A leading SME tax expert is urging businesses to take advantage of new and extended schemes whilst they still can, ahead of rising inflation and a likely ‘tax grab’ by the Chancellor this year.
Paul Attridge, Partner, Tax Advisory who is based in the Hertford office of Azets, the UK Top 10 accounting firm, is predicting harsher rules could be introduced in the Spring, along with the withdrawal of existing support measures.
In the last Autumn Budget, the Chancellor confirmed that the economy is forecast to return to its pre-Covid level. Unemployment is also at a lower level than it was initially forecast – expected to peak at 5.2% rather than the previously predicted 12% – whilst the Office for Budget Responsibility forecast for business investment has also gone up.
Despite a business-friendly Budget, Paul 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 also struggling to recover following the end of the furlough scheme and surging energy requirements putting a strain on prices and leading the global cost of oil and gas to double.
Paul Attridge said: “The Chancellor delivered a relatively upbeat Autumn Budget, but more challenges lie ahead and, 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 30 June 2022.”
Rishi Sunak announced the extension of the Recovery Loan Scheme (RLS) during the Autumn Budget, enabling funding for SMEs at a reduced cost and make available loans that lenders would struggle to fund as part of their everyday ‘business as usual’ policy,
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.
He highlighted additional steps businesses can take now to optimise their financial position:-
- Take advantage of Annual Investment Allowances (AIA), which will continue at their current rate of £1 million until 31 March 2023, supporting business to invest
- Consider selling assets and shares sooner rather than later whilst Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) is still available to help reduce CGT
- Keep investing in Research & Development (R&D), with the R&D tax relief scheme expanded to include cloud computing and data costs, and a refocusing of reliefs towards innovation in the UK announced, targeting domestic R&D expenditure from April 2023.
Paul Attridge added, “Businesses must plan ahead, with Spring just round the corner and no confirmation on what further measures could be introduced at the next Budget. 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.”