Last week, the Chancellor Jeremy Hunt released his last budget before the expected General Election later in the year. It did not contain any major surprises and has elicited mixed reactions from the manufacturing industry. What are the key takeaways for the sector?
National Insurance Cuts
The Chancellor cut the main rate of national insurance contributions (NIC) paid by workers; the Primary (Employee) Class 1 NICs category. This cut is effective from 6 April 2024, and is in addition to the 2 per cent cut announced in the Autumn statement.
Manufacturing leaders need to make sure that their Payroll software and systems are adjusted to the new rate of contributions. For those using Advanced’s Payroll solution, legislative changes are made within the software – dealing with regulations so you don’t have to. Despite the short notice period we have worked to ensure that this NIC cut rate is already included in the year-end release.
Full expensing to leased assets
Hunt announced that draft legislation would be published on extending full expensing to leased assets. Full expensing provides tax relief for businesses investing in their company growth, by providing a 100 per cent capital allowance for certain equipment and machinery investments in the first year they are bought. This allows you to deduct the full cost of qualifying assets from your corporation tax calculations.
Previously, this did not apply to leased equipment or machinery. Although the Government has not made a final commitment yet, drafting the legislation to extend the full expensing to leased assets is an important step, especially for growing manufacturers who are in the position to expand operations but not buy. It will make growth through leasing more feasible. Stephen Phipson, Chief Executive of Make UK, has called for the legislation to be brought forward so it can come into action sooner rather than later, and Fay Skelton, Head of Policy at Make UK, suggests it should be expanded further to support sustainability goals by covering refurbished, second-hand technologies.
Also helping smaller businesses, the Budget brings a rise of £5000 in the threshold small companies must register to pay VAT, from £85,000 to £90,000 – however, many are saying the change is too little.
Funding for life sciences, automotive and aerospace
The Chancellor announced new projects that will receive government funding, including two pharmaceutical manufacturers being given £84 million to expand their UK plants. He also confirmed that companies can soon apply for a share of the £520 million life sciences manufacturing funding announced in the Autumn statement, and almost £73 million of investment in automotive Research and Development (R&D) projects related to Electric Vehicle technology.
Freeze on alcohol duty
Hunt announced a freeze on alcohol tax, which would have risen otherwise in line with inflation. This will benefit drinks manufacturers and provide stability.
Top up for growth sector apprenticeships
Thirteen specific apprenticeships will receive a £3000 per apprentice boost from April, coming on top of the usual funding for training providers. However, they will need to demonstrate 15 applications to the course to access it. The apprenticeships receiving the boost include machining technician, which qualifies manufacturing engineers of precision parts, science manufacturing technicians, and process leaders, involved in the production of high-volume manufacturing such as a pharmaceuticals, textiles or food and drink.
What are the trade body reactions to the Budget?
Make UK has been largely supportive of the changes. Marco Forgione, Director General at the Institute of Export and International Trade, suggests that the increase in the VAT threshold for small businesses is too little and presses for it to be increased to £100,000.
Some manufacturers, such as Rowan Crozier, CEO of Brandauer, a Birmingham-based metal pressing specialist, have expressed disappointment over the lack of support for businesses dealing with export regulations in a post-Brexit world. For more on these changes and their impact, read our blogs April changes to EU border controls: Explainer for your team and ‘Not for EU’ labels: Are you prepared?
In all, this was a mixed budget for manufacturers and there have been no drastic changes to the landscape. Reactions will largely depend on size of business and sub-sector, and for many only the National Insurance cuts will have a direct impact. Some will argue that the Budget is glaring for its absences, for example in substantial measures to ease pressure on exporters and to combat the skills shortage. Stay tuned to Advanced for further updates on legislative changes ahead of the General Election.
