In our article titled Autumn Budget 2021: what will it mean for the commercial sector? published on 22 October 2021, we set out some predictions of what Chancellor Rishi Sunak might announce at this year’s Autumn Budget.
On 27 October 2021, the Chancellor gave his budget speech to the Commons and we have commented below on our predictions and the impact the Chancellor’s announcements may have on the commercial sector.
1. Will fuel duty stay frozen?
The Chancellor has confirmed that the planned fuel duty rise for 2022/23 due in the Autumn Budget will be scrapped for a 12th successive year. The widely anticipated move means fuel duty will be held at 57.95 pence per litre, closing off the planned 2.8 pence per litre rise and at a loss of £1.5 billion to the Treasury.
The announcement comes after many organisations had lobbied for a further fuel duty freeze, in particular after fuel prices hit a new record high at the weekend. And with the cost of a barrel of oil continuing to rise – it’s already more than doubled in the last year – further fuel price increases are predicted in the coming weeks.
On the face of it, this looks like good news for those businesses (particularly in the transport and distribution sector) but with fuel prices hitting a new record high this month, a fuel duty freeze might not have businesses jumping for joy.
Businesses should be alive to the impact that increasing fuel costs might have on their operating costs, and steps that can be taken to mitigate these risks. Supplier and customer contracts will be an important consideration as part of this assessment, highlighting the importance of having robust contracts and diligent contract management in place.
2. Will the government listen to the hospitality and tourism industries to keep VAT low?
Although there was no mention in the budget of keeping VAT low in the hospitality and tourism sector, the Chancellor did announce a 50% business rates discount for retail, hospitality and leisure sectors for one year. Pubs, music venues, cinemas, restaurants, hotels, theatres and gyms are all eligible. Overall, it’s a tax cut worth £1.78 billion, the biggest single-year cut to business rates in 30 years, outside of emergency COVID-19 reliefs.
This will benefit both established businesses and start-up businesses in the retail, hospitality and leisure sectors, who will welcome this discount when expanding or starting their business.
3. Further details on the help to grow scheme?
No further details were announced in the budget on the government’s “Help to Grow: Digital” scheme.
Further details on the scheme, including eligibility for the software discount vouchers and timescales, can be found on the government and help to grow websites.
Potential impact on businesses?
The government says the programme will help 30,000 businesses over the next three years to:
- develop a growth plan
- improve resilience
- learn how to innovate
- inspire employee engagement
- build marketing and financial strategies
- adopt digital technologies
Those businesses hoping to take advantage of the scheme should ensure that they have a good understanding of the software which is being offered and the potential legal risks associated with these types of service offerings. We would of course recommend that businesses ensure that there is a contract in place with their software providers and that these terms are reviewed by lawyers to ensure that businesses are aware of the material legal risks and commercial considerations associated with these types of contracts.
4. What are the government’s plans to level up opportunities across the UK?
The government had previously pledged to match lost EU funding – to “tackle inequality and deprivation” – which would have required at least £4.5 billion over the next three years. But the Autumn Budget reveals just £2.6 billion has been allocated to this and reallocates the funds to improving “functional numeracy skills” to boost job prospects.
One of the ways in which the government is planning to “level up” all areas of the UK is by introducing 8 new Freeports across the UK – please see our pre Budget article and Freeports article for further details. These Freeports will be special economic zones with simpler planning rules, infrastructure funding, cheaper customs and lower tax to encourage private investment. The government announced that the first Freeport tax sites will be in the Humber, Teesside and Thames regions, and those Freeports will be able to begin initial operations from November.
5. Will there be an improvement to the UK’s R&D tax reliefs?
Alongside the government’s plans to increase R&D spending, the government also announced that R&D tax reliefs will be reformed to support modern research methods by expanding qualifying expenditure to include data and cloud costs, and to more effectively capture the benefits of R&D funded by the reliefs through refocusing support towards innovation in the UK.
These changes will be legislated for in the Finance Bill 2022-23 and take effect from April 2023. Further details of these changes and next steps for the review will be set out by the government in due course.
Government spending on R&Dspending on R&D
The Chancellor has delayed the government target of increasing annual investment into UK research and development to £22 billion by two years. In the Chancellor’s budget speech back in March this year, the Chancellor had promised to hit the £22 billion target by May 2024.
However, in this year’s Autumn Budget, the Chancellor told the Commons: “We will maintain our target to increase R&D investment to £22billion… but in order to get there, and deliver on our other priorities, we’ll reach the target in 2026-27 spending.” Therefore, spending on research is now expected to reach £20 billion a year by the end of this term – a significant, albeit smaller, sum.
This R&D investment will be made into areas including supporting ground-breaking, innovative research to establish the UK as a global life sciences superpower. This aspect of the R&D investment will be the largest ever cash uplift for health R&D, with an increase of £605 million on 2021-22 funding by 2024-25 which means the investment will rise to £2 billion by May 2024. This will support:
- new research funded by the National Institute for Health Research
- £95 million for the Office for Life Sciences for delivery of the government’s Life Sciences Vision
- the UK’s world leading genomics industry, including Generation Genome, a new pioneering newborn screening programme to detect over 200 rare diseases, and ‘Diverse Data’, to increase representation of minority groups in genomic research
- research for cutting-edge COVID-19 treatments
Businesses involved in research and development activities should speak to their professional advisors to ensure that available R&D tax credits are claimed, that their intellectual property rights are protected and that appropriate contracts are in place to ensure that the commercially agreed position is clearly documented to reduce the scope for future disputes and protect valuable assets and, in turn, business value.
This article discusses just a handful of the potential business opportunities and risks presented by the Autumn Budget – contact us for an informal discussion on how we can help your business explore the Autumn Budget opportunities and the steps that can be taken to mitigate any risks:
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