Companies planning to make significant investments and life-sciences ventures ploughing money into research and development will have been delighted with the Budget.
Chancellor Jeremy Hunt said that, for smaller firms, he has increased the annual investment allowance to £1million.
This means that 99% of all businesses can deduct the full value of all their investment from that year’s taxable profits.
He also announced a new policy of “full expensing” for the next three years, with an intention to make it permanent.
Every pound a company invests in IT equipment, plant or machinery can be deducted in full and immediately from taxable profits.
The chancellor said: “It is a Corporation Tax cut worth an average of £9billion a year for every year it is in place.
Huge impact
“And its impact on our economy will be huge. The OBR (Office for Budget Responsibility) says it will increase business investment by 3% for every year it is in place.
“This decision makes us the only major European country with full expensing - and gives us the joint most-generous capital allowance regime of any advanced economy.”
Mr Hunt said he also wanted to make taxes more competitive in the life sciences and creative-industry sectors.
He added: “In the autumn, I said I would return with a more robust R&D tax credit scheme for smaller, research-intensive companies.
“So today, I am introducing an enhanced credit which means that, if a qualifying small or medium-sized business spends 40% or more of their total expenditure on R&D, they will be able to claim a credit worth £27 for every £100 they spend.
“That means an eligible cancer-drug company spending £2million on research and development will receive over £500,000 to help them develop breakthrough treatments.
Science superpower
“It is a £1.8billion package of support helping 20,000 cutting-edge companies who, day by day, are turning Britain into a science superpower.”
One tax expert said the new enhanced tax credit for R&D-intensive SMEs was “excellent news”.
Penny Simmons, of Pinsent Masons, added that the announcement was a “huge relief” for those operating in sectors heavily dependent on research and development - particularly life sciences.
She went on: “It is positive and reassuring to see how constructively the Treasury has engaged with R&D-intensive sectors and listened to their concerns about the significant detrimental impact of cuts to SME R&D tax reliefs being introduced in April.
“It is reassuring that a workable solution has been found to reduce the detrimental impact of the cuts.”
“SME tax reliefs provide a vital source of financing for R&D-intensive start-ups. Safeguarding tax relief is essential – without it, many start-ups may have struggled to secure adequate funding to progress R&D and ultimately new UK-based innovations.
Huge relief
“The ability for eligible companies to claim part of the credit as a cash repayment will be a huge relief for loss-making start-ups in the life-sciences sector and those focused on developing technology to support the UK’s net-zero transition, which may have limited access to other sources of finance.
“Recent events involving Silicon Valley Bank and the exposure of tech and life-sciences start-ups, demonstrate the often-limited financing options available to UK start-ups. SME tax credits provide a vital financial lifeline to these businesses.”