When Rishi Sunak unveiled his budget, many expected the Chancellor to announce tax reliefs and incentives to support the UK’s net-zero strategy – given it was taking place just days before Glasgow’s vital COP26 conference.
With the north-east heavily reliant on the energy industry, many local firms will have been hoping for support for their own journey to net-zero, says Gillian McColgan of Johnston Carmichael, the largest independent firm of Chartered Accountants and Business Advisers in Scotland.
Here, tax director Gillian explains more about what the budget means for tax reliefs and incentives in the north-east:
The Chancellor did place focus on other forms of investment in innovation. With an increase in Innovate UK’s annual core budget to £1billion, the establishment of a new Advanced Research and Invention Agency, a new Scale-Up visa to bring highly skilled individuals to the UK and an extension to the range of qualifying expenditure for R&D tax relief, there is potential benefit to many north east businesses with an interest in developing new science and technology.
R&D tax relief schemes
A commitment was also made to tackling abuse of the UK’s R&D tax relief schemes – a step in the right direction in order to secure the long-term viability of this important relief – as well as the introduction of a new territorial restriction, intended to “incentivise greater investment here at home”.
The extension of the £1m Annual Investment Allowance will come as welcome news for businesses, particularly unincorporated entities, leasing businesses and those investing in second hand plant that do not qualify for the ‘super-deduction’ that was announced in March.
Aberdeen city to receive £20million
Aberdeen is set to receive £20m from a total of more than £172m being invested in Scottish ‘levelling up’ projects.
The funding is being used in the city centre, which is a welcome announcement for many businesses, especially as it comes months after it was confirmed the popular John Lewis store would be closing.
Retail has been particularly hard hit by the pandemic, so anything that aids its recovery will undoubtedly be backed by the sector.
Small craft brewers and pubs may also benefit from the simplification of the alcohol duty regime and the introduction of small producer and draught beer relief, as well as the announcement that the planned increase in alcohol duty has been cancelled.
Business rates to be cut in half across England
Mr Sunak also unveiled a temporary 50 per cent cut in business rates for shops, restaurants, bars and gyms – up to a maximum of £110,000 – across England.
Businesses in the north-east will be eager to see the detail of Kate Forbes’ announcements of measures to support the Scottish hospitality, retail and leisure sectors come the Scottish budget on December 9 this year.
Aberdeen and Inverness were also mentioned as potential beneficiaries of the reduction in Air Passenger Duty for domestic flights.
Some have viewed this as a surprising announcement ahead of COP26 however others may hope that this could increase footfall in these local airports, and make more people consider the north-east as a tourist destination.
Tax reliefs and incentives north-east – the impact of Tonnage Tax reform
One announcement that may have significant impact in the north-east was the reform of Tonnage Tax.
The precise details are yet to be announced but it is hoped that more shipping businesses will be able to access the benefits of the regime as a result and that this may compensate for recent reductions in the rate of tax relief available on the purchase of new vessels.
The freeze in fuel duty may be broadly welcomed, along with the further temporary suspension of the HGV levy and introduction of temporary visas, aimed at alleviating pressures in the supply chain.
A positive future for Aberdeen and the north east
It is fair to say that the Chancellor’s statement did not contain radical changes to the tax system.
This didn’t come as a huge surprise following the more significant announcements seen in the March Budget and recent introduction of the health and social care levy.
Instead, he painted a positive picture about the future, beginning “the work of preparing for a new economy”, while still acknowledging the huge financial impact caused by Covid-19.
The Chancellor always has difficult decisions to make in these budgets, but there are some positives for Aberdeen and the north-east to take from his announcement.
Investment in the city centre cannot be a bad thing and research institutions, educational establishments and businesses alike may benefit from some of the commitment to investment in research and development.
For more information on the budget and tax reliefs and incentives in the north-east, please visit Johnston Carmichael’s website.