Andrew England – Manufacturing Specialist
This was a budget set against the background of the Coronavirus epidemic, for the Chancellor to provide the fiscal support to impacted businesses and services, while planning for the Government’s long-term priorities.
This was a budget to turn the spending taps on full: to invest in public services and to provide the promised Infrastructure Revolution; for ‘levelling-up’ opportunity across regions of the country that have supported the Conservative Party for the first time. Overall, it will be seen as good news for businesses, although there were relatively few tax measures overall with the majority of attention focussed on spending.
The key Budget 2020 takeaways for the UK manufacturing sector
The lifetime allowance has been reduced from £10m to £1m reducing the potential benefit from £1m to £100k per taxpayer. This was a disappointing announcement but for many businesses it will be a relief to see at least an element of the relief has been retained.
Annual Investment Allowance
There was no announcement on Annual Investment Allowance meaning that this is likely to drop from £1m to £200k from December 2020 – businesses with annual capital spending in excess of £200k should be looking to advance large capital spend where commercially practical to take advantage of the relief whilst it is still available
A consultation is set to be launched to determine whether to incorporate expenditure on data and cloud computing into R & D tax credits. This may be relevant to businesses looking to introduce Smart Technology or to take advantage of data analytics and cloud computing to drive growth.
RDEC rate increases
RDEC rates – supports those performing subcontracted R & D for larger entities or undertaking grant funded projects – are set to increase from 12% to 13% from April 2020.
Supporting STEM education
Institutes of Technology
The government will provide £120 million to bring further education and higher education providers in England together with employers to open up to EIGHT new Institutes of Technology. These institutions will be used to deliver high-quality higher level technical education and to help close skills gaps in their local areas.
Facilities and equipment to support T levels
The government will provide £95 million for providers in England to invest in high quality facilities and industry-standard equipment to support the rollout of T levels. Funding will support T level routes being delivered from autumn 2021, including construction, digital, and health and science.
Zero emission cars allowances
The Government have chosen to extend first year allowances on zero emission cars to encourage more businesses to transition to low emission vehicles.
Review of Enterprise Management Incentives (EMI) scheme
The government will review the EMI scheme to ensure it provides support for high-growth companies to recruit and retain the best talent so they can scale up effectively, and examine whether more companies should be able to access the scheme which may open the scheme up to more entrants or improve the position.
IR35 off-payroll working
The expected changes to the ‘Off-payroll working’ rules (IR35) will target non-compliance with IR35 by making medium and large organisation in the private sector (and third sector) responsible for determining contractors tax status with effect from 6 April 2020. Small businesses will continue to apply the existing IR35 rules. This will be relevant to those businesses that contract with personal service companies and it is crucial that these businesses take steps to protect their interests.
Access to growth capital for innovative businesses
Since the 2017 Patient Capital Review, the government have announced substantial support for innovative businesses seeking access to long-term growth capital. To build on this, the Budget will provide the British Business Bank with the resources to make up to £200 million of additional investment in UK venture capital and growth finance in 2020-21.
To discuss any of the above or the implications of Budget 2020 on you or your manufacturing business, please contact your Menzies Relationship Partner.