Business Tax

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Capital Allowances

• Full Expensing (FE)

This is introduced to replace the Super-deduction relief which is coming to its scheduled end on 31 March 2023. 

FE will apply to companies and will allow them to deduct 100% of their capital expenditure on new ‘general pool’ items such as equipment and plant and machinery, with no limit on the amount of expenditure.

Like the Super-deduction, the FE allowance will allow companies to obtain a 25p tax saving for every £1 invested.  However, this comparable only applies if the company is subject to the 25% Corporation Tax rate which will apply from 1 April 2023 to companies with profits above £250,000:

• Super-deduction gave 130% relief x 19% Corporation Tax rate = 25%
• FE gives 100% relief x 25% Corporation Tax rate = 25%

FE will apply to expenditure incurred from 1 April 2023 until 31 March 2026, however, the chancellor announced his intention to make the relief permanent when the economy allows.

FE will only apply to new and unused plants and machinery and will not apply to cars, assets acquired by gift or assets bought to lease to someone else.

• 50% First Year Allowance (FYA)

The 50% FYA was introduced for companies alongside the super-deduction relief and was also due to end on 31 March 2023.  However, the chancellor has now extended the availability of FYA until 31 March 2026.

‘Special rate’ expenditure (e.g. Integral features & long life assets) don’t qualify for FE but will qualify for 50% FYA instead.  The same conditions that apply for FE will apply for FYA, therefore the expenditure will need to be on new unused items and will not apply to cars, assets acquired by gift, or assets bought to lease to someone else.

Again, the chancellor stated his long-term ambition is to make the 50% FYA permanent.

• Annual Investment Allowance (AIA)

As unincorporated businesses cannot claim the FE they can instead claim AIA which gives 100% relief on the cost of eligible plant and machinery up to £1 million. The annual limit of £1 million had been set to reduce back to £200,000 from 1 April 2023 however the mini budget in 2022 announced that the £1 million limit will become permanent from 1 April 2023 instead.  Furthermore, AIA is available on second-hand assets and those bought to lease to someone else.

Research & Development

A new R&D scheme has been introduced with effect from 1 April 2023.

The scheme is targeted specifically at loss making ‘R&D intensive’, small and medium sized enterprises (SMEs).

• Qualifying R&D expenditure must be at least 40% of total expenditure to qualify as an ‘R&D intensive’ SME

Qualifying companies will be able to claim £27 for every £100 of expenditure.  In contrast, ‘non-intensive’ R&D loss making companies can claim £18.60 for every £100 spent on qualifying R&D.

Meanwhile, tax relief for larger companies spending on R&D will increase with the rate for R&D expenditure credit increasing from 13% to 20% from 1 April 2023, as previously announced.

Investment Zones

12 new Investment Zones are to be established across the UK which can benefit from specific tax reliefs such as enhanced capital allowances and relief from stamp duty land tax, business rates and employer NIC. 

The confirmed locations include the West Midlands, Greater Manchester, the North-east, South Yorkshire, West Yorkshire, East Midlands, Teesside and Liverpool. 

Employers

• In Summer 2023 the government will consult on informal and ad hoc flexible working to understand arrangements between employees and employers.
• The government will also consult on ways to incentivise the take up of occupational health provisions via tax reliefs.
• The government intends to look at ways to simplify and improve employee Share Incentive Plans (SIPs) and Save as you Earn (SAYE) plans.
• The Chancellor also announced new measures to simplify the grant of Enterprise Management Incentive (EMI) share options. 

Individuals

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Income Tax rates and thresholds

There were no changes to previously announced Income Tax and National Insurance Contribution thresholds or rates.

Pensions

• The annual allowance for pension contributions will increase from £40,000 to £60,000 from 6 April 2023.  Individuals remain able to carry forward unused annual allowances from the previous 3 tax years. 
• The lifetime allowance charge will also be removed from 6 April 2023.  The lifetime allowance is the maximum you can hold within a pension during your lifetime and its current limit is £1.073 million.  

Charities

Charities located outside of the UK will no longer qualify for UK tax relief with effect from April 2024.

Childcare

Working parents in England will be able to access 30 hours of free childcare for 38 weeks of the year when their child is age 9 months old until they start school.

The free childcare places will be rolled out in stages as follows:

• From 1 April 2024, all working parents of 2-year-olds can access 15 hours per week of free childcare
• From 1 September 2024, all working parents of children aged 9 months to 3 years old can access 15 hours per week of free childcare
• From 1 September 2025, all working parents of children aged 9 months to 3 years old can access 30 hours per week of free childcare

(Under existing rules working parents of children aged 3 years old can already access 30 hours per week of free childcare)

If parents need childcare for more than 38 weeks of the year the entitlement to free hours can be spread over a longer period.

Childcare providers who deliver the free hours will be supported by an increase in the payment rate from the government and also, increased flexibility as restrictions are relaxed on staff to child ratios in line with comparable countries.

Working parents will be further supported by the government funding local authorities to increase the availability of wrap around care provided by schools.

Indirect Taxes & Duties

• Fuel Duty will be frozen and a 5p reduction will be maintained for another year.

Alcohol duty rates will follow the new previously announced system from 1 August 2023, which sees higher duty charged according to alcohol content. 

• The chancellor today announced a new ‘draught relief’ which will apply to the sale of draught products in pubs (beer, cider, wine etc) ensuring a discount on the cost of a pint.

Other measures

• The energy price guarantee for households will continue at the current rate for a further three months to June 2023.  The price guarantee limits the typical household energy bill to £2,500 per annum.
• The government continues to target promoters of tax avoidance schemes and will consult on the introduction of a new criminal offence for those who fail to comply with a legal notice to stop such promotions.

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