Spring Statement reaction from Karen Campbell-Williams, Head of Tax, Grant Thornton UK LLP:
“With inflation at a 30-year high, the cost-of-living crisis was always going to cast a shadow over today's Spring Statement. While the 5p per litre cut in fuel duty for the next 12 months and the £2,690 increase in the National Insurance threshold will be well-received, such measures will not immediately ease the pressure on households and on businesses facing pressure to raise wages.
“The rabbit out of the hat was the 1p cut in the basic rate of Income Tax from 2024, but the Chancellor also warned that the inflation squeeze is going to get worse before it gets better amid continuing macro-economic headwinds.
“Though the statement was light on details that will impact most larger businesses, some specific sectors and types of business will benefit from plans to modify and enhance the R&D tax credits regime from next April.
“The expansion to include cloud computing, storage, data, and pure mathematics is a positive step. Also very welcome, if it can improve matters and incentivise more innovation, is the review of Research & Development Expenditure Credit (RDEC), aimed at larger businesses. This change reflects the value these businesses drive into the UK economy through leading-edge R&D activities at scale. We await the draft legislation due later this year with interest.
“The Tax plan – People, Ideas and Capital – with a stated aim of making the tax system clearer, fairer, and more efficient, is a clear signpost to what is coming in the Autumn Budget. In the meantime, there is an opportunity for business to influence changes to reliefs for training, innovation, and capital investment through lobbying for focused changes.
“There is an inherent risk that this process slows investment in the short term, as business wait to see what incentives the Autumn Budget will deliver, but the Chancellor clearly sees that as a risk worth taking to foster longer term confidence.
“It is interesting to note the review of the Enterprise Management Incentive (EMI) scheme has concluded that it remains effective and well targeted, which is good news for many privately held businesses looking to attract the best talent.”
“The Chancellor seems keenly aware that the worst thing for business confidence is a potential cliff edge when the Super Deduction comes to an end next year and the higher rate of corporation tax (to 25%) is introduced in April 2023.
“To mitigate the impact of this, and with a stern caution from the Chancellor that the economic environment is likely to worsen, a real focus for businesses, particularly in consumer facing industries, should be to utilise all available tax reliefs including capital allowances and R&D, review their cash tax payments in more detail than ever, and review supply chain and property costs.”
Uncover our insight, analysis, and expertise on the Spring Statement 2022
