The UK Chancellor, Jeremy Hunt, delivered his Spring Budget today (06 March 2024).
Although the Chancellor’s focus was on cutting personal tax to attract voters ahead of the near term general election, he emphasised his commitment to improving UK business growth and productivity.
A number of business measures were announced though many were tidying up points rather than fundamental changes to the UK business tax arena.
Capital Allowances: Full Expensing on Leased Assets
The government intends to extend Full Expensing to assets for leasing when fiscal conditions allow. Draft legislation will be published shortly. Full Expensing allows companies to claim 100% capital allowances on relevant assets in the year of investment, which equates to a 100% first year allowance for eligible expenditure.
Full Expensing is not right for every business as the interaction with the UK’s loss relief rules means that some businesses will be better off with writing down allowances, taking relief more steadily over the life of a project rather than front loading tax relief.
VAT Registration Threshold Increase
The VAT registration threshold will be raised to £90k on 1 April 2024, up from £85k, the first increase in 7 years. Businesses will not need to register for VAT until their turnover is likely to exceed £90k.
This will ensure that the UK continues to have one of the highest VAT registration thresholds in the OECD. The deregistration threshold will change from £83k to £88k.
Stamp Duty Land Tax (SDLT): Multiple Dwellings Relief
From 1 June 2024, the government will abolish Multiple Dwellings Relief, a bulk purchase relief in the SDLT regime. This follows an external evaluation which showed no strong evidence the relief is meeting its original objectives of supporting investment in the private rented sector.
Stamp Duty Land Tax (SDLT): Acquisitions by Registered Social Landlords and Public Bodies
Legislation will be updated to ensure that from 6 March 2024, registered providers of social housing in England and Northern Ireland are not liable for SDLT when purchasing property with a public subsidy. Public bodies will be exempted from the 15% anti-avoidance higher rate of SDLT when purchasing residential property with a value of over £500k.
Investment Zones
The Chancellor announced further details of 6 Investment Zones: Greater Manchester, Liverpool City Region, North East of England, South Yorkshire, West Midlands and Tees Valley.
The refocused Investment Zones programme gives areas a £160 million envelope to catalyse local growth and investment. Offerings include tax reliefs to attract businesses, and initial investments on skills, research and innovation and infrastructure.
Investment Zones will be extended from five to ten years in Scotland and Wales, matching the extension announced for England at Autumn Statement 2023.
Freeport Tax Reliefs Sunset Date Extension
The tax reliefs available in freeport tax sites are being extended from five to ten years, until September 2031 in England, and September 2034 in Scotland and Wales.
Energy Profits Levy (EPL)
The government announced that the levy is to be extended by a further year to 31 March 2029. This is expected to raise an extra £1.5 billion.
The EPL was introduced on 26 May 2022 to respond to exceptionally high prices that meant oil and gas companies were benefiting from profits above and beyond what they might have expected to earn. The levy rate is currently 35%, and the regime was due to end on 31 March 2028.
Gas prices are forecast to remain abnormally high until at least 2028-29. Clauses will be added into the Spring Finance Bill to disapply the levy once prices return to “normal” and demonstrate that this is supposed to be a temporary tax.
Green Industries
The government announced a further £120 million for the Green Industries Growth Accelerator, to support expansion of low carbon manufacturing supply chains across the UK, lowering costs and accelerating the transition. Of the over £1 billion of total funding available, up to £390m is expected to support supply chains of offshore wind & electricity networks and up to £390m is available for supply chains of Carbon Capture Utilisation and Storage and hydrogen. This sits alongside the £300 million already allocated to nuclear fuels for the High Assay Low Enriched Uranium (HALEU) programme. For the UK renewables sector, the full parameters will be published for the Contracts for Difference Allocation Round 6 (AR6), including setting the largest ever budget for a single round of over £1 billion.
Grid Connections
The next steps in removing barriers to investment within the infrastructure and commercial planning system were announced. Since Autumn Statement 2023, government reforms to the grid system have accelerated offered connection dates for projects totalling 40GW, equivalent to £40 billion of investment. At Spring Budget 2024, the government is publishing the consultation on a new accelerated planning service for major commercial applications; a response to the consultation on operational reforms to the Nationally Significant Infrastructure Project Regime; and the updated National Networks National Policy Statement.
Carbon Border Adjustment Mechanism
The government will introduce a carbon border adjustment mechanism from 1 January 2027 which will apply to relevant goods imported in the aluminium, cement, ceramics, fertiliser, glass, hydrogen and iron & steel sectors. The details will be subject to public consultation later in 2024. This will give industry the confidence to invest in the knowledge their decarbonisation efforts will not be undermined.
Landfill Tax Rates
Landfill tax rates will be adjusted in line with the Retail Prices Index to ensure the tax continues to incentivise investment in more sustainable waste management infrastructure. From 1 April 2025 the standard rate of landfill tax will increase to £126.15 per tonne and the lower rate will increase to £4.05 per tonne.
Landfill tax was devolved to the Scottish Parliament in April 2015 and to the Welsh Assembly in April 2018.
Economic Crime Levy Adjustment
From 1 April, the rate at which very large businesses with annual revenue greater than £1 billion, and which are regulated for anti-money laundering purposes, will pay the Economic Crime (Anti-Money Laundering) Levy will increase from £250k to £500k per annum. This is a response to lower-than-expected receipts, and additional revenue will be used to deliver existing commitments on economic crime. Amounts are payable following the end of each financial year. There will be no change to the charge for small entities (which remain exempt), medium entities (which will continue to pay £10k), or large entities (which will continue to pay £36k).
Our View
The Chancellor clearly has his eye on the next general election and introduced little significant change for the business sector, focussing his efforts on cutting personal taxes. For businesses, there was some tidying up of anomalies in the legislation, and the extension of the Full Expensing Capital Allowances regime to leased assets. The increase in the VAT registration threshold will be welcomed by many as the level has been static since 2017. The measure fits with the Chancellor’s stated growth aims. However, this does not address the “cliff edge” effect where businesses near the threshold control their growth, fearing the addition of VAT to their invoices will price them out of the consumer market. The Chancellor hopes that pushing the cliff edge further out will bring in increased tax receipts to the Exchequer.
