Autumn Statement 2016: The impact on UK SMEs

25 Nov 2016

In his first major fiscal statement to the House of Commons on Wednesday, 24 November, the Chancellor Philip Hammond, acknowledged the "sharp challenges ahead", but pledged a post-Brexit economy "that works for everyone". But what does the Autumn Statement mean for UK SMEs?

Investment in infrastructure

In a bid to allow for sufficient flexibility to build a resilient economy and support the UK in becoming a world leader in tech and innovation, the Chancellor said he would prioritise investment in UK infrastructure and innovation, and announced the creation of a new £23bn National Productivity Investment Fund. He said that investing in infrastructure will directly benefit businesses, adding that he remains committed to making sure “Britain is the number one destination for business”.

The money will be used to invest in transport, digital communications, research and development, and housing.

£1 billion to invest in full-fibre broadband and trialling 5G networks

This investment will support the private sector to roll out more full-fibre broadband by 2020-21. Funding will also support trials of 5G mobile communications. And from April 2017, the government will also provide a new 100 per cent business rates relief for new full-fibre infrastructure for a 5 year period.

Speaking to Tech City News, William Newton, EMEA director at WiredScore: “With its new targets for full-fibre broadband, the government is setting goals that will truly future-proof the UK’s connectivity infrastructure – rather than settling for part-fibre investments that will not meet the digital needs of businesses and consumers in five years and beyond. ”

£2 billion more per year in research and development funding by 2020-21

A major increase in research and development funding for businesses with research and development (R&D) projects to help the UK remain an attractive place for businesses to invest in innovative research.

“We don’t invest enough in research, tech and innovation,” said Hammond, adding that innovation needs to be encouraged, startups need to be supported to become scale-ups and these businesses must be encouraged to remain in the UK.

The Chancellor went on to say that the government will also look at ways to build on the “above the line” R&D tax credit, with the aim of further incentivising R&D.

Speaking at the Confederation of British Industry conference earlier this week, Prime Minister Theresa May said: “I want us to turn our bright start-ups into successful scale-ups by backing them for the long-term."

“To do this we need to better understand where the barriers are, so I am pleased to announce we will launch a new Patient Capital Review – led by the Treasury – that will examine how we can break down the obstacles to getting long-term investment into innovative firms.”

The Chancellor confirmed in the Autumn Statement that the government will legislate in the Finance Bill 2017 to add specific provisions to the Patent Box rules where R&D is undertaken collaboratively by two or more companies under a ‘cost sharing arrangement’. These will ensure that such companies are neither penalised nor able to gain an advantage under these rules by organising their R&D in this way. This will have effect for accounting periods commencing on or after 1 April 2017.

Commenting on the Government's intention to support R&D, Matt Clifford MBE, co-founder and CEO of Entrepreneur First, said:

“By taking this opportunity to prove its commitment to small technology businesses, the new administration is putting measures in place to take advantage of the ‘once-in-a-generation’ opportunity for Britain to cement its role as a leader in tech innovation.

“A position further underlined with news of the further cuts in corporation tax and tax free personal allowance – moves that will not only encourage the thriving companies being created in the UK to stay here, creating jobs and wealth in the process, but one that can help them flourish by freeing up much-needed capital for innovation and growth,” he concluded.

The funding support announced by the Chancellor in the Autumn Statement will back scientific research and development of technologies such as robotics, artificial intelligence and industrial biotechnology.

R&D tax credits have proved to be a major boost to British business, encouraging innovation and increased spending on research and development activities by companies operating in the UK. But many are still unaware that they can claim the credits to help fund research and development, often incorrectly thinking that their ongoing enhancement of existing products and services does not quality, because “it is just what we do”.

Speak to our R&D tax credit specialists at Beavis Morgan who are on hand to maximise the value of any potential claim and manage the often complex process on your behalf.

If you would like to know more about how we can help you and your business, please contact Steve Govey or your usual Beavis Morgan Partner.

Commitment to cutting corporation tax to 17 per cent by 2020

Confirmation that corporation tax will be cut to 17 per cent is good news for SMEs. It will help to reduce costs and outgoings and support growth and expansion in the current economic climate.

The main rate of corporation tax has already been cut from 28 per cent in 2010 to 20 per cent, and will be cut again to 17 per cent by 2020, by far the lowest in the G20 and benefitting over 1 million businesses.

If you would like to know more and to understand how this change could be beneficial for you and your business, please contact Paul Attridge.

£400 million through the British Business Bank to invest in growing innovative firms

The funds will support the UK's growing companies by providing the finance they need to expand. This will support up to £1 billion of new investment for growing firms.

“I am taking a first step to tackle the longstanding problem of our fastest growing technology firms being snapped up by bigger companies, rather than growing to scale,” the Chancellor said.

Speaking to Real Business, Philip Salter, director of The Entrepreneurs Network, commented: “£400m into venture capital funds through the British Business Bank makes sense in the context of Brexit, given the expected need to transition from the European Investment Fund after we leave the European Union.

The Federation of Small Businesses welcomed the added support for small business growth in Britain’s rural regions.
Our business experts at Beavis Morgan offer specific expertise on many aspects of landed estates and their associated rural businesses such as capital taxes planning, including mitigating exposure to inheritance tax and capital gains tax on chattels and land.
Please contact Alan Ford or your usual Beavis Morgan Partner to find out more about how we can assist you to protect your wealth and plan for IHT.

A restriction in tax-free employee benefits offered by salary sacrifice schemes

From April 2017, most salary sacrifice schemes will be subject to the same tax as cash income. The change to this popular employee remuneration mechanism will impact many businesses.

In salary sacrifice schemes, employees exchange some of their salary for a non-cash benefit in kind (such as a mobile phone). Both the employer and employee make a tax saving, because the benefit is taxed less than a salary or not taxed at all.

The change will affect types of salary sacrifice schemes differently:

- pensions, pensions advice, childcare, Cycle to Work and ultra-low emission cars will be exempt
- all arrangements in place before April 2017 will be protected for up to a year, and arrangements in place before April 2017 for cars, accommodation and school fees will be protected for up to 4 years

Remuneration packages for SMEs have always been a blend of salary, benefits and dividends. Our tax and business experts at Beavis Morgan are available to work with you to understand your requirements and needs, together with those of your family, and put in place a legitimate structure which best meets those requirements within the framework of your business.

Contact Steve Govey for further information and to discuss your individual situation and the options available to you.

Insurance Premium Tax will increase by 2 per cent from 1 June 2017

The Chancellor announced that Insurance Premium Tax (IPT) will increase from 10 per cent to 12 percent. IPT is a tax on insurers and it is up to them whether and how to pass on costs to customers. But insurers are saying that the change you have a negative impact on SMEs who may not take out adequate insurance cover to save on costs.

Speaking to City AM, Steve Treloar, LV's general insurance managing director, said: "The government has incorrectly stated that IPT is a tax on insurers – it’s not, it’s a tax that consumers have to pay when they purchase insurance.

"This is now the third IPT increase in a row, so it’s extremely disappointing that the Treasury appears to be setting a precedent of placing an ever-increasing burden on hardworking consumers.”

Beavis Morgan – Advisers to UK SMEs

With all the changes announced in the Chancellor’s Autumn Statement, it is essential that all business owners and managers capitalise on the opportunities presented to them and be closely aware of their income and expenditure by keeping proper records and monitoring trends and patterns.

At Beavis Morgan, we specialise in working with SMEs and entrepreneurial people across a wide range of sectors, providing guidance and strategic advice to help in formulating plans for your business in order to strengthen its prospects of success, achieve growth and maximise wealth.
If you would like to find out more about how we can help you plan your business efficiently and navigate the maze of tax issues for you and your company whilst taking advantage of the various tax incentives available, contact Steve Govey or your usual Beavis Morgan Partner.