Our Spring Budget 2023 coverage will begin at around 12:30pm when Chancellor Jeremy Hunt stands up in the House of Commons
13:02: Announces replacement for super-deduction tax break, a new full capital extension for the next three years. Every pound that a company invests in IT, plant and machinery can be deducted from profits, a measure worth £9bn a year. This full capital extension will increase business investment by 3 per cent for every year it’s in place, says Hunt. “We need to be Europe’s most dynamic enterprise economy”. I want us to have the most pro business tax repair anywhere.
12:54: Hunt turns to tackling productivity issues and repeats his four pillars of his investment strategy: enterprise, employment, education and “everywhere”. Pointing to Canary Wharf and Liverpool Docks as examples of urban regeneration, he announces 12 new investment zones including the West Midlands, Greater Manchester, the North-East, South Yorkshire, West Yorkshire, East Midlands, Teesside and Liverpool. There will also be at least one in each of Scotland, Wales and Northern Ireland.
12:48 UK over the last 30 years has become the third-largest technology economy after the US and China. “Growth is the Prime Minister’s third priority and the focus of this Budget,” says Hunt.
12:41: Good news for hospitality as from August 1 duty on draft beer in pubs will be 11p lower than beer sold in supermarkets. “British ale is warm but the duty is frozen,” he jokes.
12:35: Hunt begins his Spring Budget 2023 saying that he intended to remove obstacles that stop businesses investing, helping to make “Britain a technological superpower”.
12:34: OBR says UK will not now enter technical recession. “We are following a plan and the plan is working,” says Chancellor Jeremy Hunt.
What can small business expect from Spring Budget 2023?
Corporation tax will increase from 19 per cent to 25 per cent from April, as first announced by Rishi Sunak in his 2021 Spring Budget as chancellor. The full force of the tax rise will hit businesses with profits of more than £250,000. Companies with profits of between £50,000 and £250,000 will get some relief. And for small businesses making profits of less than £50,000 there will be no change.
Revamping ‘super-deduction’ tax break
Chancellor Jeremy Hunt and his Treasury team are understood to be looking at a successor to former Chancellor Rishi Sunak’s “super-deduction” tax incentive, the £25bn tax incentive which encouraged business investment by providing 25p off company tax bills for every pound of qualifying spend on plant and machinery, which expires in March.
Business groups including the CBI, IoD and Make UK, the trade body for manufacturers, are concerned about what happens when the super-deduction scheme for capital investment — a two-year measure offering 130 per cent tax relief on companies’ purchases of equipment — ends.
Hunt is set to replace the super-deduction with “full expensing”, which allows 100 per cent of qualifying capital expenditure in the UK to be written off against taxable profits in the year it is incurred.
The Treasury has estimated that “full expensing” would cost £11bn at its peak compared to £25bn for super-deduction but that would fall over time. That is because initially the scheme will include an upfront tax break for new capital spending, alongside allowances for old investment which is currently written off over a number of years.
A CBI survey found that creating a new permanent investment deduction “could boost UK business investment by up to £40 billion a year by 2026”.
CBI director general Tony Danker said: “We know the economy can – and must – break out of its low growth trap, but we will need action on business investment to achieve it. Firms are seeing the end to the super-deduction with nothing to replace it but a big rise in corporation tax. This will have a huge impact on investment and leave the UK falling behind its global competitors.”
Make UK wants the Government to focus tax relief on investment in green plant and machinery, while the IoD wants the super deduction scheme retained on a permanent basis.
BT, Siemens and Virgin Media have all called for the super-deduction tax break to continue. This tax break is of particular importance to telecoms companies as they invest heavily in infrastructure through full-fibre broadband.
The Federation of Small Businesses (FSB) wants the Small Business Rates Relief (SBRR) threshold raised to £25,000 (it is currently £15,000), while introducing a new “large business multiplier” for properties with a rateable value above £500,000. This move would not cost the Government anything, the FSB wrote to the Chancellor at the beginning of February.
With the Government cutting subsidies for companies on their energy bills from April, both the FSB and the CBI want ministers to provide vouchers to small businesses to help them invest in “green” improvements to their premises, including heat pumps, better insulation and solar panels. The FSB has proposed a “Help to Green” voucher worth £5,000 with renovations.
Help with childcare
Business groups see help with childcare as key to getting more women back into a workforce depleted post-COVID and post-Brexit.
The CBI has called for Government support to help parents back into work via some free childcare for one and two-year-olds, while the FSB wants to increase the maximum amount claimable for tax-free childcare from £2,000 to £3,000 per year, as well as exempting nurseries from business rates.
Occupational healthcare subsidies
The Government is to trial covering 80 per cent of the cost of providing healthcare to employees in small and medium-sized firms.
Chancellor Jeremy Hunt should announce trialling the subsidy in the Spring Budget 2o23, as part of the Government’s push to get nearly 7m economically-inactive people back into work.
These occupational health subsidies will help pay for SMEs to offering preventative health screening for staff, such as measuring weight and height, blood pressure and body mass index.
Appraisals would be given annually as a kind of “health MoT”, one Government source told the Sunday Times.
Many large companies have inhouse occupational health services such as their own doctors or buy in services from private providers to monitor the health of their workforce. This is seen as prohibitively expensive for small businesses, with owner-directors of SMEs five times less likely to invest in occupational health, according to the newspaper.
Foreign worker rules
Hospitality businesses may be able to recruit foreign chefs as well as restaurant and hotel managers more easily under an update to the points-based post-Brexit immigration system.
The Government has asked the Migration Advisory Committee (MAC) to review what it can do for sectors facing labour shortages, including construction, hospitality and retail, by way of tweaking the shortage occupation list.
The list, which was last reviewed in 2020, sets out the skilled jobs for which there is a short supply of domestic workers and makes it easier to recruit people from abroad.
It does this primarily by reducing the salary threshold under which foreign workers can qualify for a skilled worker visa to come to Britain. While the salary threshold is £25,600 at present, roles on the shortage occupation list can be offered at £20,480 or at a 20 per cent discount, whichever is higher. It also reduces the cost for businesses to sponsor a visa for a foreign worker.
Meanwhile, the Treasury is planning to announce up to 10 so-called “investment zones”, which will enable businesses operating inside them to benefit from enhanced tax relief and lighter-touch regulations.
Digital skills and IT training
Another idea is to offer Government-funded job placements for disability and sickness claimants. The focus is expected to be on digital and IT skills for jobs that can be done remotely – helpful for those who are housebound but want to get back into work.
The Government is expected to extend the 5p cut to of fuel duty, which was due to expire in April. Extending the cut for another year could cost in the region of £6bn.
Fuel duty is supposed to rise by RPI inflation in April, which would add 7p to the price of a litre of fuel. Plus the temporary 5p fuel duty cut, announced by then Chancellor Rishi Sunak in March 2022, is also due to expire this March. These two factors combined mean the cost of fuel duty would rise by 23 per cent – an extra 12p per litre.
However, the RPI fuel duty increase has been cancelled by every chancellor every year since 2011, making it politically difficult for the current resident of Number 11 Downing Street to back a rise.
R&D tax credits
The Government announced cuts to R&D tax credits for UK’s SMEs and start-ups in the Autumn Statement. From April 2023, the R&D tax credit for SMEs will decrease from 130 per cent to 86 per cent from April 2023. Going forward, the R&D tax credit will be worth only 18.6p for every pound of R&D spend compared with the current 33.3p – changes that will cost SMEs £4.5bn in lost tax benefits over the first five years of the new system.
However, the Chancellor has said he is open to reforming the system again in 2024/5 and the FSB has suggested that he makes 2023-24 a transition year maintain R&D tax relief rate at 130 per cent.
Tax breaks for self-employed training
One glaring anomaly in the current tax system is that businesses can claim for training courses against tax but the self-employed cannot. The FSB would like this distinction to be removed.
More on Spring Budget 2023