Daily Mail

£9bn tax break for firms to offset the big rise in corporate rates...

- By Calum Muirhead City Reporter

BUSINESSES will be able to take advantage of a £ 9billion tax break announced by Jeremy Hunt in a bid to boost Britain’s competitiv­eness.

The Chancellor unveiled a package to allow firms to offset 100 per cent of investment­s in the UK against their tax bills.

The measure, known as ‘full expensing’, has been brought in to replace the ‘superdeduc­tion’ – a tax relief measure allowing businesses to claim 130 per cent of what they spend on equipment for the business against their taxable profits. It will expire at the end of this month.

The new tax break will run from the start of April and will cost nearly £8billion this year, £10.7billion in 2024 and £8.7billion in 2025, resulting in an average annual cost of around £9billion.

This means it will offset roughly half of the controvers­ial increase in corporatio­n tax, from 19 to 25 per cent from April, which is expected to raise about £18billion a year. Matthew Fell, interim director general of the Confederat­ion of British Industry, said: ‘Full capital expensing will keep the UK at the top table for attracting investment and puts us on an essential path to a more productive economy.’

The Chancellor also announced an ‘ enhanced’ tax credit for small and medium- sized businesses if they put 40

‘Keep UK at top table for investment’

per cent or more of their total spending towards research and developmen­t (R&D). They will be able to claim credits worth £27 for every £100 spent.

The Treasury estimated the policy will cost £40million in its first year, rising to £285million the following year and £455million the year after that.

Mr Hunt also announced tax relief measures for creative industries, including theatres, orchestras and museums, as well as firms which are developing audio-visual equipment. The measures were brought in after multiple business leaders pleaded with the Chancellor to replace the superdeduc­tion and offset the impact of the rise in corporatio­n tax.

The Chancellor also unveiled 12 new investment zones across the UK, which will provide tax breaks and other benefits for businesses.

Jon Richardson, head of tax policy at accounting giant PwC, said the Budget provided ‘much-needed support for UK competitiv­eness’ and that businesses would be ‘relieved’ that the Chancellor had moved to soften the blow from the hike in corporatio­n tax and the end of the super-deduction.

‘Combined with increased R&D incentives, this leaves the UK in a competitiv­e position compared to the other G20 economies – albeit somewhere short of the most probusines­s tax environmen­t anywhere,’ Mr Richardson said.

But some argued that the changes to business investment and tax rules had not gone far enough. Kitty

Ussher, chief economist at the Institute of Directors, said the full expensing regime was ‘very welcome’ but she urged the Chancellor to make the measure permanent beyond its 2026 expiry date.

The comment came as the Office for Budget Responsibi­lity predicted that while the full expensing allowance would cause business investment to ‘rise strongly’ next year and in 2025 as firms brought forward spending to take advantage of the measure, this would ‘fall back’ after it expires in 2026.

Ms Ussher also said the Chancellor’s decision to only target tax credits towards R&D was ‘disappoint­ing’ and ‘ could lead to less innovation across the economy more widely’.

Others were more critical of the Budget, with the Federation of Small Businesses (FSB) saying that the announceme­nts would ‘leave many feeling short-changed’.

FSB national chairman Martin McTague said: ‘The enhanced R&D tax credit is a significan­t step towards promoting innovation.

‘However, the large proportion of firms who fall outside of the 40 per cent intensity threshold will be left feeling mystified by the change in policy since last autumn...

‘While there are some positive words in today’s Budget, the Government’s lack of support for small firms in critical areas is glaring.’

Meanwhile, Yael Smith, chief economist at audit giant KPMG, said that the full expensing regime’s focus on machinery was ‘too narrow’ and its temporary nature meant it only served to ‘bring forward investment but not to increase the overall long-term trend.’

 ?? ?? Bravo: Lingerie firm boss Steff McGrath says tax break will help small businesses like hers to grow
Bravo: Lingerie firm boss Steff McGrath says tax break will help small businesses like hers to grow

Newspapers in English

Newspapers from United Kingdom