Autumn Statement 2023: Companies and other businesses
While the Chancellor provided relief in the form of National Insurance savings, announced changes to simplify the R&D tax relief schemes and made capital allowance full expensing permanent, which are welcome. For most businesses, the Autumn Statement did not go far enough to support them to invest, innovate and grow.
What was noticeably absent from the Chancellor’s statement was any additional tax incentives to encourage further growth and investment in sustainability and green initiatives.
If you require further information or support, get in touch or speak to your usual Crowe contact.
Our tax specialists identify the key tax changes and outline practical support for you and your business.
Two Research and Development tax credit schemes merged
Author: Stuart Weekes, Partner, Corporate Tax
Following a 2021 government review to enhance competitiveness, the UK will merge its two research and development (R&D) tax credit schemes from 1 April 2024. The national tax rate restriction for loss making companies will decrease from 25% to 19%.
The intensity threshold for R&D intensive small and medium-sized enterprises (SMEs), will reduce from 40% to 30% and companies will have a year of grace to continue to be treated as R&D intensive if they drop below the 30% threshold. This is expected to benefit 5,000 extra SMEs.
Despite these changes, the government is still concerned about non-compliance in R&D reliefs and HMRC will publish an action plan to tackle perceived abuse.
Thanks to the reduction in notional tax rate, Loss-making R&D companies will experience a 6% improvement in cash flow, as a greater portion of the research and development expenditure credit (RDEC) credit becomes repayable in the claim year.
Companies claiming R&D tax reliefs face uncertainty about how HMRC will apply it's own guidance on what it determines a qualifying project.
The few R&D intensive companies impacted by the 30% threshold changes will welcome the news. However, there is still much uncertainty around the projects that HMRC believe qualify – it is disappointing HMRC did not extend the advance approval scheme to provide companies with more certainty prior to making a claim.
Back to top: Explore all Autumn Statement measures announced
Capital Allowances – Full expensing and permanent reliefs available
Author: Stephen Metheringham, Director, Capital Allowances
As expected, 100% full expensing (main rate pool) and 50% First Year Allowance (FYA, special rate pool) for qualifying plant and machinery has been made ‘permanent’ (originally a temporary measure for expenditure incurred on qualifying plant and machinery between 1 April 2023 and 31 March 2026).
The change makes permanent relief available for qualifying capital expenditure on plant and machinery in the year the expenditure is incurred. The Chancellor announced that “the change provides one of the most generous capital allowance provision in the world”.
For qualifying expenditure incurred on or after 1 April 2023, companies can claim:
- a 100% FYA for main rate expenditure – known as full expensing
- a 50% FYA for special rate expenditure.
Full expensing will be available for expenditure on new qualifying plant and machinery, however some expenditure will not qualify for FYAs. Pooled historic expenditure continues not to qualify.
While this is great news for companies and provides much needed certainty not afforded by super-deduction and temporary full expensing measures, it is still not available to individuals who will need to rely on the £1 million Annual Investment Allowance (AIA).
Consideration should be made around future plans on disposal of plant and machinery as special disposal rules apply after claiming full expensing, and standard pooling and AIA may be an option.
While second hand property acquisitions do not apply, new construction, refurbishment and fit-out expenditure may qualify for full expensing. On property disposals where qualifying plant and machinery fixtures have been full expensed, it is important to receive the correct advice to consider the use of the CAA01/s198 election provisions to prevent balancing charges.
LLPs and partnerships do not benefit from the full expensing, but corporate members will be able to claim it, if appropriate. LLPs and partnerships without corporate members can continue to claim the AIA.
Back to top: Explore all Autumn Statement measures announced
