Whilst the Budget naturally considered current events regarding COVID-19 and the impact of this across all businesses, the new Chancellor still was able to make some specific announcements impacting directly upon the Manufacturing & Engineering Industry.
The Government remains keen for businesses to continue to invest in Research and Development (R&D), as it seeks to increase economy-wide investment in R&D to 2.4% of GDP by 2027, therefore it is welcome that the rate of R&D Expenditure Credit will increase from 12% to 13% for expenditure incurred on or after 1 April 2020. However, this announcement will only, generally, benefit large companies. No changes were announced regarding the enhanced rate of R&D used as a deduction against applicable expenditure for SME’s and changes, in respect of the SME payable tax credit for loss making companies in one year being capped at three times their total PAYE and NIC liability, is still commencing from 1 April 2020.
The Government also remains keen to support exporters by extending and permanently increasing the lending capacity of UK Export Finance from £3bn to £5bn and providing additional lending facilities for projects supporting clean growth and buyers of UK defence and security goods and services.
Whilst the R&D and Export Finance announcements provided some good news, there was a new measure which may not be so welcomed – the plastic packaging tax.
Given the governments drive on a Greener economy, UK producers and importers of plastic packaging will be charged £200 per tonne on plastic packaging that contains less than 30% recycled plastic. This was not an unexpected measure and does not commence until April 2022 to allow businesses time to adjust their current procedures. There will be a minimum threshold, being 10 tonnes of plastic packaging, ensuring the smallest business are not caught by this measure and disproportionally impacted.
Business owners in the sector will also be disappointed in the reduction in Entrepreneurs Relief from a lifetime limit of £10m to just £1m commencing from Budget. As a result, the tax rate paid by these owners to sell up or cash in will significantly increase.
The government also announced it would look into how to improve the Apprenticeship Levy. A key area for development of staff in this industry, as it seeks to support large and small employers in meeting the long-term skills needs of the economy. As well as ensuring that sufficient funding is made available in 2020-21 to support an increase in the number of new high-quality apprenticeships in small- and medium-sized businesses.
Overall, with the announcements detailed above and increased spending in public sectors and infrastructure, it is hoped these measures will provide manufacturers with a welcome boost. However, with short term difficulties over COVID-19 and trade deals being undertaken, including with the European Union, it is unlikely we will see how much benefit is brought to the industry by these measures until these matters are addressed.