Taxes

The government will be replacing super deduction tax relief with the three-year “full expensing” regime from April 1, 2023.  

Full expensing allows companies across the UK to write off the full cost of qualifying plant and machinery investment in the year they invest. It can be deducted “in full and immediately” from taxable profits. It is effective from 1 April 2023 to 31 March 2026.

Equipment includes but is not limited to:

• Warehousing equipment such as forklift trucks
• Tools such as ladders and drills
• Construction equipment such as bulldozers and excavators
• Machines such as computers and printers
• Vehicles such as tractors
• Lorries and vans
• Office equipment such as chairs and desks
• Some fixtures such as kitchen and bathroom fittings
• Fire alarm systems

Full expensing is available only to companies who pay corporation tax. Unincorporated businesses cannot claim, but these businesses can claim the Annual Investment Allowance (AIA) which offers the same benefits as full expensing for the investments it covers (up to £1m per year).

The hope is that the scheme will be permanent if conditions allow, The Office for Budget Responsibility (OBR) has said that full expensing will help boost business investment by almost 3.5 per cent in 2024-25 and 2025-26.

This has been introduced to run alongside two other capital allowances:

• The 50 per cent first-year allowance (FYA) for expenditure by companies on new special rate (including long life) assets until March 31, 2026
• The Annual Investment Allowance (AIA) providing 100 per cent first-year relief for plant and machinery investments up to £1m, which is available for all businesses including unincorporated businesses and most partnerships.

Full expensing is viewed as a way of making up for the corporation tax increase of 19 per cent to 25 per cent, which is still going ahead.

What the Budget means for tech - R&D tax credits

The Chancellor announced enhanced R&D tax credits for tech start-ups working specifically in fintech and artificial intelligence in a package worth £1.8bn.

Businesses in the most high tech sectors, including fintech and artificial intelligence, which invest up to 40 per cent of their spending in R&D, will continue to receive an enhanced tax credit worth an extra £27 for every £100 spent.

The Government estimates about 8,000 businesses could benefit, which is about 10 per cent of current R&D tax credit claimants, turning Britain “into a science superpower”. This is good news for the thousand companies in the pharmaceuticals and life sciences sectors and 4,000 in sectors such as AI, machine learning and computer programming.

New tech hubs

Meanwhile, the Treasury has announced a dozen “investment zones”, which will enable businesses operating inside them to benefit from enhanced tax relief and lighter-touch regulations. including the West Midlands, Greater Manchester, the North-East, South Yorkshire, West Yorkshire, East Midlands, Teesside and Liverpool. There will also be at least one in each of Scotland, Wales and Northern Ireland.

The location of these investment zones must show a partnership “between local government and a university or research institute in a way that catalyses new innovation clusters,” Mr Hunt said.

This move to create new tech hubs around universities in England is viewed as help to turbo-charge innovation and promote more equal economic regional growth across the country

Artificial Intelligence

The Intellectual Property Office will clarify rules to help artificial intelligence developers access copyrighted work for their modelling, while digital regulators will test ideas which could smooth the path to market for AI through what Mr Hunt called an “AI sandbox”.

Meanwhile, Mr Hunt launched a £1m annual prize over the next decade to reward the most ground-breaking British AI research. It will be called the Manchester Prize in honour of the world’s first stored programme computer built at the University of Manchester 75 years ago.

Fuel duty

If you have a business that requires you to drive a lot, the soaring fuel costs will have already impacted your business and profitability. The announcement of a 5p a litre cut on fuel came into effect from 6pm on 23 March 2022 and was originally due to end in April, but it will now be kept for another year.

Fuel duty is included in price of petrol and has been frozen at 57.95p a litre since 2011. Whilst motoring organisations had recommended a reduction in VAT as that would have automatically had to be passed on by retailers. However, the passing on of the reduction in fuel duty depends entirely on retailers reducing their prices and not using it as opportunity to take greater profit on every litre sold.

This reduction in fuel duty was the largest cut across all fuel duty rates ever. Combining the fuel cut plus freeze in 2022-23 represents £5bn saving over next 12 months.

Childcare costs

The 2023 budget placed an emphasis on helping people to get back into work. Hunt announced that 30 hours of free childcare will be rolled out for working parents of one- and two-year-olds from April 2024, making returning to work more accessible.

Childcare support will be available upfront for families receiving universal credit. The previous £646 a month cap has been increased to;

• £951 a month for one child (currently £646 a month)
• £1,630 a month for two or more children (currently £1,108 a month)

The government is also increasing the hourly rate for nursery providers from September 2023. The changes to childcare costs are hoped to enable more parents to return to work, supporting the economy. New childminders will be eligible for incentive payments of £600 for new joiners, and £1,200 for those joining through an agency.

Additional help for workers

£63m has been allocated for programmes designed to support retired people over 50 who want to return to work. The programmes will include skills boot camps to help retirees to retrain, making it easier for them to access the workforce.

To help relieve the labour shortages in the construction sector, immigration rules will be eased for five roles within the industry.

The introduction of a scheme called Universal Support will enable people with disabilities to work without the threat of losing their benefits.

The new measures aim to remove barriers preventing people who want to work from seeking employment. This should mean small businesses have access to a wider pool of potential employees and suffer fewer staff shortages in the longer term.

There’s more good news for workers as the tax-free allowance for pensions is set to rise for the first time in 9 years, from £40,000 to £60,000. On the fuel front, duty has been frozen, which may help businesses keep on top of fuel costs.

Energy price cap

Although the economic crisis continues to make doing business a challenge, the energy bill price cap increase will be going ahead this April. Instead of a fixed price, businesses will receive a discount on wholesale gas and electricity prices.

Despite the ongoing economic challenges and cost of doing business crisis, the energy bill price cap increase still going ahead in April. The Energy Bills Discount Scheme will end on 31 March 2024. Typical energy bills will be capped at £2,500 a month for three more months (April, May, and June). This is estimated to save a typical household £160 a month from April 2023.

Tax on draught beer frozen

The freezing of fuel duty on average-strength draft beer means hospitality businesses will pay less tax on a pint. From 1 August, the duty on draught beer will be up to 11p lower than the relief for supermarkets.

Autumn statement takeaways

In the absence of big changes this time around, here is a reminder of the key tax takeaways from last year’s Autumn Statement, all of which come into effect from April 2023:

Reduction of additional rate tax threshold

The additional rate threshold reduces from £150,000 to £125,140 exposing more individuals to the 45% tax rate.

Increase in Corporation Tax

The main rate of Corporation Tax increases from 19% to 25% for businesses with profits exceeding £250,000. Businesses with profits under £50,000 will continue to pay at 19% and those in between will be subject to a marginal rate of 26.5% on profits falling between those upper and lower limits.

About the author

Alison Wild BCom (Hons), MAAT, MATT, Taxation Technician is a highly respected industry professional who has been working with and advising SMEs in areas including tax, pensions, insurance and marketing for over 25 years. She is a member of the Association of Accounting Technicians (AAT) and Association of Tax Technicians (ATT) and also has over 20 years' experience as a residential landlord.