PRESS RELEASE : Autumn Statement – PwC comments on general tax and R&D [November 2022]
The press release issued by PWC on 17 November 2022.
Jon Richardson, head of tax policy, PwC, says:
“The Chancellor delivered on the promise that there would be few rabbits out of the hat on tax for this Statement. The bulk of extra revenue raised has come from freezing or reductions in allowances as well as the expected increase in the energy windfall tax. There was some positive news on business rates but the net impact is the UK is now facing a record tax burden.
“Apart from the additional tax there is a hidden cost to the announcements which is the additional tax compliance burden – as tax free allowances reduce, more income and gains are brought into the tax net which will need to be reported on tax returns for the first time.
“The Chancellor talked a lot about growth but with the corporation tax rate going up to 25%, no replacement to the super deduction and a net reduction in R&D tax relief, the UK’s tax competitiveness is significantly deteriorating.”
Rachel Moore, R&D tax partner, PwC
“The Chancellor has given large companies a surprise and much welcomed bonus by increasing the headline R&D credit rate from 13% to 20% resulting in a change in cash value from 10.5% to 15% (after taking account of the change in corporation tax rate). However this is being more than paid for by a significant reduction in credits available for SMEs where the rate of relief for loss making companies nearly halves from 33% to 18.6%. This rebalancing of rates between the two schemes will result in more than a £1 billion of extra funds for the exchequer.
“While it is widely recognised that there are issues in the SME market, this seems to be a blunt approach which penalises all claimants and does not tackle the underlying issues. It is also a double whammy for SMEs operating globally who will see claims reduced by the previously announced exclusion of overseas costs from claims. These changes will particularly impact the life sciences sector who depend heavily on R&D credits for funding.”
