Home Business News It’s time the Chancellor turns his words into action and deliver on promise to sponsor entrepreneurial businesses

It’s time the Chancellor turns his words into action and deliver on promise to sponsor entrepreneurial businesses

by LLB Finance Reporter
6th Mar 23 12:04 pm

Chancellor Jeremy Hunt is being urged to turn his government’s pro-business talk into clear and decisive action, by setting out a tax plan to sponsor the activities of UK-based innovators and entrepreneurial businesses.

Despite the UK recording an unexpected budget surplus in the first month of the year, the Chancellor is not expected to announce any significant tax cuts in his Spring Statement on 15th March 2023. His hands are tied by the high level of public debt, which has built up due to the pandemic and the impact of the war in Ukraine. However, the signing of the Windsor Agreement in Northern Ireland last week indicates that the current Government is placing an emphasis on positive action, so fiscal changes can’t be ruled out.

Richard Godmon, tax partner at accountancy firm, Menzies LLP, said, “Top of the list of concerns for SMEs across industry sectors at the moment is the energy price cap rise in April and the immediate effect this will have on cashflow. Most businesses are planning ahead, but they need every bit of support they can get. Whilst he is unlikely to reverse the price cap increase, the Chancellor could help businesses to plan with greater certainty and confidence by presenting a long-term view of the UK’s fiscal landscape and the direction of travel.

“The Chancellor set out his new economic plan for the country at the end of January, but since then we have heard nothing about how he intends to make the UK an attractive place for innovators and entrepreneurs, particularly those in the digital tech, life sciences, clean energy, creative industries and advanced manufacturing sectors, and we need decisive action.”

Other tax changes that are going to impact businesses in the coming months include the planned rise in Corporation Tax, which is due to rise from 19 to 25% at the start of April. This is likely to go ahead, but the Chancellor could take a closer look at Capital Gains Tax (CGT) exemptions.

Richard Godmon said: “The annual exemption for CGT has already been cut to £6,000 for the 2023/24 tax year and it will halve again in 2024/25. This seems at odds with the Chancellor’s economic plan to sponsor innovation as it could have a negative impact on entrepreneurial investment. Is this really the best way forward? If these changes have to go ahead, we would urge the Chancellor not to change the headline rate of CGT and protect the current benefits of Business Asset Disposal Relief.”

Another much-valued incentive for innovative companies is provided by the R&D tax credits regime, which allows businesses to claim a cash payment or a discount on their Corporation Tax bill if they invest in developing new products, processes or services, or enhancing existing ones. From April, the credits payable to qualifying SMEs are being cut, along with changes affecting any additional deductions that they might be eligible for.

Richard Godmon said, “These changes will have a detrimental effect on SME innovators, and are at odds with the Government’s goal to create an environment that is attractive to R&D-led businesses. Depending on the outcome of a consultation, which is exploring ways to combine the R&D tax relief schemes that apply to larger businesses and SMEs, more change in this area could be on the way.”

Finally, the Chancellor could choose to shed more light on his plans for Enterprise Zones, which will be strategically located across the UK, aimed at supporting the Levelling Up agenda and providing tax breaks and support for businesses investing in innovation and technology. “Whilst we are waiting for more information, this could be a game changer for innovative businesses and deliver a significant tax boost to the UK economy. Decisive action should be taken sooner rather than later,” concluded Richard Godmon.

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