UK Treasury Fiscal announcement: What does it mean for businesses?
There was nothing “mini” about the Fiscal Event, or “Growth Plan” as the government called it, that took place on the 23 September, the first for the new Chancellor of the Exchequer Kwasi Kwarteng.
The package was designed to simplify and lower taxes with the aim of attracting businesses and talent to set up and work in the UK and increase the UK`s slow growth rate to a target of 2.5% per year.
Markets in the UK didn’t react as well though with stock markets in the UK down and Sterling £ falling to a 50 year low against the Dollar, £1 to $1.07 and weakening against other currencies including €1.11 Euro and 87INR.
There were a number of welcome announcements for companies in the UK to support businesses in the short term and also to stimulate investment.
Tax and Levy cuts: The reduction or removal of the Health and Social Care Levy from 6th November 2022 is estimated to save the average business around £10,000 next year as a result. This, combined with the cancellation of corporate tax increases (previously set to go up from April 2023 to 25% from 19%), will be welcome relief to business and means the UK continues to have the lowest Corporation Tax level in the G20.
Annual Investment Allowance: The announcement that the Annual Investment Allowance (AIA) for qualifying expenditure on plant and machinery, which was originally increased to £1,000,000 in the 2018 Budget, and was due to revert to £200,000 from 1 April 2023, will instead be permanently set at £1,000,000 will also be welcome news to businesses in the UK who are looking at investing in plant, machinery or new technologies.
Investment Zones: We have heard the news about Investment Zones in previous budgets and they seem to have gone quiet over the last few years. They are intended “unleash the power of the private sector”. In these agreed areas, of which there could be almost 40 in England, taxes will be cut, and tax reliefs will be accelerated, including 100% on qualifying investment in plant and machinery, and on purchases of land for commercial use. There will also be no stamp duty to pay on newly occupied business premises, and no business rates to pay in the tax zone. Employers will not have to pay NI on the first £50,000 a new employee in the tax site earns.
Energy relief: Ahead of the Budget, the new Business Secretary Jacob Rees-Mogg had already announced a new Energy Bill Relief Scheme. The support package will provide a discount on wholesale gas and electricity prices for all non-domestic customers whose current energy bill has been significantly inflated. The support is very similar to the energy price guarantee put in place for domestic consumers. As with the Energy Price Guarantee for households, UK companies will not need to take action or apply to the scheme to access the support. Support (in the form of a p/kWh discount) will automatically be applied to bills. It is worth noting that this is currently only in place for six months (whereas the support for domestic consumers will last for two years) and will then be reviewed.
Off Payrole workers: The final announcement which affects businesses operating in the UK is for Off Payroll workers. Changes introduced over the past few years have put the burden on to medium and larger businesses to determine the employment status for off-payroll workers operating through an intermediary. This has required a rework of systems/controls and, in many cases, businesses have simply put workers on the payroll to lower the risk. These changes will be reversed from April 2023 and it will once again be the responsibility of the intermediary company to determine the employment status.