Corporation Tax

Despite all the lobbying the corporation tax increase to 25% from 19% due in April 23 is still to go ahead. The Chancellor’s argument is that this only applies to 10% of businesses as relates to profits above £250,000 and still makes the UK one of the lowest tax regimes in the G7.

However, marginal rates apply to increase the tax rates from £50,000 and therefore a lot more business will be paying a lot more than the current 19%.

Capital Allowances

A new ‘full expensing’ relief has been announced from 1 April 2023 to 31 March 2026 for qualifying plant and machinery which is included in the main pool. A 100% of the initial cost will be allowed for tax purposes.

The new relief replaces the ‘super-deduction’ relief which comes to an end at 31 March 2023, where 130% relief was given for qualifying plant.

We were hoping for an extension of the super-deduction as this gave more incentive to businesses to investment. With the ‘Annual Investment Allowance’ of £1 million still in place which effectively gives 99% of business 100% of relief for qualifying plant, it is difficult to see how this new relief will benefit smaller and medium sized businesses.

In addition a new 50% first year allowance can be applied to the special rate pool which currently attracts a writing down rate of 6%. However, the annual investment allowance can also be applied to this pool therefore potential benefit seems limited to the majority of businesses.

Tax Reliefs

• Audio-visual tax relief – film, TV and video games tax reliefs will be reformed to become expenditure credits instead of additional deductions from 1 April 2024

• Theatre tax relief, Orchestra tax relief and Museums and galleries exhibitions tax relief – previously announced an extension of these reliefs following Covid, it has been announced that the higher rates will stay in place for a further two years

• R&D intensive SMEs – from 1 April 2023 a higher rate of relief for loss making SMEs where qualifying R&D expenditure constitutes at least 40% of total expenditure

• R&D Consultation – Previously announced a consultation on R&D tax relief which closed on the 13 March, the proposal is a merged scheme from April 24

Overall with the announcements made today, it is difficult to see how the measures will encourage most business to invest more to create the growth the Government is looking for.

Read more about our services for businesses here. More info can be found on the HMRC website.