The Autumn Statement: top implications for businesses

The Chancellor’s Budget has all but reversed the announcements made by his predecessor just eight weeks ago, looking for stability and with an eye to future growth through innovation.

The Chancellor’s aim is to minimise its length and depth. Only time will prove whether that will be a success. His announcements look to encourage growth and innovation, and not the support businesses have seen in recent years. Changes to the R&D tax credits will be closely watched as will plans to turn the UK into a new ‘Silicon Valley’.

Here are our top implications for businesses and their owners.

Research & Development

As part of this reform, the Chancellor announced a change to the headline rates of R&D relief in an effort to curtail what the Government sees as ongoing misuse and abuse of the generous scheme.

Currently Small and Medium sized entities (SME’s) obtain an additional 130% deduction on their qualifying R&D spend resulting in a total tax deduction of 230% of the amount spent. Where the company was in an overall loss position, it could surrender these losses for a cash repayable credit equivalent to 14.5% of the loss surrendered.

Under the changes, which will take effect from 1 April 2023, the headline 130% rate will be reduced to 86% and the surrender amount will be reduced to just 10%. The net effect is the reduction in the overall repayment from HMRC from 33.35% to 18.6% of expenditure, resulting in a circa 45% reduction.

Conversely, the RDEC scheme which primarily targets larger businesses and is overall less generous than the SME scheme, will be increased from the current 13% rate to 20%.

The changes are likely to have a negative impact on smaller companies more so than larger ones and it will be interesting to see how these feed into the Government’s stated objectives of promoting innovation and investing in R&D.

Employment allowance

The employment allowance will be kept at the current amount of £5,000, ensuring the level at which businesses start to pay class 1 National Insurance will remain the same in the foreseeable future.

VAT

The Autumn Statement confirmed that the current VAT registration threshold of £85,000 will be maintained until April 2026.

Furthermore, import tariffs will be removed from over 100 goods for two years to help ease the current macroeconomic pressures faced by UK businesses.

If you would like further information on how the Autumn Statement will affect your business, please get in touch with our team.