We’ve just witnessed the UK Chancellor Rishi Sunak give his Spring Statement for 2022 and the contents of it have left the business world buzzing. With the economic aftershocks of the pandemic still being uncovered and experienced keenly by businesses across the country, the statement aims to combat the stubbornly high levels of inflation via bold tax cuts and a rollout of additional financial support for small businesses and individuals.
In addition to these changes, promises have been made to cut taxes for businesses in the country in the hopes to stimulate poor investment levels and improve productivity. These efforts go in tandem with announcements of the overhauling of how development and research tax credits are currently managed.
Consulting with businesses
Rishi Sunak has offered reassurance to the business community through promises that the strategy for how to cut taxes to improve investment prior to the autumn Budget will be done through close consultation with UK businesses. In this plan, a number of options will be laid out in the hope of replacing the current system of super-deduction tax breaks on capital spending, which is due to end in 2023.
There have long been hopes in the business community for the improvement of the current research and development expenditure credit. With the current levels commonly being seen as poor, the Chancellor has promised to make a decision on the improvement of this alongside their prior commitment to reforming the overall system.
Investment levels remain low
One of the key themes of the statement has been ongoing concerns over the low levels of UK business investment, particularly when compared to major EU players such as Germany and France. With businesses in the UK having previously been notified of planned increases to corporation tax, and a final ending of the super-deduction tax break next year, the level of interest in business investment has understandably dropped to a concerning level.
To address this very real concern, the new tax plan includes alterations to the treatment of tax on new capital investment – essentially improving the overall tax relief that is available each year. This includes a permanent increase to the level of annual investment allowance. This goes hand-in-hand with other announced proposals including first-year allowances or even the potential for a full write-off of any business qualifying investment expenses. Other ancillary changes may also be considered, such as relief initiatives for specific investments or changes to the current allowance for buildings and structures.
With business investment levels currently sitting at 10.6% lower than pre-pandemic levels, this wide-ranging plan of initiatives, adjustments, and support is hoped to help return business investment to the healthier levels seen in and before 2019.
R&D reforms and changes
We know from the last Budget in autumn that an overhaul of the R&D tax credit system is coming. The previously announced measures include an expansion of expenditures that qualify for the system, namely to include cloud computing and data usage. There’s also been a promise of a change to focus on supporting activity that is undertaken directly within the UK.
Apprenticeships and training
With businesses in the UK having long struggled with training and talent retention and attraction, the Chancellor has announced that the government will look into how it can stimulate this vital area of the business world. This is a welcome announcement after statistics for UK apprentices fell under the levy in place – a tax on employers which is used to fund training for businesses since 2016.
In a statement that addressed the frustrations experienced by UK businesses, Rishi Sunak noted the concerns over the use of apprenticeship levy funds and promised that improvements are being planned for the scheme going forward.
Great news for the future of UK business
As we emerge slowly but surely from the worst of the pandemic, the business world is showing signs of recovery. Although the challenges and pain points experienced by SMEs and larger companies in the UK are significant, it is hoped that Budgets such as these will support economic recovery and stimulate the UK business and investment landscape.
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