Blog: The Spring Statement 2023: Key takeaways for UK businesses
In the Autumn Statement 2022, the Government took the difficult path needed on tax and spending to restore economic stability, support public services, and lay the foundation for long-term growth. The government is building on this foundation, with a plan to deliver on three of the five key priorities set out by the Prime Minister in January:
1. Halve inflation,
2. Grow the economy,
3. Get debt falling.
Here are 6 important announcements for the Spring Statement 2023 for UK businesses:
The Office for Budget Responsibility (OBR) is now forecasting that Consumer Price Index (CPI) inflation will fall to 2.9% by the end of 2023. It has also been announced we are going to avoid a recession this year.
2. Research and Development
On top of the changes outlined in the Autumn 2022 statement, the Chancellor announced in the Spring Statement further R&D tax relief support for R&D intense, loss-making SMEs. This will affect approximately 20,000 SMEs in the UK – coming into effect from 1 April 2023 and worth around £500 million per year.
All confirmed R&D changes from 1 April 2023:
- The Research and Development Expenditure Credit (RDEC) rate will increase from 13% to 20%.
- The small and medium-sized enterprises (SME) additional deduction will decrease from 130% to 86%.
- The SME credit rate will decrease from 14.5% to 10%.
- If a company is loss-making and considered R&D intense, it will be eligible to claim £27 from HMRC for every £100 of R&D investment. A company is considered R&D intensive where its qualifying R&D expenditure is worth 40% or more of its total expenditure.
- There will be now a delay to restrictions on overseas expenditure in R&D tax relief claims. The previously announced restriction on some overseas expenditures will now come into effect from 1 April 2024 instead of 1 April 2023. This will allow the government to consider the interaction between this restriction and the design of a potential merged R&D relief.
3. Corporation Tax
This new tax year brings with it the biggest tax policy changes the UK economy has seen in the last decade and a half.
- A Corporation Tax rate of 19% will exist for Companies with profits of less than £50,000.
- Companies with profits between £50,000 and £250,000 will pay tax at the main rate, reduced by a marginal relief. This provides a gradual increase in the effective Corporation Tax rate.
- From April 2023 the main rate of Corporation Tax will now be 25% for companies with profits of £250,000 or more.
4. Full Expensing
The Spring Statement 2023 announced that Full Expensing replaces Super Deduction Tax, allowing companies across the UK to write off the full cost of qualifying plant and machinery investment in the year they invest. It can be deducted ‘in full and immediately’ from taxable profits. It is effective from April 1, 2023, to March 31, 2026.
5. Energy and Fuel Support
The Energy Bill Relief Scheme runs until 31 March 2023, it will be replaced with the Energy Bills Discount Scheme. The EBDS will run for 12 months from 1 April 2023 to 31 March 2024. As per the current scheme, the government will provide a discount on gas and electricity unit prices. Eligible non-domestic consumers will now receive a per-unit discount on their energy bills during the 12-month period from April 2023 to March 2024, subject to a maximum discount.
The Government is continuing to support households and businesses by maintaining the rates of fuel duty at the current levels for an additional 12 months by extending the temporary 5p fuel duty cut and cancelling the planned increase in line with inflation for 2023-24.
6. Investment In Innovation
The Spring Statement 2023 confirmed 12 new Investment Zones – ’12 potential Canary Wharfs’. These will be in the West Midlands, Greater Manchester, the North-East, South Yorkshire, West Yorkshire, East Midlands, Teesside and, once again, Liverpool. There will also be at least one in each of Scotland, Wales and Northern Ireland, chosen areas will receive £80m of support over five years – including generous tax incentives to attract businesses to left-behind parts of the country.
The UK already has one-third of all artificial intelligence development and Hunt accepts all nine recommendations of Sir Patrick Vallance’s digital technology recommendations, including the launch of an “AI sandbox” to help innovators get products faster to market. The chancellor has promised £900m of funding to build an Exascale supercomputer and to establish a new AI Research Resource. The government will also award a £1 million prize every year for the next 10 years to researchers that “drive progress in critical areas of AI”.
To further leverage private investment into the UK’s secure and clean energy future, the Government is launching Great British Nuclear (GBN) to address constraints in the nuclear market and support new nuclear builds as the government works towards net zero. GBN will launch the first staged competition for Small Modular Reactors, which is expected to attract the best designs from both domestic and international vendors. The government’s ambition is to select the leading technologies by the end of this year and if demonstrated to be viable, co-fund this exciting modern technology.
The government said in the Spring Statement that it will also provide up to £20 billion in funding for early deployment of Carbon Capture, Usage and Storage (CCUS), to help meet the government’s climate commitments. This unprecedented level of funding for the 113 The Low Carbon Economy Index 2019, PwC, 2019. Spring Budget 2023 65 sectors will unlock private investment and job creation across the UK, particularly on the East Coast and in the Northwest of England and North Wales.