Manufacturing highlights from Spring Budget 2023

Tax and capital allowances

As previously announced, the rate of Corporation Tax for companies with over £250,000 in profits will increase from 19 per cent to 25 per cent from April 2023. Those with profits between £50,000 and £250,000 will pay between 19 per cent and 25 per cent. Those making profits of less than £50,000 will stay on the 19 per cent rate.

In an update to capital allowances, the government will introduce Full Expensing (FE) for 3 years from April 2023, allowing companies to immediately deduct the full cost of qualifying plant and machinery investments from profits in the year they invest, rather than more slowly over the life of the asset. This applies to spending on main rate equipment, which includes but is not limited to:

• Warehousing equipment such as forklift trucks
• Tools such as ladders and drills
• Construction equipment
• Machines such as computers and printers
• Vehicles such as lorries and vans
• Office equipment and some fixtures such as kitchen and bathroom fittings and fire alarm systems.

The existing 50 per cent First-Year Allowance (FYA) scheme will also be extended by three years to March 2026. This lets businesses deduct half of the cost of special rate capital assets from profits in the year of purchase. Special rate equipment includes long-life assets such as solar panels.

The new capital allowance schemes are on top of the £1 million Annual Investment Allowance (AIA) for all businesses, which provides 100 per cent first-year relief for plant and machinery investments up to £1 million.

Energy

Despite pressure from business groups and a decision to extend existing support for households, the government is proceeding with plans to cut energy bill support for businesses by transitioning from the current Energy Bill Relief Scheme (EBRS) to a new Energy Bill Discount Scheme (EBDS) from 1 April 2023.

The transition means businesses will no longer qualify for any energy bill relief at all from April, and most of those that do will receive a maximum discount of just 2p/kWh and 0.7p/kWh for electricity and gas respectively until 31 March 2024.

Certain energy-intensive businesses will qualify for a higher level support from April depending on their SIC code. A more in-depth summary of the EBDS scheme is available here.

However, the government has decided to extend the Climate Change Agreement (CCA) scheme for a further two years. Eligible companies that agree a CCA commit to meeting energy efficiency targets and in return receive a discount on the Climate Change Levy (CCL) paid on business energy bills.

R&D tax relief

A new R&D scheme specifically for SMEs will be introduced, targeting loss-making ‘R&D-intensive’ businesses – those for whom R&D expenditure makes up 40 per cent or more of turnover. Qualifying businesses will be able to claim £27 from HMRC for every £100 of R&D investment.

The government believes around 3,000 manufacturing firms will qualify for the enhanced support. However, R&D tax relief for most other SMEs will become less generous from April 2023.

Skills & training

A new skills offer will be launched for over 50s. Called ‘Returnerships’, the offer will promote accelerated apprenticeships, sector-based placements and Skills Bootcamps to people over 50, providing better access to re-training. The number of 50-64 year-olds out of work has increased by 320,000 since before the pandemic.

Overall, £62 million will be invested in an additional 8,000 Skills Bootcamps places in 2024-25 in England, providing access to flexible training courses of up to 16 weeks for people aged 19 and over.

Fuel duty

Fuel duty rates will be maintained at current levels for another 12 months rather than increasing in line with inflation, extending a temporary 5p fuel duty cut introduced last year.

Greater Manchester Investment Zone

Greater Manchester is one of 12 ‘growth clusters’ to be selected for an ‘Investment Zone’ – a new scheme providing economically underperforming areas with enhanced tax reliefs and grant funding, focusing on green industries and advanced manufacturing among other key sectors.

Investment Zones will have access to a single 5-year tax offer which may include:

• Enhanced relief from business rates on newly-occupied premises and Stamp Duty Land Tax
• Enhanced Capital Allowance relief for qualifying expenditure on plant and machinery
• Enhanced Structures and Buildings Allowance relief on qualifying investments
• Enhanced relief on employer National Insurance Contributions (NIC).

Greater Manchester will be able to tailor its Investment Zone, including the specific area(s) to be covered, to its own priorities. Proposals are expected to be agreed by the end of 2023.

In addition, the Spring Budget announced a new trailblazing devolution deal with Greater Manchester, which gives local leaders greater control over local transport, skills, housing, innovation and net zero funding.