Does the Budget aid warehouse automation?
The Chancellor’s Spring Budget could help businesses looking to boost warehouse performance through automation. The business case for investment into warehouse automation is gathering pace. Poor labour availability is increasing risk at peak, costs are rising and volumes are volatile and unpredictable, demanding greater operational flexibility and scaleability.
Warehouse automation addresses these issues but, what can the Government do to help and what’s on offer following the Spring Budget?
The ‘super-deduction’ introduced by then-Chancellor Rishi Sunak in 2021, which allowed businesses to set 130% of the value of qualifying investments against their Corporation Tax liability, was potentially a game-changer, but was only for two years – too short a timescale for many companies to plan and implement investments which could fundamentally change their warehouse operations. Charles & Dean, the finance brokers, estimate that only 40% of transport and logistics companies took advantage of the super-deduction.
In Jeremy Hunt's March Budget, however, the concept of ‘full expensing’ – that is, enabling the full value of a qualifying investment to be offset against tax in the year it is incurred – has been extended, albeit only at 100% rather than 130%, for at least the next three years. The intention is to make this permanent ‘when circumstances allow’. That is worth 25p in the pound on the Corporation Tax bill which, as the tax rate has gone up, is about the same saving as the super-deduction offered.
There are actually several schemes. Companies paying Corporation Tax can claim for an uncapped level of qualifying investment, but all enterprises, including partnerships and unincorporated businesses, have an Annual Investment Allowance (AIA) to fully expense up to £1 million.
The AIA distinction matters because, unlike the uncapped scheme, the AIA also covers leased assets – increasingly important for businesses that wish to ‘flex’ the number of, for example, Autonomous Mobile Robots (AMRs) they employ in response to changing demand. The AIA also covers deposits and stage payments, whereas the larger scheme requires the investment to have come into use.
‘Qualifying investments’ cover most aspects of a warehouse automation project – in fact, supporting documents from HM Treasury specifically mention warehouse equipment. So fixed and mobile equipment, computers, printers, handsets, terminals, electrical and pneumatic systems, data cabling all qualify.
These changes, especially if they become permanent, will move the UK from being one of the least, to one of the most, attractive tax regimes for business investment in plant and machinery. Of course, no business should be justifying investment solely on the basis of tax savings, but the Government’s latest initiative may help make any beneficial automation project significantly more attractive and, importantly, affordable.
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