Autumn Budget 2021: Key tax announcements for businesses

Richard Stanley, tax partner at our Nottingham office, comments on the Autumn Budget and Spending Review, saying: “Yesterday’s budget promises to deliver for ‘the whole United Kingdom’ after a challenging 18 months. Recovery and levelling up, as expected, is at the heart of this. 

We welcome the approach that ‘now is not the time to remove tax breaks on investment’ and the significant financial support this will bring to allow businesses, SMEs and innovative entrepreneurs to grow. Two major tax relief extensions were announced for Research and Development (R&D) and the Annual Investment Allowance (AIA), which will now be extended until March 2023. This will align AIA with the end of the super deduction announced in March 2021.

The extensions are significant, especially given that the AIA was due to revert to its previous level of £200,000, demonstrating a much-needed fillip for many SMEs. Furthermore, the catchment for R&D expenditure relief has been expanded and modernised to include cloud computing and data costs, which reflects the growing demand for cloud computing over the past decade.

This Budget has also prioritised the hospitality, leisure and retail sectors – some of the hardest hit by the pandemic - by announcing a 50 per cent discount on their business rates for one year only. Along with a temporary increase from today in exhibition tax relief for museum and galleries until 2024.This will be a welcome relief and instrumental in helping the sector recovery, as these savings can be reinvested into the creative arts.

A reform of the duty system within the alcoholic drinks sector brings much needed simplicity to the industry. Additionally, the brewery sector will receive a ‘draught relief’, which has the potential to cut duty by five per cent. While in theory this should lead to increased profitability, the ‘stronger the drink the higher the rate’ clause, will mean that - based on existing rates - there will be a small increase for higher percentage alcoholic drinks.

An increase to the national living wage by 6.6 per cent to £9.50 per hour will support a stronger economy, but the impact will differ depending on the industry. For hospitality businesses with more living wage employees on their payroll, forecasting for this cost will be more challenging.

Addressing the skills gap was also acknowledged with a new high skills visa system for international talent to be ‘the most competitive in the world’. This will enable SMEs to attract from a greater talent pool.

To maximise the opportunities for growth in this budget, businesses, SMEs and entrepreneurs should be open to innovation and investment, while also moving with some caution. There is a lot to be positive about, but still some work is needed to address the post-pandemic impact on businesses. With careful planning however, businesses can weather the challenges ahead, but with a ‘new age of optimism’.”

The next step

For more information about any of the Autumn Budget and Spending Review announcements, please contact your usual UHY adviser

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