Autumn Statement: BUSINESS CHANGES
BOLSTERING SUPPORT
The Autumn Statement intends to bolster British businesses of all sizes to eliminate investment barriers and close the productivity gap with other G7 nations.
The long-view is to unlock £20bn in additional business investments annually for the next decade. The plan is set to “reward hard work” and includes 110 growth measures for businesses.
Here are a few of the headline announcements.
FULL EXPENSING FOR BUSINESSES
Hailed as a key feature of what the Chancellor called “the largest business tax cut in modern British history,” one of the most significant business announcements was Hunt’s decision to make the full expensing scheme permanent.
Full expensing provides 100% first-year relief to companies on qualifying main rate plant and machinery investments, including IT equipment. Initially introduced in the Spring Budget 2023, the scheme was due to expire in March 2026.
The Government predicts this will unlock an additional £14bn in investment over the OBR’s forecast period, helping to drive sustainable economic growth.
BUSINESS RATES SUPPORT PACKAGE
A £4.3bn business rates support package over five years was announced. This includes freezing the small business multiplier for the fourth consecutive year and extending Retail, Hospitality and Leisure (RHL) relief to continue supporting vulnerable businesses.
This business rates package is part of a broader effort to invest an additional £20bn in business per year over the next decade.
The main features of this measure include:
Extended relief for hospitality and retail: The package extends a 75% business rates discount for retail, hospitality and leisure businesses for an additional 12 months, offering relief up to £110,000. Despite warning that support measures cannot continue indefinitely, the Chancellor said the extension would save the average pub about £12,800 annually.
Freezing the small business multiplier: The small business multiplier is frozen for another year, aiding vulnerable businesses. However, the standard business multiplier will see a 6.4% increase, which could put more pressure on consumer prices and inflation.
Additional measures: The statement also includes a freeze on alcohol duty.
PENSION REFORMS AND INVESTMENT
The Autumn Statement includes pension reforms to unlock £75bn of financing for high-growth companies by 2030.
These reforms aim to streamline the pensions market by encouraging the consolidation of pension schemes. This move anticipates that most savers will be part of large schemes, potentially exceeding £30bn by 2030.
For businesses, this translates into a more efficient, cost-effective pension system. Pensions will include a stronger focus on private equity, injecting more capital into businesses.
INVESTMENTS IN R&D AND INNOVATION
Hunt announced his plans to invest over £750m in research and development (R&D) to maintain the UK’s leadership in science and technology, including substantial funding for discovery fellowships and business innovation.
Meanwhile, the extension of the enterprise investment scheme (EIS) and venture capital trusts until 2035 ensures continued support for start-ups and SMEs.
SUPPORT FOR SMES
The Chancellor’s Statement also included several measures to bolster the growth of SMEs.
1. Freezing small business rates: The Government continues its support by freezing the small business rates multiplier, reducing operational costs for SMEs.
2. Addressing late payments: Stricter payment timelines for bidders on large Government contracts are being introduced to alleviate cashflow issues caused by late payments, a common challenge for SMEs.
3. Enhancing digital adoption and skills: Expanding the ‘Made Smarter’ program and the ‘Help to Grow’ initiative will assist SMEs in adopting digital technologies and enhancing management skills crucial for boosting productivity and growth.
4. Supporting self-employed individuals: Tax cuts for the self-employed, including a reduction in Class 4 NICs and the abolishment of Class 2 NICs, are set to benefit around two million people.
5. Clarifying tax deductibility for training: HMRC will update guidelines on the tax deductibility of training costs for sole traders and the self-employed, clarifying what counts as an eligible business expense.
R&D TAX RELIEF REFORMS
The Autumn Statement 2023 ushered in significant reforms to R&D tax relief to foster innovation across the business landscape.
From April 2024, the current R&D expenditure credit (RDEC) for larger businesses and the SME R&D scheme for smaller enterprises will merge into one scheme. This will reduce the tax rate for loss-making companies from 25% to 19% and lower the threshold for additional support from 40% to 30%, expanding eligibility to about 5,000 more SMEs.
Companies fluctuating below the 30% threshold will also receive a one-year grace period, allowing more businesses to become classified as ‘R&D-intensive’. These reforms are expected to provide an additional £280m in relief annually by 2028/29.
However, it’s currently unclear which companies will benefit most from the consolidation of the two schemes: SMEs or larger businesses.
CLIMATE CHANGE AGREEMENT SCHEME EXTENSION
Chancellor Jeremy Hunt also discussed the UK’s commitment to energy security and achieving net zero. Achieving this will include significant public and private investment in low-carbon energy.
To support this transition, the Government is allocating £185m through the Industrial Energy Transformation Fund for energy-efficient technologies and offering around £300m yearly in tax relief under the new Climate Change Agreement scheme.
SECTOR-SPECIFIC ANNOUNCEMENTS
Numerous sector-specific announcements also centred on manufacturing, green industries, digital technology and AI, life science and the creative industries.
ADVANCED MANUFACTURING
Acknowledging the crucial role of advanced manufacturing sectors, the Government plans to invest £4.5bn in the automotive, aerospace, life science and green industries.
DIGITAL TECHNOLOGY AND AI
Substantial investments in artificial intelligence (AI) and digital technologies will help unlock domestic computing power for AI R&D.
LIFE SCIENCES
Life science businesses will receive increased funding for clinical trials, manufacturing investments in life sciences and genotyping.
CREATIVE INDUSTRIES
New funding and enhanced tax incentives for creative businesses, particularly
for the visual effects sector, will be introduced to help grow the industry. This includes focusing on film and high-end TV production.