As has become tradition, many of the Chancellors key announcements were heavily trailed in the days running up to the Spring Budget with targeted initiatives focussed on getting Britain back to work.

These primarily included measures designed to increase access to free child care to help enable young parents to return to work and pension reforms to entice older people, particularly Doctors and other experienced Public Sector workers, to remain in employment longer.

From a Transport perspective, there was a continued focus on the “levelling up agenda” with greater powers and funding being transferred to Local Authorities and the launch of 12 Investment Zones across the UK. How these will interact with the existing Freeport sites will become clearer in time particularly as 2 of the Investment Zones in England already have well progressed Freeports – however the drive to bring together local universities, industry and transport has been well received.

Beyond the freeze on fuel duty, greater flexibility around tonnage tax and an increase of funding towards fixing potholes there was little else of note which will directly impact the Transport sector beyond the topics below:

Full expensing for plant and machinery

The Chancellor finally announced a replacement for the Capital Allowances Super-Deduction which, rather than providing the headline-grabbing 130 percent FYA, this provides a 100 percent FYA for qualifying plant and machinery but, given the tax rate increase, the cash value of this remains at approximately 25p per £1 of investment, the same as in the super-deduction regime.

The 100 percent FYA will apply to most plant and machinery assets. Special rate assets will continue to get 50 percent FYA, as was the case with the super-deduction regime. General exclusions will apply and, as always, the devil will be in the detail, for example it remains to be seen whether there is any similar contract timing requirement to that which applied to super-deductions. It will also be interesting to see if the Government will amend one of the quirks of the super-deduction which required ownership of the asset in the period in which the claim was made, which in many cases had the effect of excluding deposits and stage payments from the regime, without any real rationale for doing so. For expenditure which does fall outside of the full expensing regime, the AIA limit has been permanently increased to £1 million, which should soften the blow.

This full expensing relief will be available for three years from 1 April 2023 to 31 March 2026, although the Chancellor signalled an intention to make this permanent when economically feasible. Given that one of the criticisms of the super-deduction was the limited amount of time it was available and the lack of certainty for long-term investment, this slightly longer period is welcome, but it still provides limited certainty for businesses embarking on multi-year investment programmes, and industry will no doubt be keen to hear about any future extensions or replacements to this relief with a bit more notice.

Finally, there was no indication in the documents issued alongside the Budget that there will be a surrenderable cash credit option for loss-making businesses. This would have been a highly desirable option; absent this, accelerated allowances to augment losses are unlikely to promote the behaviours the Chancellor is looking for from the business community.

Overall, this policy will be welcomed by businesses investing in plant and machinery and is likely to encourage businesses to bring forward expenditure with greater effect than has been seen from the Super Deduction regime. Whilst there still remains an element of uncertainty regarding the longer term availability of the relief and indeed the Capital Allowances regime in the UK, the greater visibility regarding the direction of travel will be appreciated.

Funding of £80 million each to provide support with spending and access to tax incentives for refocussed Investment Zones

A refocused Investment Zones programme has been launched, with the goals of growing priority sectors and addressing economic disparities between regions. The proposal is to provide targeted support to five priority sectors through access to a flexible package of support for businesses located in the planned 12 Investment Zones. For the eight zones in England, each Investment Zone is expected to benefit from Government interventions (including tax reliefs and grant funding) worth up to £80 million over a five-year period. Legislation to give access to tax reliefs equivalent to those for Freeports will be included in Finance Bill 2023 and the Government anticipates funding will commence in 2024/25.

The Government expects to establish 12 Investment Zone across the UK. Eight Investment Zones will be located in England. The potential locations in England have already been identified (the Mayoral Combined Authorities of East Midlands, Greater Manchester, Liverpool City Region, the North East, South Yorkshire, Tees Valley, West Midlands, and West Yorkshire) and reflect the Government’s ‘levelling up’ agenda by targeting areas which it believes have underperformed economically. Most of the published detail regarding possible incentives relates to these zones.

The remaining four Investment Zones will be located across Scotland, Wales and Northern Ireland (with at least one zone in each nation) and details of the incentives for these are to be agreed in conjunction with the relevant Devolved Administrations. For each of the areas in England identified as a possible location, the Government intends to work with the relevant Mayoral Combined Authority or Upper Tier Local Authority and other local stakeholders to develop tailored proposals for the Investment Zone.

Each Investment Zone is expected to focus on growing clusters of businesses aligned with one or more priority sectors: Digital and Tech, Green Industries, Life Sciences, Advanced Manufacturing and Creative Industries. Subject to the overall funding limit of £80 million for each zone, the plans envisage allowing considerable flexibility over the precise incentives offered to support these clusters.

This flexibility extends to any tax incentives. The incentives which could be offered correspond to those currently offered to Freeports, which includes:

·       Full stamp duty land tax relief for commercial property;

·       Full business rates relief for newly occupied and some other business premises;

·       Enhanced capital allowances offering a full deduction for certain qualifying expenditure on plant and machinery;

·       Enhanced structures and buildings allowance, broadly allowing relief for 10 percent of the cost of relevant structures and buildings each year; and

·       Relief against the cost of Employer’s National Insurance contributions for new employees.

Among the key design decisions for each Investment Zone will be whether to offer the full package of tax incentives and the size of the site(s) in which these will be available. In some cases, the proposals for individual Investment Zones may opt for an approach which does not maximise the potential use of tax measures so as to preserve a larger proportion of the overall £80 million funding envelope for other interventions (for example, grants, training, infrastructure and support services).

Where the full package of tax incentives is provided across Investment Zones and the sites are the maximum permitted size (600 hectares), then the Government estimates the value of these tax measures over five years at £45 million per Investment Zone, although clearly the value for each business located in an Investment Zone will be rather less than this.

With the approach to be adopted in each case being influenced by local stakeholders, the flexibility in how incentives are provided and resulting likelihood of different Investment Zones taking different positions raises the prospect of an interesting economic experiment, comparing the relative attraction of tax and non-tax measures in encouraging investment and growth.

New domestic and ultra-long-haul Air Passenger Duty bands to be introduced, from 1 April 2023

The Government has a number of environmental objectives in place under its Journey to Net Zero strategy which aims to decarbonise all sectors of the UK economy to meet its net zero target by 2050. As part of this at the Autumn Budget 2021, following a consultation in 2020, it was confirmed that the Air Passenger Duty (APD) reform would be legislated for in Finance Bill 2023.

The measure will introduce a new domestic band for APD for flights within the UK set at a reduced rate of £6.50 (generally Economy Class seats) instead of falling within the £13 Band A short haul rate (0-2000 miles) so may represent a reduction in air fares. The reduced rate for the new ultra-long-haul band, covering destinations with capitals located more than 5,500 miles from London, will be set at £91, (£200 for the seats with more leg room) which may lead to an increase in cost for long haul passengers. The rates for the short and long-haul bands will increase in line with the RPI as forecast at the Autumn Budget 2021, which is a freeze in real terms. The measure will take effect from 1 April 2023.

Other tax measures


·       Informal flexible working – following the Office of Tax Simplification’s report on cross-border and UK domestic hybrid and remote working, in Summer 2023 the Government will consult on informal and ad hoc flexible working in order to understand arrangements between employees and employers.

·       Boosting occupational health coverage – the Government will consult on options for incentivising increased take-up of occupational health provision through the tax system (which might potentially include expanding benefit-in-kind exemptions and a super deduction).

·       Tax-advantaged Share Incentive Plans (SIPs) and Save As You Earn (SAYE) plans – there will be a call for evidence on ‘all employee’ tax-advantaged SIP and SAYE employee share plans to identify opportunities for simplification and improvement.

·       Simplification of the Enterprise Management Incentives (EMI) share option regime – from 6 April 2023 EMI option agreements will no longer be required to state any restrictions that apply to the underlying shares, and the employer will not be required to declare that the option holder has made a working time declaration (though the working time requirement itself will remain). From 6 April 2024 the deadline for notifying the grant of an EMI option will be extended from 92 days following the date of grant to the 6 July following the end of the relevant tax year (existing EMI options exercised on or after 6 April 2023 will also benefit from these changes, but we await draft legislation to confirm what this means).


·       SME Research and Development (R&D) tax relief – additional R&D credits for loss making SMEs where R&D expenditure is at least 40 percent of total expenditure with effect from 1 April 2023.

Audio visual reliefs – legislation on the reform of audio visual tax reliefs with a view to changing to expenditure credits to be published for consultation

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