26 January 2017

BPIF Spring Budget submission to Government

BPIF call for a business environment that supports competitiveness

In our representation to the HM Treasury ahead of the 2017 Spring Budget we have called for a business environment that supports competitiveness and a Budget that acknowledges what a vital part of the UK's infrastructure print is. 

Many printing companies across the UK are SMEs, and few can generate the scale efficiencies that many of the largest manufacturers can. Yet, in a period beset by productivity declines across manufacturing sectors, our industry has continued to invest in training, technology and process improvements, driving above average efficiency gains. However, sustaining this level of investment requires a business environment that supports competiveness. Our submission focused on business taxation and Research & Development (R&D) tax relief. 

Business Taxation

The Government's Business Tax Road Map was intended to provide the certainty that businesses need to make long term investments by reducing the burden of business rates by £6.7 billion over the next five years and cutting the rate of Corporation Tax to 17% by 2020. While we welcomed this intention, we pointed out in our submission that - rather than reducing the burden, the 2017 business rates revaluation is having a significant negative impact on our members in London, with some reporting rates rises of over 10%. This has led a further few to show concern that (what is perceived to be) an expressed support for regional growth from Government is creating an uneven playing field, to the detriment of businesses based in the capital. 

Aside from the geographical impact of business rate rises, we wanted to highlight that for many printing businesses across the UK, plant and machinery requirements will include expensive litho, digital and large format printers, finishers and folders as well as state-of-the-art pre-press equipment. This machinery needs to be supported through enhancements to the premises, which are specific to the business activity. These enhancements potentially increase the rateable value, and taxing them acts as a clear brake on investment and expansion. We have recommended that plant and machinery should no longer be included in site rateable value assessments, which are calculated for business rates purposes.  This would remove a disincentive to invest and be a step towards the Chancellor's vision of ensuring that businesses are investing and improving productivity.

On corporation tax, we welcomed the Government's existing commitment to reduce Corporation Tax to 17% by 2020. However, we do not view reductions in Corporation Tax as a simple solution to deliver growth, taking into account the complexity of other key factors impacting our members' ability to do business. A recent survey showed that 62% of our members export to the EU and 90% import from the EU (either directly or indirectly through suppliers). With this in mind, we have stressed that our members would welcome clear reassurance that the Government is prepared to use the fiscal regime to boost the competitiveness of the UK's offer, should it be necessary following the outcome of the Brexit negotiations. 

R&D Tax relief

We believe that Research and Development (R&D) is crucial for the long-run growth of economies and welcomed the Government's commitment in the 2016 Autumn Statement to make the UK an even more competitive place to do R&D, building on the introduction of the 'above the line' R&D tax credit (and supported via the establishing of a National Productivity Investment Fund to provide an addition £4.7bn R&D funding by 2010-21).

However we voiced our concerns to its reach and the extent to which it is being used to not only reward innovation but encourage innovation. We believe take up is significantly lower than it could be as while the printing industry is constantly evolving its products and processes to meet customer demands, it is unaware that the work it is doing constitutes R&D. We see our role as to promote it, however have recommended that HMRC could take two steps which would increase understanding of the scheme and particularly, of what work might be eligible.

We have asked if HMRC's communications to businesses regarding R&D tax relief, particularly those on the HMRC website, could be enhanced to better engage with print. Specific guidance, and case studies of printing businesses who have benefitted, would make clearer to printing businesses the type of work that constitutes R&D. 
We have also highlighted that R&D tax relief only applies to revenue expenditure - generally, costs incurred in the day-to-day running of the business, not to money spent on capital assets. The printing industry is capital intensive, often investing profits into plant and machinery assets which generally fall outside of eligibility for R&D tax relief. We would like to see HMRC make it easier for businesses to claim enhanced capital allowances on their investment into machinery. 

We hope that Government takes on board our comments and they are reflected in the Spring Budget.