By Martin Hook, Alma Consulting Group
In response to today’s (Wednesday) Budget announcements, Martin Hook, Managing Director of research and development tax specialists, Alma Consulting Group, sums up the winners, losers and biggest disappointments.
Alignment of main corporation tax rate to 20%: The alignment of the mainstream Corporation Tax rate with the small business rate at 20% is excellent news for UK businesses. Alongside the new Patent Box and R&D Expenditure Credit schemes, which offer generous support innovative businesses, the Chancellor has sent out a clear and welcome message; the UK is a highly competitive place to do business.
Innovative companies: April 2013 will bring two new schemes for innovative businesses in the UK, in the form of the Patent Box and the R&D Expenditure Credit. We welcome these schemes as they will ensure that the UK is a competitive place for innovative, cutting-edge businesses to call home — these are the same businesses that will underpin the UK’s economic recovery. In particular the surprising increase from 9.1% to 10% for R&D Expenditure Credit is extremely welcome since it represents a real-terms benefit over the existing R&D Tax Relief. This is an increase in generosity of R&D reliefs for large companies, which has not occurred since 2008.
Video games developers: April 2013 marks a turning point for the UK’s video games industry with the introduction of the new Video Games Tax Relief. The UK is the home to some of the most-loved video game franchises, including Tomb Raider, GTA and LittleBigPlanet. A recent report by video games industry trade association, Tiga, found that employment and investment in the UK video games sector increased in 2012 and we anticipate this trend will continue throughout 2013, with the introduction of the new relief.
We believe that the new tax reliefs will help to achieve this and make the UK a competitive place for these creative businesses. This was the right ‘support for the UK’s world-class visual effects sector’.
Construction companies: With the £3bn proceeds of spending cuts being funnelled into infrastructure projects, including new homes, construction companies will be faced with a wealth of new opportunities and will play a critical role in re-building the UK economy. This is a significant move to support the construction sector, which has struggled with lack of investment in recent years.
Large businesses: The alignment of the mainstream Corporation Tax rate with the small business rate at 20% is excellent news for UK businesses. Alongside the new Patent Box and R&D Expenditure Credit schemes, which offer generous support innovative businesses, the Chancellor has sent out a clear and welcome message; the UK is a highly competitive place to do business.
The Chancellor has to be commended for introducing two new schemes for innovative businesses with effect from 1st April 2013. On top of the R&D Tax Relief, the Patent Box and the R&D Expenditure Credit will ensure that the UK is a competitive place for innovative, cutting-edge businesses to call home. Investing in innovation is crucial to growth and we are confident that these measures will play a central role in reviving the UK’s economy. We also welcome the increase from 9.1% to 10% from the initial draft legislation published last December for R&D Expenditure Credit.
Small television studios: It is disappointing that the government has not lowered the £1 million per hour requirement, which allows TV programmes to qualify for the new TV Tax Relief. This will lead to a continued challenging business environment for the many smaller studios and creative firms who will miss out on this relief.
Government departments: With a further 2% of cuts to find, government departments will face significant challenges in 2013. We welcome the fact that HMRC is not facing these further cuts, as they have already been impacted severely by cost reduction programmes that have resulted in UK tax relief claimants paying the price in the form of poor service and slow response times.
Banks: The banking sector is still suffering from the loss of reputation in recent years, with an increase in bank levy being introduced to account for the continued reduction in Corporation Tax to 20% from April 2015.
Big 4: With more measures to rein in Corporate Tax avoiders, the Chancellor has sent a clear message that aggressive avoidance is no longer acceptable. This will have a significant impact on the Big 4 and other firms who market tax avoidance schemes and will need to consider the morality of the schemes that they sell and the spirit of the tax legislation.
No incentives for peer-to-peer lending: It is disappointing the government has not introduced any form of incentive to encourage peer-to-peer lending or ‘crowd funding’. These new models have the potential to revolutionise business financing and it would have been a positive move for the Chancellor to stimulate growth in this area.
Delay in corporation tax reduction: While we welcome the reduction in Corporation Tax to 20% from April 2015, we are disappointed that it will be two years before this comes into effect. We would prefer for Corporation Tax to be reduced sooner to deliver immediate benefits to businesses and speed up the economic recovery.
£1 million requirement for TV tax relief: It is disappointing that the government has not lowered the £1 million per hour requirement that allows TV programmes to qualify for the new TV Tax Relief. This will lead to a continued challenging business environment for many smaller studios and creative firms that will miss out on this relief.
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