Marc Levy: Partner
The Chancellor has continued to support the hospitality sector in the post-Covid world with the introductions of a 50% business rates relief of up to £110k. This is certainly very welcome news for businesses in this sector and in particular for restaurants and venues suffering from staff shortages, delivery shortfalls and increased costs of energy. Combined with changes to alcohol duties and increases in the national living wage and the potential impact of ‘Plan B’ if and when it comes, businesses need to assess the implications, but will it be enough to survive the winter?
David Hough: Partner
There was a clear hint that interest rates will rise, as the Chancellor stated he has written to the Bank of England on the importance of controlling inflation. Consumer price inflation is estimated to average 4% over the next year and may require interest rates to rise to prevent this growing further. This would impact those with mortgages on variable rates and businesses reliant on debt funding.
Research and development
- The Chancellor missed an opportunity to target research and development tax credit reliefs at the green economy. Overall investment in research and development is increasing and the Chancellor announced some revisions to how research and development tax credits work. However, the green economy is growing rapidly and the global market to be at the centre of technological development in this space is very competitive. The Chancellor should have targeted reliefs at this sector in advance of COP26.
- The introduction of the scale up visa and investing in research and development at £20 billion a year by the end of this Government recognises that the UK needs to position itself as a global hub of science and technology to establish its identify post Brexit. Investment in research and development creates jobs but also allows the UK to export its developed goods overseas.
This was a statement framing prosperity from the Chancellor, announcing a series of tax cuts and public sector investment. The announcement of the Health & Social Levy increasing taxes on employment by 2.5% was strategically announced weeks earlier so as not to be today’s headline. The impact of inflation will place many businesses under pressure over the next financial year, with those in sectors worst impacted by Covid such as retail and hospitality also absorbing the increase in the national minimum wage. The Bank of England sets interest rates independently but the Chancellor’s comment that he had written to them to stress the importance of managing inflation is an early sign that interest rates are likely to rise, further pressuring businesses burdened by borrowing.
Simon Rothenberg: Director
How does making APD lower between UK airports tie with the green aims (and indeed increased long-haul duty)? How can it make sense to fly across the country when trains are good and much greener? Sound like a policy to pollute!
Retail, hospitality and leisure
50% discount to retail, hospitality and leisure centre rates (up to £110k) is likely to be welcomed by the struggling high street, along with the postponement of increases due next year. This is a big discount!
However, business rates still need to be properly reformed (not tweaked and discounts offered) to equalise between the high street and online warehouse.
Annual Investment Allowance (AIA)
Great news that the Annual Investment Allowance (AIA) increase has been continued to March 2023, however the continual changes to this scheme makes is incredibly hard for business owners to plan for the future – a long term commitment and aim for AIA would be welcomed.
Reform of duty
This reform of duty will reduce the cost of many more popular drinks (cheaper prosecco) but how will this be managed, and will it be more difficult for small business to work out what they should be doing (as it is such a change from previous years)?
They have also lowered the cost of a pint by up to 5%.
But is it right that Government has focused on reforming this area now? Should we really be reducing certain duties and encouraging more drinking and the impact this can have on society?
This was clearly a political choice – making the point that they can only do this as we have left the EU – trying to show the positives of doing so.
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