Several measures in the Chancellor’s ‘mini-budget’ were welcomed by business groups, including new investment relief and tax adjustments, although concerns remain over energy bill support.
Energy Bill Relief Scheme
The government’s already-announced energy relief package for businesses, launching on 1 October, will provide a discount on the wholesale portion of energy costs initially until 31 March 2023. Prices will be set at £211 per megawatt hour (MWh) for electricity and £75 per MWh for gas.
The support will be applied on fixed contracts agreed on or after 1 April 2022, as well as to deemed, variable and flexible tariffs. Suppliers will automatically apply the reductions and equivalent support will also be provided for those not connected to the gas or electricity grid. The level of support for each business will vary depending the type and date of their energy contract, with example scenarios provided online.
Energy prices are expected to remain high well into 2023 and possibly beyond. After the initial six-month scheme is over, the government currently plans to narrow support to those deemed “most vulnerable”. A review to determine this definition will take place in three months’ time. Anthony Ainsworth, COO at npower Business Solutions, commented:
“The question is, what happens after six months? We have campaigned for more support for businesses to enable them to reduce overall energy consumption. There is a real need to accelerate energy efficiency initiatives, whether that is through targeted incentives or extending schemes that provide tax breaks for installing more efficient equipment.”
GC Business Growth Hub is able to support SME manufacturers in Greater Manchester with fully-funded guidance on reducing energy bills and other operational costs. For more information, contact one of our Manufacturing Advisors.
Tax measures in the mini-budget include a cancellation of the planned rise in Corporation Tax, keeping it at 19 per cent in April 2023 instead of 25 per cent, and reversing the 1.25 per cent rise in National Insurance Contributions from 6 November 2022. The NIC reversal is expected to save nearly a million businesses almost £10,000 on average next year.
Off-payroll working rules (also known as IR35) will also be repealed from April 2023, meaning contractors providing their services via an intermediary will be responsible for determining their employment status and paying the appropriate amount of tax.
Annual Investment Allowance
The Annual investment Allowance (AIA), which provides 100 per cent tax relief to businesses on plant and machinery investments, will now be permanently set at £1 million, rather than falling to £200,000 in March 2023 as originally planned.
Verity Davidge, Director of Policy at manufacturers’ organisation Make UK, commented:
“This is a major policy win. We have campaigned long and hard for the increase to be permanent and it’s finally here. This will provide much-needed certainty business have been seeking for the past two years, particularly for smaller manufacturers who will now be able to make long-term plans to invest in critical areas of their business, from automation to improving energy efficiency and self-generation.”
The government announced discussions with 38 local authority areas in England – including Cheshire West and Chester, Greater Manchester, Lancashire, Liverpool City Region and Cumbria – to set up new ‘Investment Zones’ in specific areas.
Businesses within these zones will be offered targeted and time-limited tax cuts, which may include:
- 100 per cent relief from business rates on newly-occupied business premises
- 100 per cent Enhanced Capital Allowance relief for qualifying expenditure on plant and machinery
- Enhanced Structures and Buildings Allowance relief of 20 per cent on qualifying investments
- Zero-rate employer NICs on salaries of new employees earning up to £50,270
Cllr Phillippa Williamson, Lead of Lancashire County Council, commented:
“We are delighted that Lancashire has been included in the initial wave of Investment Zone discussions given the opportunities that it will bring to attract further investment, unlock development and economic activity boosting jobs and growth to our county through a targeted approach.”