This year’s autumn budget will be announced on 27 October 2021 and with the UK’s economy still recovering from the COVID-19 pandemic, it remains uncertain what affect the announcement could have for UK businesses.

The government have kept their cards close to their chest in relation to what it plans to announce in this year’s autumn budget, but speculation as to what the big speech will include has begun. We have set out below some predictions which businesses should watch out for and the impact they may have from a legal perspective.

1. Will fuel duty stay frozen?

Chancellor Rishi Sunak announced in March that fuel duty will be frozen at 57.95p for the eleventh consecutive year. However, according to the Telegraph, the Prime Minister has already refused to rule out a fuel duty rise, despite near record high petrol and diesel pump prices.

Matthew Walters, head of consultancy services at LeasePlan UK, has warned that the Chancellor doesn’t even need to mention fuel duty during the Budget for the current freeze to lift. For example, Walters was quoted saying “It’s worth noting that without any reference to an extension from the Chancellor the freeze will automatically end. That’s because existing legislation around fuel duty stipulates how much it goes up by each year.”

Walters also said that fuel duty income remained the ‘elephant in the room’ as the country waits with bated breath to hear how the Government plans to plug the £28bn gap it faces in the switch to electric vehicles.

Potential impact on businesses?

It is inevitable that increased fuel prices are going to have a direct effect on transport costs and thus distribution costs for businesses. This in turn is likely to drive up costs of production. At a time where many businesses are experiencing teething problems with Brexit (and have suffered increased costs as a result), this price increase is likely to reduce the cashflow of many businesses. The question then becomes whether these increased costs can be passed down the supply chain, including whether you can pass them to customers and whether suppliers can pass them on to you. The terms and conditions may be crucial here and we suggest they are reviewed at the earliest opportunity to ascertain the position.

2. Will the government listen to the hospitality and tourism industries to keep VAT low?

Hospitality and tourism bosses are pleading with the government to permanently lower the VAT rate on businesses in their sectors to help safeguard thousands of jobs and to aid the continued recovery since the lifting of the COVID-19 lockdown. This comes after the temporary reduction to hospitality and tourism VAT ended on 1 October 2021, when it increased from five per cent to 12.5 per cent. It’s due to return to pre-pandemic 20 per cent in April 2022.

Potential impact on businesses?

If the VAT reduction is to continue or even permanently remain at 5%, the measure is expected to boost cash flow and viability of businesses in the hotel, hospitality and tourism sectors. Where businesses opt to pass some or all of the saving on to customers, this may result in increased spending in these sectors.

However, if the government remain silent on this point, trade bodies including UK Hospitality, the British Beer and Pub Association, the British Institute of Innkeeping, Tourism Alliance and the Association of Leading Visitor Attractions are warning that rising VAT risks derailing the recovery when businesses are still in survival mode which could result in increased unemployment.

3. Further details on the help to grow scheme?

Help to Grow: Digital is a new UK-wide scheme to help small and medium size businesses (SMEs) adopt digital technologies that are proven to increase their productivity.

The scheme will offer SMEs free and impartial advice on how technology can help their business. An online platform will help them to:

  • identify their digital technology needs
  • assess technology purchasing options
  • implement new technologies in their operations

The scheme also allows businesses to claim a discount of up to 50% on the costs of approved software, worth up to £5,000. Vouchers are initially expected to be available for software that helps businesses:

  • build customer relationships and increase sales
  • make the most of selling online
  • manage accounts and finances digitally

It is expected that full details on the businesses that will be eligible and software that will be available for the voucher will be published on 27 October 2021.

Potential impact on businesses?

The government says the programme will help 30,000 businesses over the next three years to:

  • develop a growth plan
  • improve resilience
  • learn how to innovate
  • inspire employee engagement
  • build marketing and financial strategies
  • adopt digital technologies

Those businesses hoping to take advantage of the scheme should ensure that they have a good understanding of the software which is being offered and the potential legal risks associated with these types of service offerings. We would of course recommend that businesses ensure that there is a contract in place with their software providers and that these terms are reviewed by lawyers to ensure that businesses are aware of the material legal risks and commercial considerations associated with these types of contracts.

4. What are the government’s plans to level up opportunities across the UK?

Research from the Institute for Fiscal Studies (IFS) found that: “On a wide variety of measures, regional disparities in the UK are greater than in most comparable countries.”

It is therefore hoped that freeports will assist with “levelling up every part of the UK” as areas given freeport status will benefit from tax reliefs, simplified customs procedures, streamlined planning processes to boost redevelopment and government support to promote regeneration and innovation.

Freeports allow goods that arrive into freeports from abroad to be exempt from tariffs that are normally paid to the government. These taxes are only paid if the goods leave the freeport and are moved elsewhere in the UK. Otherwise, they are sent overseas without the charges being paid.

The locations of England’s eight new freeports were announced at the March 2021 Budget:

  • East Midlands Airport
  • Felixstowe and Harwich
  • Humber region
  • Liverpool City Region
  • Plymouth
  • Solent
  • Thames
  • Teesside

The government is expected to announce its plan to deliver a bespoke freeport model, and the goal would be for freeports to create jobs, increase international trade, contribute to the regional levelling up agenda and serve as hubs for innovation. The introduction of freeports is expected to represent a fantastic opportunity for companies across every sector and region of the UK.

Potential impact on businesses?

Importers get relief on customs duties or can defer the duties while the goods are held in the freeport, and there are simplified customs procedures. Governments can also use other enticements, from tax breaks to fewer regulations. If the imported goods are used in manufacturing within the boundaries of the freeport (which can extend for several miles) only the final finished product, when exported, attracts duties. Freeports can therefore help businesses increase manufacturing and encourage jobs and investment in areas that would otherwise struggle to attract them.

5. Will there be an improvement to the UK’s R&D tax reliefs?

The government, at the last budget, launched a review into R&D tax incentives with the launch of a three-month consultation period and the government has an ambitious target to raise total investment in research and development to 2.4% of UK GDP by 2027. R&D tax reliefs have a key role in incentivising this investment by reducing the costs of innovation so it is important for the UK government to ensure that the reliefs remain up-to-date, competitive and well-targeted. There is therefore a possibility that the government may announce higher rates of relief.

Potential impact on businesses?

Higher rates of R&D tax relief would be a government incentive designed to reward UK companies for investing in innovation. R&D tax credits are a valuable source of cash for businesses to invest in accelerating their R&D, hiring new staff and ultimately growing. From a legal perspective, businesses specialising in innovation should consider the ways in which they can protect their ideas – such as entering into an NDA. Businesses should also consider what protection tools are available such as patenting their ideas and inventions and registering their design rights.