Fiscal Incentives – Autumn Budget 2017

On Wednesday, the Chancellor was faced with a real test as he faced the issue of economic uncertainty and a downgraded growth forecast by the Office for Budget Responsibility.

Productivity has been the buzzword of the summer and Philip Hammond was very keen to be seen to address the systemic issues that the UK has faced since the 2008 crisis.

Research and development

Accordingly, the National Productivity Investment Fund (NPIF) has now been increased to more than £31bn from its current £23bn level, with an additional £2.3bn earmarked for investment in research and development (R&D).  It’s the Government’s aspiration to increase R&D as a percentage of GDP to 2.4% by 2021/22 and to facilitate this, the Research & Development Expenditure Credit (RDEC) rate has been increased from 11% to 12%.

What does this mean?

RDEC is applicable to all companies; however this measure is likely to be most beneficial to larger businesses and groups with more than 500 staff. Small and medium sized enterprises (SMEs) usually claim under the more generous SME scheme and no changes to this scheme have been made.

Furthermore, it was also announced that an Advanced Clearance Service (ACS) is to be introduced for claims under the RDEC rules. This would seem to be analogous to the current assurance scheme provided to SMEs, which is available to new claimants for the first three returns, although limited details are available currently. Until we understand more of the detail it is difficult to predict, but given that the SME assurance scheme hasn’t been extensively used and that this comes at a time when compliance costs are increasing for businesses, it may be that ACS will be similarly unpopular.

Capital allowances

There was a minor tweak to the enhanced capital allowances scheme, to bring the surrender value of Enhanced Capital Allowances qualifying expenditure in-line with the current Corporation Tax (CT) rate. The current surrender rate is 19% of the loss created by qualifying expenditure; however, this has now been reduced to two thirds of the current CT rate of 19%, approximately 12.7%.

Other notable announcements include £3bn for Brexit planning, an extra £2.8bn for the NHS over the next three years and the abolishment of stamp duty for first time buyers for property under £300,000.

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