Autumn Statement 2023
Research and Development
It is no surprise within the R&D community that today’s Autumn Statement confirmed the merging of the SME and RDEC scheme for accounting periods beginning on or after 1 April 2024. The government are hoping this change will align the qualifying rules and simplify the tax system to provide greater support for UK companies moving forward.
To support loss making companies under the new single scheme, the tax credit will be taxed at a reduced rate of 19%, which equates to 16.2p per £1 of qualifying expenditure.
For R&D Intensive SMEs (which were introduced in the Autumn Statement last year) the intensity threshold has been reduced from 40% to 30% for accounting periods beginning on or after 1 April 2024, with the expectation that this will extend the relief to an additional 5,000 SMEs. Furthermore, to minimise uncertainty and to simplify its application, a year of grace period has been introduced, allowing these companies to continue to receive the relief should they dip under the 30% threshold.
A welcome introduction from 1 April 2024 is that R&D claimants will no longer be able to nominate a third-party payee to receive their R&D tax credit payments. This means that in the majority of cases, the R&D relief will be paid directly to the company that’s made the claim.
Finally, while the Treasury concluded that the announcement of the merged scheme signifies the conclusion of the review, they did recognise that further action may be required to reduce the unacceptable high levels of non-compliance in the R&D relief, with HMRC due to publish a compliance action plan in due course.
Capital Allowances Updates
We heard in the Autumn Statement that the Full Expensing scheme, originally due to be in place temporarily until 2026, has been extended indefinitely. This is great news as the Full Expensing first year allowance is an excellent incentive for capital investment in the UK, at a time when development costs are high. Whilst there are restrictions to full expensing (as mentioned in our previous article, “AIA vs Full Expensing”), the £1,000,000.00 Annual investment Allowance continues to help boost full expensing from 50%.
Also, prior to budget day, we received the welcome news that Investment Zone program has been extended from 5 to 10 years. Furthermore, following the previously announced South Yorkshire and Liverpool Investment Zones, West Yorkshire has also been added to the list. It’s great to see the additional regions able to benefit from the Investment Zone reliefs.
Investment Zones include a number of benefits to Stamp Duty, Business Rates, and of course capital allowances. Much of the plant & machinery expenditure incurred as part of a capital project within an investment zone will give rise to unlimited first year allowances, and structural spend receives major acceleration with Structures & Buildings Allowance deduction arising over 10 years instead of 33.
We’ll take a closer look at Investment Zones in a future YesTax article.
Patent Box
There has been no changes to the Patent Box tax relief rules so companies will continue to pay a reduced corporation tax rate of 10% on profits deriving from qualifying intellectual property, i.e., 60% lower than the current main rate of corporation tax.
Creative Industries
Changes to the Creative Industries tax reliefs, including the amalgamation of the film, high end, animated and children’s TV tax reliefs into one audio visual expenditure credit, were announced back in the spring and are expected to be implemented in early 2024. The Chancellor also announced that films and TV shows will get more financial support to create their visual effects in the UK.
If you have any questions regarding today’s announcements, please get in touch.
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