5 Mins
Enterprise Management Incentives
Electricity generator levy
Losses and HMRC letters
Homeworking costs
Autumn Budget 2022 – R&D Tax Relief Changes
At the Autumn budget 2022, the chancellor announced highly anticipated changes to R&D Tax Relief.
For SMEs, the enhanced deduction rate will reduce from 130% to 86% of qualifying expenditure, with the rate of tax credit decreasing from 14.5% to 10%.
Meanwhile, for RDEC claims, the rate of relief has increased from 13% to 20%.
The above rate changes will come into effect on qualifying expenditure taking place on or after 1 April 2023, and will be legislated for in the Autumn Finance Bill 2022
These come as additional changes to those already announced at the Autumn Budget 2021, where the inclusion of data and cloud costs as qualifying expenditure was announced. The changes to qualifying expenditure will be legislated for in the Spring Finance Bill 2023.
The government plans to “work with industry” to better understand what support R&D-intensive SMEs may require, meaning further changes may be on the horizon.
We would be happy to discuss any questions you may have.
Enterprise Management Incentives
Motivation is a key factor for a successful business; and having a team of highly motivated employees is a major win for any business owner. An “Enterprise Management Initiative (EMI) scheme can help your business by offering workers a great incentive to join you, to work hard for you, and to stay with you. EMIs are attractive to employees because of their tax efficiency, and can even offer a corporation tax deduction to the company when the employee gets their shares, so everyone wins.
The EMI legislation is relatively flexible and – within limits – allows you to shape the scheme in a way that suits the company and your aspirations for it, ensuring that employees feel valued and motivated to help you deliver those aspirations.
Assisting companies with setting up and running EMI schemes are things that we have a long history of helping our clients with, with a team who works with businesses to ensure their EMI scheme delivers what they need.
If you would be interested in setting one up, or exploring the options available, please get in touch.
Electricity generator levy
The chancellor announced in his Autumn Statement the introduction of a new Electricity Generator Levy from 1 January 2023. The levy is designed to ensure electricity generators make an appropriate contribution to the substantial cost of support for energy bills. The Treasury has outlined the following scope for the levy:
- The levy will apply to corporate groups, or, where relevant, standalone companies, that undertake electricity generation in the UK and are either connected to a national grid or connected to local distribution networks.
- The levy will be applied to groups generating electricity from nuclear, renewable and biomass sources who are benefitting from a significant increase in the price received for their output without a corresponding increase in the costs of generation.
- The levy will not apply to electricity that is generated under a Contract for Difference entered with the Low Carbon Contracts Company Ltd (LCCC).
- The levy will be limited, through a de minimis threshold, to those groups generating more than 100 Gigawatt-hours (GWh) per annum of electricity from in-scope generation assets in a qualifying period.
The Treasury has yet to confirm the precise definition of a group for the purposes of the levy, however, this is being considered urgently as the legislation is finalised. The treasury aims to publish draft legislation before the tax comes into force on 1 January 2023, at which time we will provide a further update.
If you believe that your company will be impacted by the new levy, please get in touch and we can provide additional support including details of how the levy will be calculated.
Losses and HMRC letters
HMRC have been sending letters out to companies headed up as “differences in the loss amounts of the Company Tax Returns”. From our communication with HMRC, it would appear that a number of software providers have had these inconsistencies which have resulted in HMRC’s system not matching expectations for specific types of losses. As such, HMRC have confirmed that they would use the computations as a basis for the carry forward position – and if we agree that this is correct, then nothing further needs to be done.
In our process, the computations are submitted alongside the return as a matter of course and therefore we do not need to provide any further information for HMRC to proceed.
If you receive one of these letters and require a more detailed check, please let us know.
Homeworking costs
Homeworking has become one of the more complicated areas of employment taxes and as a result, there is often a lot of confusion around what can be paid without attracting a tax charge for the employee and employer.
That being said, HMRC accept that where there is a homeworking arrangement between employee and employer exists, then the payment of the £26pm can be made free for tax or NIC provided that the following criteria was met:
- The employees are working at home as agreed with the employer and they regularly work from home under those arrangements
- The amount the employer pays give them is not more than their additional household expenses or the amount the employer pays is not more than the current weekly limit
It should be noted that from April 2022, that the rules for employees claiming a deduction for homeworking expenses have been significantly tightened. As an example, simply working from home because the employee’s contract allows flexible working will no longer be eligible to claim a deduction. If you would like more information on this area, please do not hesitate to get in touch.
