Leyton responds to the government’s growth plan

Note: Measures in the government’s ‘growth plan’ for the UK are fluctuating. Leyton will continue to monitor the announcements and update this article if necessary.

The UK government recently announced a series of controversial measures to stimulate growth, including a freeze on energy bills. These announcements came against the difficult backdrop of rising energy prices, inflation increasing by 10%, an expected economic recession, and Pound Sterling hitting its lowest level against the dollar in 37 years.

During these challenging times, Leyton is here to help. We’ve written this summary of the newly announced ‘growth plan’ measures to help explain how the changes might affect your business.

Support for businesses facing rising energy bills has been unveiled

The Energy Bill Relief Scheme (EBRS) was announced in September and has been effective since 1 October 2022. The scheme implements an energy bill relief for non-domestic customers in Great Britain, such as businesses, voluntary sector organisations and public sector organisations.

The discount is provided to businesses on a non-domestic gas or electricity contract who are:

Discounts are initially applied to energy usage for a six-month period between October 2022, and March 2023. The UK Government will review the scheme in a few months to either limit its application or to introduce a replacement scheme beyond 31 March 2023.

The UK Government calculates the discount on gas and electricity unit prices by comparing the estimated wholesale portion of the unit price payable this winter to a baseline’ government-supported price’ (the Supported Wholesale Price). This scheme does not require an application, and suppliers apply it directly on energy bills. The discount applied is in pence per kilowatt hour (p/kWh).

For all non-domestic energy users in Great Britain, this government-supported price has been set at:

In comparison, this winter, wholesale costs in England, Scotland and Wales are expected to reach (i) £600 per MWh for electricity and (ii) £180 per MWh for gas.

The government will compensate suppliers for reducing wholesale gas and electricity unit prices. The p/kWh government support for comparable contracts is the same across suppliers, but the absolute level of individual bills continues to vary across different contracts and tariffs. Errors could therefore occur both in the calculation of the bill relief, and in the calculation of the compensation for suppliers. As a key partner to all our clients, our technical and tax experts support you in your sustainable progress and provide financial and organisational solutions regarding EBRS.

Energy Markets Financing Scheme (EMFS)

The Treasury intends to implement a new Energy Markets Financing Scheme (EMFS) that will provide additional liquidity to energy firms to meet extraordinary variations in margin calls due to high and volatile energy prices. This £40 billion scheme would be delivered with the Bank of England, to address exceptional liquidity requirements through a 100% guarantee, delivered via commercial banks and will open to applications from 17 October.

The scheme will be designed as a last resort to provide short-term financial support. The EMFS sets eligibility requirements for applying firms, such as being otherwise in sound financial health, making a material contribution to the liquidity of UK energy markets and undergoing solvency checks.

Investment zones

The UK Government is willing to implement geographical tax investment zones designed to enhance their attractiveness and generate investments and growth. As a time-limited (10 year) measure, the government will set up massive tax incentives within these ‘investment zones’.

The government is working with the devolved administration and the local partners to establish a local growth settlement that widens the government support to localities. The government is in early discussions with 38 Mayoral Combined Authorities and Upper Tier Local Authorities who have already expressed an initial interest in having a clearly designated, specific site within their locality.

The tax incentives could include:

Business rate relief

100% relief from business rates on newly occupied business premises and some existing businesses that would expand their activities in investment zones.

Enhanced Capital Allowance

Companies could receive a 100% first-year allowance for qualifying expenditures on plant and machinery.

Enhanced Structures and Buildings Allowance

Businesses could be granted an accelerated relief for qualifying non-residential Structures and Buildings investments and reduce their profits by 20% (to deduct 100% of the investment’s value over 5 years).

Employer National Insurance Contribution (NIC) relief

For new employees working on investment zone sites for at least 60% of their time, NICs will be 0 rated on earnings up to £50,270 per year and charged the usual amount above this level.

Stamp Duty Land Tax (SDLT)

The plan intends to implement a 100% relief of SDLT for land and buildings bought for use or development for commercial purposes in investment zones (as a reminder, a business must pay SDLT on the purchase of property or land over a certain price threshold in England and Northern Ireland).

It’s worth noting that investment zones have proven to be spectacular sources of growth in other countries that have implemented likewise schemes, such as France. As a worldwide group, we have international experience of similar geographical investment zones. In the UK, our highly qualified tax and technical consultants, based across our London, Manchester, Edinburgh and Glasgow offices, advise thousands of businesses annually on all aspects of innovation funding, government incentives and capital advisory.

Phase 2 of the Industrial Energy Transformation Fund (IETF) started in Autumn 2022

Phase 2 of the Industrial Energy Transformation Fund (IETF) provides approximately £70 million of grant funding for feasibility and engineering studies and for deploying industrial energy efficiency and deep decarbonisation projects. The Autumn 2022 competition is open to businesses of any size registered and operating in England, Wales or Northern Ireland (Some IETF rules may differ for businesses based in Northern Ireland). Applications open on 10 October 2022 and will be closed on 13 January 2023. The competition is held by the Department for Business, Energy & Industrial Strategy (BEIS), which is expected to notify the results of the competition’s initial stage by May 2023.

Leyton helps UK businesses leverage financial intensives to accelerate their growth. Our tax and technical experts help thousands of businesses claim tax relief, incentives, and savings. Our core services include R&D Tax Credits, Energy Tax Relief, Capital Allowances, Patent Box Scheme, Land Redemption Relief and Creative Industries Tax Reliefs.