Spring Budget: hidden messages for business

The Headlines

• The Budget has had a reasonable reception – the unenviable task of reducing national debt and managing cost of living was always going to mean a raft of tax changes were unlikely, but there are still some significant tax developments for businesses to know.
• The UK remains an excellent destination for tech. It is now the world’s third trillion dollar tech economy after the US and China.
• The economic climate is improving with the UK forecasted to avoid a recession this year and the Government also targeting inflation to be down to 2.9% by the end of 2023.

Talking Tax

• There were no last minute corporate tax reversals, meaning profitable large companies will pay at a rate of 25%. The UK still has a rate of 19% but only companies with profits under £50,000 can take advantage of that.
• There was an excellent development for capital allowances! In a pro-growth move, the “full expensing” regime will mean that for every single pound businesses spend on plant and machinery (IT equipment, fixtures and fittings) they will be able to take a deduction in full from taxable profits. That is in place for 3 years.
• In a good move, the Government responded to feedback on R&D, deferring the restriction of claiming relief on overseas expenditure until 2024 and entitling loss making R&D companies that meet the rules to claim a higher tax credit of 14.5%.

The Hidden Messages

• Despite all of the U-turns last year, do not forget about IR35. This was less of a feature but the rules have not changed and so businesses remain responsible for correctly managing their relationships with subcontractors and dealing with any employment/tax fallout.
• Stealth tax is on the rise! Income Tax Bands and the Personal Allowance were already fixed until 2026 but are now extended to April 2028. With wage inflation, that means more tax for employees and the government will be hoping this doesn’t get much attention.

Advice to the Chancellor

• Don’t merge the UK R&D schemes later this year as suggested. Keep things simple for businesses claiming R&D relief and avoid further change, complication and ambiguity.
• Introduce a five year roadmap for Corporation Tax rates. Give businesses certainty over future rates and the pathway for these reducing. That will help to attract even more businesses coming to the UK.
• Think about making the UK’s tax approved share scheme, Company Share Option Plan (CSOP), even more generous. It is great businesses can now award employees qualifying CSOP options up to a value of £60,000 (increased from £30,000) but should we do more? I would like to see this covered in the Autumn Budget and I am calling for an increased threshold to £100,000.

How ZEDRA can help

Our award-winning tax team is ready to advise you on all aspects of doing business internationally and accelerate your expansion into the UK, throughout Europe and beyond.

To discuss how these areas may affect your business, or anything else related to doing business in the UK, please get in touch with Adam Dunnett.