Which Way Next?

The Chancellor delivered her maiden Budget speech on Wednesday and while a large portion of it had been correctly predicted in advance, there is always interest in what is contained in the detail released on the day. We knew that a Corporate Tax Road Map was going to be published but we weren’t expecting anything radical given the insistence that this budget would seek to deliver stability above all else.

The road map goes further than just stability and includes predictability and certainty as two more key watch words. The Corporation Tax strategy focuses on these areas by preserving key features, consulting businesses on changes, enhancing UK competitiveness, and providing clearer guidance with upfront tax clarity for major investments.

In terms of what this means:

• Capping the main rate of Corporation Tax at 25% during the period of this parliament and maintaining the small profits and marginal relief. Potentially this gives scope for a reduction in main rate of Corporation Tax in future years.
• Maintaining permanent full expensing, preserving core capital allowances like the £1 million Annual Investment Allowance and Structures and Buildings Allowance, clarifying qualification criteria, simplifying legislation, reviewing predevelopment costs, and considering full expensing for assets purchased for leasing or hiring.
• Maintains generous rates for the merged R&D Expenditure Credit scheme and enhanced support for R&D-intensive SMEs, alongside the Patent Box and competitive intangible asset regime. Additionally, it aims to improve R&D relief administration through an expert advisory panel, enhanced guidance, an R&D disclosure facility by 2024, and a consultation on expanding advance clearances for R&D reliefs.
• Maintaining an Audio-Visual Expenditure Credit and a Video Game Expenditure Credit.

While the Corporation Tax regime remains largely stable, with an emphasis on predictability and certainty, businesses should be aware of other potential shifts in related areas such as employment regulations and National Insurance. These forthcoming changes may impact operational costs and workforce management, underscoring the importance of monitoring updates beyond corporation tax alone to maintain a comprehensive understanding of the evolving fiscal landscape.

To discuss how these wider changes may have an impact on your business please contact one of the team at BHP LLP.