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March 2023 UK Budget - impacts for SMEs and the environment

It’s that time again! The recent release of the Spring 2023 Budget by HM Treasury has revealed some interesting changes while some things are set to stay the same. Here are some key areas affecting SME’s, energy and the environment.

Our key takeouts - some long term plays in here, focused on nuclear and carbon capture. Nothing dealing with existing perverse subsidies that crowd out more appropriate energy investment in the short term. Short term, its not very supportive for SMEs, with existing breaks being reduced, likely to add more pressure on SME survival rates over the coming year.


New investment zones

The government has announced the creation of 12 new investment zones to “drive business investment and level up” the country. Jeremy Hunt said the 12 areas agreed are: the West Midlands, Greater Manchester, the north-east, South Yorkshire, West Yorkshire, East Midlands, Teesside, and Liverpool. There will also be at least one investment zone in Scotland, one in Wales and one in Northern Ireland. Each English investment zone will have access to interventions worth £80m over five years, including tax reliefs and grant funding.

Corporation Tax

The main rate of corporation tax will increase from 19% to 25% from April 6. This higher rate will be paid by limited companies on profits over £250,000. Companies with profits of £50,000 or less will pay a small profits rate of 19% and any companies with profits between £50,000 and £250,000 will be eligible for marginal relief. This means there will be a gradual increase between the small profits rate and the main rate, so companies are not hit with the full 25% rate.

Super-deduction replacement

The super-deduction, a form of capital allowance where companies can deduct up to 130% of the cost from profits before tax is set to end on 31 March. The Chancellor announced a partial replacement of the scheme by introducing a new investment allowance: Full Capital Expensing. Allowing 100% of qualifying capital expenditure in the UK to be written off against taxable profits for the next three years, the new scheme expands on the current Super-deduction criteria to include IT infrastructure, as well as plant and machinery.

Research and Development

The Budget also included the announcement of a tax credit for SMEs worth £27 for every £100 they spend if they invest 40% of their expenditure in research and development. The enhanced deduction which SMEs could claim for qualifying R&D expenditure would reduce from 130% to 86%.

Energy and the Environment

Nuclear and green energy

Nuclear energy will now be classed as environmentally sustainable, while the government will create a body to oversee new nuclear power stations across the UK, as well as launching a competition for the design of small modular reactors. The government will also issue a further £10bn in green gilts.

Carbon Capture

Plans have been announced to drive investment in new carbon capture utilisation and storage (CCUS) and nuclear projects, in which the Chancellor promised to boost UK energy security and establish the country as a “science and technology superpower”. The government has committed £20bn over the next 20 years towards this.

Energy Bills Discount Scheme

In September 2022, the government announced the energy bill relief scheme – which capped the energy bills for non-domestic users by setting a guaranteed wholesale price. This programme was set to expire at the end of March 2023, to be replaced by the energy bill discount scheme, which was far less generous than the previous scheme. Under the new system, there will be no price cap, with businesses instead only offered a discount if energy prices breach a certain threshold. In the spring budget, the chancellor has opted to extend energy relief for households beyond the April date when the scheme was set to expire, for an additional three months. However, this has not been extended to business, who will go on past March with no assurances of a price cap.

Let us know what you think of the budget!

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