The Spring Budget: Bristol 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.

Samuel Gee, director of Manning Gee Investments in Bristol, said the government’s commitment to promoting work and productivity was evident in the major reforms to support parents with childcare costs and encourage non-employed individuals over 50 to return to work.

“The protection of disabled individuals’ benefits while they are employed further emphasises the importance placed on employees and enterprise,” Sam, pictured, said.

“The pension reforms announced are a positive step towards incentivising high earners to work and invest in their pensions.

“By increasing the annual pension contribution limit from £40,000 to £60,000, individuals with the means to do so will have more flexibility to save for their retirement.”

The removal of tax charges via the lifetime allowance for pension values exceeding £1,073,100 would be particularly beneficial to high earners, including NHS doctors, who have previously been disincentivised from working due to the pension-tax regime, he said.

“For consumers, while the three-month extension to the energy support scheme will provide critical assistance for those living on the edge, the long-term effects of the cost of living crisis will continue to cause stress and anxiety for many people, undoubtedly posing a challenge for the government for some time to come.” 

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.”

Sarah Maddock, senior knowledge lawyer at Bristol-headquartered national law firm TLT, welcomed the extension of access to free childcare to cover one and two-year olds.

“As well as being financially beneficial to working parents in terms of getting back to work – this benefit will likely be welcomed by employers tackling staffing shortages and looking to reduce any gender pay gap,” Sarah, pictured, said.

“Given statistics on the ‘motherhood penalty’ show that the high cost childcare pricing female employees out of work, and the extension of free access to early years childcare may reduce the likelihood of female employees seeking lower paid, part-time work in order to accommodate the care of very young children. 

“This is very timely news ahead of companies sharing their gender-pay gaps figures next month, providing the opportunity to re-think their ‘getting people back to work’ strategies.”

David Harris, tax partner at KPMG UK Bristol, 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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