Tax grab warning as borrowing soars and interest rates rise
A THAMES VALLEY-based SME tax expert is urging businesses to take advantage of new and extended schemes while they still can, ahead of rising inflation and a likely ‘tax grab’ by the chancellor this year.
Paul Attridge, partner of tax advisory at Azets, is predicting that harsher rules could be introduced this spring, along with the withdrawal of existing support measures.
In the autumn budget, the Chancellor confirmed that the economy is forecast to return to its pre-Covid levels, and unemployment is also at a lower level than it was initially forecast – expected to peak at
5.2% rather than the previously predicted 12%.
The Office for Budget Responsibility forecast for business investment has also gone up.
Despite a business-friendly Budget, Mr Attridge is predicting further challenges for SMEs, with inflation expected to rise to an average of 4% in the next year, and demand exceeding supply across most industries, creating manufacturing delays and product shortages.
Many SMEs are struggling to recover following the end of the furlough scheme and surging energy requirements putting a strain on prices.
Mr Attridge said: “For many
SMEs, the support measures available today won’t be sufficient to offset higher bills over the coming 12 months.
“SMEs should seek professional advice to ensure they take full advantage of every available allowance, with inflation set to keep rising and the extended Recovery Loan Scheme ending on June 30, 2022.”
The Chancellor also announced a range of business rate cuts, with the retail, hospitality and leisure sector receiving a 50% discount on business rates, worth around £7 billion.
Paul Attridge is urging SME businesses to take advantage of these schemes, with 1.25% increases to National Insurance Contributions already confirmed from April 2022 and Corporation Tax increasing from 19% to
25% from April 2023, as well as predicted changes to Inheritance Tax (IHT) and Capital Gains
Tax (CGT) following recent simplification reviews by the Office of Tax
Simplification.
“Businesses must plan ahead, with Spring just round the corner and no confirmation on what further measures could be introduced at the next Budget,” he said.
“Soaring public borrowing and the continuing rise in interest rates will force the Government to increase the tax take in order to cope with crippling costs.
“As ever, SMEs could be hit hardest and need to optimise their financial position in readiness for a potential tax grab as early as April 2022.”