Last week, Chancellor Jeremy Hunt delivered his Autumn Statement, potentially the last one before the next UK general election. The new changes were a little lighter on tax content than anticipated, but due to a decrease in inflation and borrowing levels being lower than projected, the Chancellor was able to implement certain measures aimed at tax savings.
Many had predicted measures to encourage business growth and they have not been disappointed. Below is a summary of the key measures relevant to our business clients.
Firstly, ‘full expensing‘ will be permanent instead of ending on March 31, 2026. This allows companies to claim tax relief for 100% (or 50% in certain cases) of qualifying capital expenditure within the same fiscal year. While this benefits larger companies, those with annual qualifying capital spend under £1 million already have a 100% ‘Annual Investment Allowance’ (AIA) providing similar advantages. Unlike full expensing, the AIA is also accessible to unincorporated businesses.
As pledged, additional reforms to research and development (R&D) reliefs are scheduled to be implemented in April 2024. The existing two schemes will be consolidated into a single framework with a technical document from the Government detailing essential elements, such as contracted out R&D, subsidised expenditure, externally provided workers, and the ‘Step 2’ reduction. The note also delineates extra relief for loss-making R&D intensive small and medium-sized enterprises, defined as those with qualifying R&D expenditure constituting at least 40% of their total expenditure.
The 75% business rates relief for retail, hospitality, and leisure businesses in England is extended until March 31, 2025. This relief, up to £110,000 per business yearly, covers shops, restaurants, hotels, gyms, cafes, pubs, cinemas, and music venues. The business rates multipliers remain unchanged until March 31, 2025. Separate announcements are expected for Scotland, Wales, and Northern Ireland due to differing business rates rules.
Starting from January 6, 2024, the Class 4 National Insurance Contribution (NIC) on business profits between £12,570 and £50,270 will decrease from 9% to 8%, saving up to £377 in 2024–25. Additionally, the flat-rate Class 2 NIC of £3.45 per week will be abolished from the same date. Notably, while there is a 2% reduction in employee NIC, the employer NIC will remain at 13.8% in 2024–25.
Following consultation, the cash basis regime is set to be extended thanks to the removal of i) the turnover thresholds for businesses, ii) the £500 limit on interest deductions and iii) the restrictions on using loss relief. Furthermore, the cash basis will be now the default method of calculating taxable profits with an opt-out for accrual basis.
The construction industry scheme (CIS) is also undergoing reform, with draft legislation set to be published to include compliance with VAT obligations in the gross payment status compliance test and to exclude from the scope of the CIS the majority of payments from landlords to tenants.
Finally, the government will extend the operation of the Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) scheme to 6 April 2035, continuing the availability of income and capital gains tax reliefs for investors in qualifying companies and VCTs.
Please contact a member of the WellTax team if you would like to discuss anything in further detail.
