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Autumn Statement 2023: GrowthBuilders response

The Chancellor summarised the backdrop to the Autumn Statement 2023 with details of the Office for Budget Responsibility forecasts for economic growth. With inflation down from a peak of 11% last Autumn to 4.6% at the end of October, the OBR forecast that inflation will fall to 2.8% by the end of 2024. Whilst there is no recession, growth forecasts remain subdued with 0.7% growth in 2024 and 1.4% growth in 2025.

The Chancellor put forward a package of tax measures aimed at strengthening economic growth through supporting British businesses and increasing the number of people in work. Whilst there were no real headline-grabbing tax cuts, the Statement did include a range of administrative changes which will help businesses attract investment particularly in respect of EMI, EIS and VCT tax reliefs.

Key tax measures impacting businesses are summarised below.

In the Spring Budget, the government introduced two new temporary first-year allowances. A 100% allowance for qualifying plant and machinery expenditure, known as ‘full expensing’, and a 50% first year allowance for special rate expenditure. These reliefs were made permanent for all businesses.

The existing sunset clauses for the EIS and VCT tax relief scheme are being extended from April 2025 to April 2035. This will provide a boost in confidence for investment into qualifying businesses.

The time limit to notify HMRC of a grant of EMI options will be extended from 92 days from the grant date to 6 July following the end of the tax year in which the option was granted. This change will apply to EMI options granted on or after 6 April 2024.

We’ve known for some time that there would be significant changes to the R&D tax relief schemes. Following a period of consultation and proposals from HMRC to tackle non-compliance, we now know that the RDEC and R&D for SMEs schemes will be merged for accounting periods beginning on or after 1 April 2024. The rate offered under the new merged scheme will be implemented at the current RDEC rate of 20%.

The notional tax rate applied to loss-makers in the merged scheme will be the small profit rate of 19%, rather than the 25% main rate currently set in the RDEC.

There will continue to be enhanced support for R&D intensive SMEs, providing a higher rate of payable tax credit for eligible SMEs. Loss-making companies claiming the existing SME tax relief will be eligible for a higher payable credit rate of 14.5% if they meet the definition for R&D intensity.

The intensity threshold required to qualify for this enhanced support will be reduced from 40% to 30% from 1 April 2024. A one-year grace period will also be introduced, enabling a company which has previously claimed but which fails to meet the intensity threshold, for example due to a one-off shock, to continue to claim for the following period provided it meets the other conditions for the relief.

The Chancellor announced an immediate change to the nominations process, with R&D tax repayments only being processed to the claiming company with immediate effect.

A package of changes to National Insurance Contributions were announced including a reduction to the main rate of Class 1 National Insurance Contributions (NICs) from 12% to 10% with effect from 6 January 2024, a reduction in Class 4 NICs for the self-employed from April 2024, and from 6 April 2024 self-employed people with profits above £12,570 will no longer be required to pay Class 2 NICs. Additionally, the NICs relief for employers who hire former members of the UK regular armed forces has been extended to cover the 2024 to 2025 tax year.

National Living Wage:

From 1 April 2024, the National Living Wage (NLW) will increase by 9.8% to £11.44 an hour for eligible workers across the UK aged 21 and over. Young people and apprentices on the National Minimum Wage (NMW) will also see a boost to their wages, which will increase to £6.40 an hour.

In summary, whilst there were few surprises in the Chancellor’s Autumn Statement, there were some key changes which will help boost investment in SMEs and some tax reliefs which will provide immediate impact for businesses. We welcome these reliefs and the continuing investment and support for the UK’s Technology sectors.


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