across the UK, including four across Scotland, Wales and Northern Ireland.
Each English investment zone will have access to interventions worth £80m over five years, including tax reliefs and grant funding.
They will be focused on one of a series of key sectors: technology, creative industries, life sciences, advanced manufacturing and the green sector.
Eight areas in England have been shortlisted for the investment zones – the East Midlands, Greater Manchester, Liverpool, the North East, South Yorkshire, the Tees Valley, the West Midlands and West Yorkshire.
The Chancellor said: “To be chosen, each area must identify a location where they can offer a bold and imaginative partnership between local government and a university or research institute in a way that catalyses new innovation clusters.
“If the application is successful, they will have access to £80m of support for a range of interventions including skills, infrastructure, tax reliefs and business rates retention.”
Hunt also set out plans to invest £200m in local regeneration projects across England and £400m for new levelling-up partnerships.
Creative industry expenditure
Creative industries across the UK will receive continued Government support through reformed tax reliefs and expenditure credits.
Expenditure for high-end TV production will remain at £1m per hour. The Government will also extend the higher rates of theatre, orchestra, and museums and galleries tax reliefs for two further years.
Corporation tax rises as expected
As previously announced, the corporation tax rate will increase from 19% to 25% in April 2023 but with marginal relief for businesses with profits between £50,000 and £250,000.
According to Hunt, only 10% of companies will pay the 25% rate, and the UK has the lowest rate of corporation tax in the G7.
