At first blush it would appear the Chancellor was encouraging capital investment by retaining the increased Annual Investment Allowance at £1m (it was due to reduce to £200k from 1 January 2022). However, on the basis he had already introduced the 130% super deduction the reality is that this will have a relatively narrow impact. For unincorporated businesses who cannot benefit from the super deduction this will be a very welcome change.
There was a lot of focus on investment in innovation and this was backed up by tax breaks in this area. The scope of R&D tax credits has been extended to include costs in respect of data and cloud costs. The Chancellor also alluded to the fact that the beneficial regime will be restricted to work undertaken in the UK which would impact any international groups where elements of qualifying work is outsourced to foreign businesses. There is currently very little detail behind this and indeed it will not even be legislated for until Finance Bill 2022/2023 but we are anticipating detailed guidance later this Autumn.
There was a more drastic improvement in other Creative Tax Incentives, such as Museum and Galleries Exhibition Tax Relief (“MGETR”) where the headline rates of the benefit will be doubled to as high as 50%. MGETR was due to be revoked from 1 April 2022 but will now continue until 31 March 2024.
The Chancellor did re-enforce that the Corporation Tax rate will increase to 25% from April 2023, but he also flagged that he hopes to cut taxes before the end of this Parliament so perhaps there is still scope for him to reduce that headline rate before the next election.