First of all – congratulations to Jeremy Hunt for lasting as Chancellor long enough to actually present the Budget. It’s a good job he didn’t tweet about refugees or (Sir?) Stanley Johnson…
Hunting for solutions
When an accountant or tax adviser studies Budget announcements, they tend to ignore all the puff about the Government’s cherry-picked achievements, the long-term macro-economic statements and policies that will make the Country great again and even the announcements designed to put more money in family purses. Instead they focus on changes that will impact on their business clients and far be it from me to buck that trend.
Most important to us are the changes that impact across the range of businesses and activities of our client base. Sadly there was little to get too excited about. The spin Jeremy put on the full “pound for pound” tax relief for capital expenditure sounded impressive to the casual listener. However there is a scheme already in existence that is known as the Annual Investment Allowance (AIA) that does the same thing. Admittedly, there is a £1m annual cap on AIA expenditure, but realistically 99% of our business clients will never reach that level. The new scheme is to replace the 130% Super Deduction that came in temporarily to try and ensure companies continued to invest during Covid times. It does appear however that many of the restrictions that existed with the Super Deduction remain with this one (e.g. expenditure needs to be on brand new items, must be by limited companies etc.)
He tinkered yet again with the R&D Scheme but the changes will only really benefit companies that are still purely in the research phase, since at least 40% of total expenditure must be qualifying R&D costs. Alongside that were increases to schemes to assist creative industries such as film, TV, theatre and video games.
Other measures announced can, I think, be considered great or awful depending on the colour of your politics, particularly around the supply of labour. I will not comment for fear of being suspended but:
- How many people currently hit the existing maximum lifetime allowance for pension contributions? Of those, how many will want to work significantly longer just because they can now keep paying into pensions with no lifetime allowance?
- The announcements around helping people with disabilities and ill health to get back into work, alongside sanctions for those seeming to be avoiding work. Anyone remember the PIPS fiasco?
The Tories have until January 2025 before they have to call a General Election, so they have almost two years to turn the economy round and avoid a pasting at the Ballot Box, which current opinion polls suggest. Not only that, the Levelling Up promises will need to start bearing fruit or the Red Wall will soon reappear now that Brexit is finally behind us. Only time will tell.
Posted by Mike Carabine
The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.