The Spring Budget: Bath expert reaction

March 16, 2023

Rob Chedzoy, tax partner at regional accountancy firm Milsted Langdon, believes the Chancellor Jeremy Hunt’s drive for growth has created interesting tax planning opportunities for businesses and their owners.

Rob, pictured, said prior to the Budget, many businesses were concerned about the upcoming increase to Corporation Tax in April, when the rate will rise from 19% to 25% for businesses with profits of £250,000 or more. 

Only those with profits of £50,000 or less would continue to pay 19%, with those between these two thresholds paying tax at a tapered rate.

The Chancellor’s introduction of ‘full expensing’ – 100% tax relief for spend on qualifying plant and equipment – may help some companies grappling with this tax increase, albeit replacing existing reliefs for most.

“For the next three years businesses will be able to write off the full cost of qualifying plant and machinery expenditure in the same year they make the investment,” he said.

“This new relief sits alongside a number of existing capital allowances to help firms better manage their annual tax bill through investment. This new measure goes some way to replacing the lost relief available from the ‘super deduction’, which ends on 31 March.”

R&D tax credits also provide an important Corporation Tax relief to many SMEs. In his Autumn Statement, Mr Hunt announced changes that would restrict the rate of tax relief and credits for some small and medium-sized enterprises (SMEs).

However, to support what he called “British ingenuity”, the government has decided to introduce a new enhanced tax relief for loss-making R&D-intensive SMEs.

Eligible companies will be able to receive a tax credit worth £27 from HM Revenue & Customs (HMRC) for every £100 of R&D investment they make. 

“This additional relief will be somewhat limited, but it will play a role in driving growth among the most pioneering businesses,” added Rob.

Ed Rimmer, chief executive officer at Bath-headquartered alternative finance provider Time Finance, said Chancellor Jeremy Hunt had called the UK the best place to do business in his speech.

“I echo this sentiment – but congratulating ourselves can tempt complacency,” added Mr Rimmer, pictured.

“We need to keep moving to retain our place and give businesses what they need.

“Business – and economic – growth simply isn’t possible without investment. In January the Chancellor spoke of optimism and the need for risk-taking to advance our businesses, our economy, boost productivity and create jobs.

“The introduction of full capital expensing for business investments puts some real substance to this argument, giving businesses the confidence to make those all-important investments in technology now so they can grow and prosper.” 

He also said the measures to tackle labour shortages complement the government’s ‘returnerships’.

“Businesses invest to grow and this requires a growing workforce,” he said.

“In this sense, the government is putting in place a machine for growth, with support packages for the disabled and sick, those seeking work on Universal Credit and parents on Universal Credit looking to get into work.

“But every single one of these vital cogs is reliant on the success of the other. Skills investment is another essential element here; we did see more from the government on investment zones for various regions across the UK, which will support new workers via skills investment.

“However, this still does not address the skills shortage that many businesses, not in these investment zones, are currently facing.

“What they needed was a dedicated package which supports skills, directly for growth, as his predecessor so promised in his last statement.”

Jonathan Riley, South West practice leader at accountants Grant Thornton, pictured, said there was a “disappointing lack” of good news for the South West.

“We were notably absent from the 12 new Investment Zones announced, despite our recognised strengths in engineering and advanced manufacturing,” he added.

“A solitary name-check in the context of enhanced funding to fix potholes is unlikely to raise much enthusiasm in the South West and will no doubt increase calls for more political cohesion in the region, to ensure our voice shouts as loudly as those areas of the Midlands and North.”

David Harris, tax partner at KPMG UK in the South West, said Mr Hunt had delivered a Budget with significant fiscal loosening, and while he had managed to address many of the concerns circulating in the headlines, but there were still some gaps.

“On business taxes it had been clear that the Corporation Tax rate rise would go ahead. But in an attempt to ease the pain of this, combined with the loss of the ‘super-deduction’, the Chancellor announced the introduction of full expensing for qualifying spend on plant and machinery for the next three years.

“The aim is to make the measure permanent when fiscal rules allow. Whilst this replacement for the ‘super-deduction’ will be welcomed, the temporary nature demonstrates a continued lack of long-term strategy which can be damaging to investment.”

He said while there were some measures aimed at tackling economic inactivity there were other areas where the pickings felt lean.

“The investment zone initiative sounded fairly minimal, with 12 zones each able to access interventions worth up to £80m over five years,” he added.

“The limitation of full expensing to plant and machinery spend excludes large sectors such as infrastructure and construction.

“Major business rates reform seems to have been kicked down the road once again. And there were no measures to address some of the cliff-edges and distortions in the tax system, such as the VAT threshold.”





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