Mini Budget 2022: Large and listed businesses

*For the latest information please see our mini budget summary

In line with ‘The Growth Plan’ several tax cuts have been announced which should benefit large and listed corporations. While there are no sector- specific measures – and notably no announced changes to R&D incentives that may impact specific industries - the measures should benefit large and listed corporations generally and especially those operating in the Retail & Consumer sector and other industries employing a large workforce, such as manufacturing and the automotive sectors. This is intended to be a bold budget in favour of growth and investment to combat recession fears.

Energy cost plan

The chancellor announced an energy package with plans to reduce wholesale energy costs for UK businesses by capping energy costs over the next 6-months starting in October 2022. This is intended to be funded by government borrowing which could cost about £60 billion. While this is a short-term measure, it should reduce the operating cost of most businesses particularly those with a large Real Estate footprint, such as the Retail sector, who have been battling with soaring energy bills in the past months.

Given that this is a short-term measure, being just for 6-months, it remains to be seen how the government can continue to support businesses in the long-term.  A review of the plan has been promised withing three months, though this is to inform how relief might continue to be given to the most vulnerable non-domestic customers after March 2023.

Corporation Tax rate *

This should create a competitive tax rate for the UK in comparison to other jurisdictions and ensure that the UK continues to be an attractive destination for large businesses looking to invest in new territories or looking for attractive holding locations. For businesses already operating within the UK, this should help relieve pressure on cash which can be used to re-invest into their businesses. For deferred tax accounting purposes, it will be necessary to continue to use the enacted 25% rate until its repeal is substantively enacted.

Capital allowances

The 100% Annual Investment Allowance (AIA) which is currently available to companies which make qualifying investments (capped at £1m) in plant and machinery will no longer be reduced to £200k from 1 April 2023. The AIA will remain at £1m. Thus, large businesses can continue to use this incentive to invest in qualifying fixed assets of up to £1m.

Designated Tax Zones

Certain low-tax investment Zones are being designated in 38 local authorities across England to encourage investment and growth of the UK economy by reducing business taxes, though other areas may apply for investment zone status in the future. Companies located within these Zones will benefit from additional enhanced capital allowances.

In addition, the following tax reliefs will be available for a period of 10 years –

• Accelerated tax reliefs for structures and buildings.
• 100% tax relief on qualifying investments in plant and machinery.
• Nil stamp duty on purchases of land and buildings for commercial or new residential development.
• Potential employer National Insurance relief for employing qualifying new employees
• Nil business rates on newly occupied business premises.

For large retail and other businesses looking to expand into or enter the UK market, this could be a good consideration in terms of where to locate their businesses.

VAT free shopping for UK tourists

This is an incentive specifically targeted at UK Consumer businesses. Tourists visiting the UK will not have to pay VAT on purchases made in the UK that they then remove from the UK. It restores the position that existed up to the beginning of 2021 and should boost sales for retail businesses that attract foreign tourists and result in the overall growth of the sector. This is an attractive incentive for  retail businesses focusing on this sector to establish or re-develop their businesses within the UK.

IR35 Reform

The IR35 ‘off-payroll working’ reform will be repealed from April 6, 2023. Thus, UK workers who currently provide services via an intermediary, such as a personal service company, will now revert to being responsible for determining their employment status for tax purposes and paying the appropriate amount of tax and national insurance. It is expected that this reform will encourage large multinationals, and especially those without a physical presence in the UK, to engage off-payroll workers to carry out activities in the UK without needing to take on the administrative burden imposed by the IR35 rules that were introduced into the Private Sector in 2021.  Organisations will need to take care in the period up to April 2023 and beyond April 2023 in respect of individuals they engage directly (i.e., no personal service company is in place) as this will still be the responsibility of the end user.

Tax simplification and new measures to combat fraud and money laundering

Alongside simplifying IR35 compliance by its repeal, the Chancellor announced his intention to embed simplifying the tax code into the heart of Government, although winding down the independent Office of Tax Simplification may be seen as a controversial move. The new Economic Crime and Corporate Transparency Bill, sped along by current political events, had its first reading the day before the mini budget.  It proposes long overdue reforms to Companies House, which will inevitably bring about increased corporate regulation to mirror existing legislation to make companies criminally liable for facilitating tax evasion. 

National Insurance

The April 2022 increase in National Insurance will now be reversed from 6 November 2022 to save cost for both businesses and employees. For large corporations with high numbers of employees, this should result in substantive savings in staff costs. 

Conclusion

While the tax measures introduced by the Chancellor should boost growth for businesses and the UK economy in the short term, it remains to be seen whether this will result in increased Government revenue to sustain these measures. We would expect to see the government and office of budget responsibility’s updated projections in this regard during the next budget announcement.

* - The 25% has been reinstated as per the announcement of 14 October