With the main rate of corporation Tax at its highest in more than a decade and the income tax bands for individuals being frozen until 2029, the increased tax burden is being felt by businesses and business owners across the UK.
Today the chancellor announced a package of tax measures, with the clear intention of incentivising business investment and economic growth. However, only time will tell if the measures go far enough to close the 1.7 per cent gap in business investment between the UK and some other G7 countries.
Few of the announcements for UK businesses in the Autumn Statement should come as a surprise, given the heavy speculation over recent weeks. However, confirmation that the full expensing regime for companies will remain a permanent measure, allowing 100 per cent or 50 per cent tax relief for certain asset acquisitions, will likely be a welcomed measure.
This will provide certainty for capital intensive businesses, whilst also allowing them to mitigate some of the impact of the increased corporation tax rate. While proudly announced by the chancellor as the biggest business tax cut in modern British history, the majority of companies with capital spend of less than £1m per annum will likely not benefit, as the existing annual investment allowance already provides for full relief in the year of acquisition.
The vast number of companies will therefore be unaffected by the full expensing rules.
Another highly anticipated announcement impacting UK companies was confirmation that the research and development tax relief regimes would be merged into a single scheme. The new scheme will take effect from April 1, 2024, meaning small and large businesses will be subject to the same regime, akin to the existing large company regime.
Most small and medium businesses will now not only have to get used to the additional administrative requirements to make an R&D claim, but they must also get to grips with an entirely new regime.
Companies will also have to face the cost of the national living and minimum wage increases; the largest single increases ever announced.
While there were no major surprises in yesterday's Autumn Statement, could the government have gone further to help all UK businesses? The full expensing regime should incentivise capital investment for the largest UK companies, keeping those businesses happy while achieving the government’s growth objective.
However, small and medium enterprises and those in the services sector may be underwhelmed by the tax measures announced for them.
Bethany Barker is an associate director at RSM
