What the Budget means for Entrepreneurs
In his final Budget before the General Election, George Osborne confirmed that entrepreneurial businesses were the key to sustained economic recovery as UK PLC continued to out-perform its main economic competitors.
In particular, the Chancellor referred to the Northern Powerhouse of Makers and Doers as the basis of future growth, with the grudging acknowledgement that the North has grown faster than the South over the last couple of years and created more jobs.
Whilst there were no pre-election give-aways, Budget 2015 did, as a result, focus on targeted support for entrepreneurs, manufacturing and innovation including:
- Investment measures to boost business in the North.
- Devolved powers on skills, training, business growth, transport and housing.
- £14 million over 2 years invested into the Advanced Wellbeing Research Centre in Sheffield, a new sports and exercise research centre.
- £11 million investment into tech incubators in Sheffield, Leeds and Manchester. Intended to create thriving ecosystems by nurturing start-ups and providing mentoring, learning and business support.
- £3.7 million investment to renovate derelict police headquarters in Leeds.
- Government funding to develop a financial technology incubator in Leeds.
- The Leeds Enterprise Zone to be changed to support energy and waste technology business.
- The rate of corporation tax finally reduces to 20% from 1 April 2015 so that all companies now pay the same rate of tax irrespective of size. UK PLC now has the joint lowest rate of company tax in the G20.
- The Annual Investment Allowance of £500,000 introduced last year continues to be available until 31 December 2015 and enables 99% of businesses to get full tax relief on their capital expenditure. Recognising that continued investment in plant and machinery is the key to future innovation and growth, the Chancellor has announced that the rate will not reduce to £25,000 as previously announced, however he did not confirm the amount to which the allowance will reduce.
- The list of technologies and products covered by the energy saving and water efficient Enhanced Capital Allowances (ECA) scheme has been updated to adopt Waste Heat to Electricity sub-technology and to remove the Packaged Chillers subtechnology. Details of the full list, and when it will take effect, can be found at etl.decc.gov.uk. The scheme allows 100% of the cost of the qualifying plant and machinery to be written-off against taxable profits in the year of investment.
- Research & Development (R&D) relief gives additional Corporation Tax relief for expenditure incurred on R&D projects that seek to achieve an advance in science or technology. Profit-making companies benefit from the enhanced relief, while companies with no Corporation Tax liability are able to claim a repayment from HMRC.
In an attempt to streamline the application process for small companies investing in R&D, the Government is looking to introduce an advanced assurance scheme for small businesses making their first claim.
The rates of R&D relief increase slightly from 1 April 2015 and the extra relief can be worth up to almost 30% of the actual costs where SMEs are profitable and paying Corporation Tax at marginal rates. A loss making SME can “surrender” its losses and obtain a cash repayment of nearly 25% of the underlying R&D costs. With effect from 1 April 2015, the above the line credit (available to both large companies and SMEs) increases from 10% to 11%.
- The UK and Germany recently issued a joint statement agreeing a way forward for patent box regimes in the EU, which will mean some changes to the UK regime. It is apparent the current UK patent box regime (where a company is able to benefit from an effective 10% rate of Corporation Tax on qualifying profits) will end by June 2016 at the latest (although there will be a run off period to June 2021 for those already within the regime) and changes will be made which will require substantial economic activities to be directly connected to R&D expenditures. There will also be a restriction on the amount of patent box relief available for qualifying expenditure that is outsourced.
So a political Budget with no pre-election giveaways but certainly one that supports the Makers and doers of the Northern Economy!