Autumn Budget announcement is a measured approach - Derek Gemmell

With fanfare, The Chancellor delivered a Budget increasing public sector spending by £150 billion but what was the effect on the private sector?
Derek GemmellDerek Gemmell
Derek Gemmell

Companies are already planning for Corporation Tax (CT) rising to 25 percent from April 2023 on profits greater than £250,000.

No further rate increases on CT were announced. To this end, companies are encouraged to take advantage of the tax super deduction on the cost of new plant and machinery providing a deduction against taxable profits equal to 130 percent of the cost of the assets.

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Additionally, 100 per cent capital allowances on the first £1 million of expenditure on plant and machinery was extended to April 2023.

Residential Property developers with profits greater than £25 million per annum will be smarting following the introduction of a new four per cent tax on annual profits.

Applying from April 2022, this new tax to fund dangerous cladding replacement creates a further funding requirement and complexity for residential property developers and will undoubtedly prevent some projects progressing. Advice will be needed on its operation before introduction.

The Chancellor continued his support for companies involved in innovation with a package of government support to keep the UK at the forefront of global innovation.

As part of this, Research & Development (R&D) tax relief available to companies has been extended to include expenditure on cloud computing and data costs for the first time.

Additionally, only expenditure on R&D activities undertaken within the UK will qualify for R&D tax relief from April 2023 aimed at preventing the UK subsidising innovation that does not benefit the UK.

The UK’s drinks industry will be able to access this innovation support and at the same time they will have to consider the new alcohol duties which will be applied dependent on the strength of the drinks produced.

The arts and culture sector has been provided further support through the doubling of Creative Tax Reliefs aimed at supporting museums, galleries, orchestras and the like to create new productions.

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The urge to raise Income taxes was resisted, with rates remaining at currently announced levels together with the existing pension reliefs.

The already announced Health and Social Care Levy will see an additional 1.25 per cent of Employee NIC being suffered on employment income with employers also paying an additional 1.25 per cent of Employer NIC.

This levy, applying from April 2022, will also be suffered by those receiving dividends and earning income from self-employment.

Covid support for the hospitality industry will continue with a 50 per cent cut in business rates for 12 months. Additionally, a raft of changes to the determination of business rates have been announced.

It is also worth noting that the expected digital tax aimed at online retailers such as Amazon was not introduced.

This is likely to be introduced in the future as pressure to fill the tax void vacated by retailers increases.

We await the detail of some of these changes to determine how in practice they will affect companies, individuals and other businesses.

Derek Gemmell is a partner and head of innovations tax at Anderson Anderson & Brown

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