4 things businesses need to know about the Chancellor’s spring statement – Raconteur

The spring statement usually comes with a little less fanfare than the fall budget. However, with inflation above 6.2% for the first time in 30 years and the war in Ukraine threatening to push that figure even higher, households and businesses were looking to Chancellor Rishi Sunak to pull the economic levers needed to make in the face of rising costs.

While there were several measures designed to help households, including lifting the National Insurance threshold and VAT relief for energy-efficient appliances, there were fewer to support businesses, even if many of them faced the same challenges.

Speaking in the House of Commons, Sunak said: “To drive our growth and productivity, we need the private sector to train more, invest more and innovate more.” However, some business groups questioned whether the measures provided them with sufficient support to do so.

Investment incentives

In February, the Confederation of British Industry (CBI) called for the super deduction – a tax break on business investment in certain types of equipment and machinery – to be made permanent. The policy is currently set to end in March 2023, but CBI chief executive Tony Danker claimed that “evolving the policy from a short-term solution to a long-term strategy will give businesses confidence that the government and industry are aligned”.

Sunak admitted that once the super deduction ends next year, tax breaks for capital investments “will be much less generous than other advanced economies.” Although he did not respond to the business group’s demands in his statement, Sunak pledged to replace the super deduction with new tax reforms, which are expected to be announced in the fall budget.

Neil Murphy, Global Head of Supply Chain at software company ABBYY, said: “Sunak’s announcement that the government will reduce tax rates on business investment comes at a critical time. Businesses need reassurance that investment and growth plans can move forward.

Review of the apprenticeship tax

Sunak also expressed concern that 18% of 25-64 year olds have vocational qualifications – a third below the OECD average – while UK employers spend barely half the EU average on training their employees. employees.

Based on these figures, Sunak questioned whether the current measures were proving effective in encouraging employers to invest in training and said that the operation of the apprenticeship tax would be reviewed.

There is a market failure in upskilling and reskilling the workforce, especially for small businesses, and this needs to be urgently addressed

In response, the Institute of Directors’ chief economist, Kitty Ussher, said, “We have long advocated for stronger tax incentives for workplace training, so we are pleased with the commitment to work with companies to take this into account in the fall budget.

“There is a market failure in upskilling and retraining within the workforce, particularly for smaller businesses, and this needs to be urgently addressed, so we will be urging the Chancellor in the months ahead to provide tax incentives for retraining in areas of skill shortage.”

Reform of the R&D tax credit

The Chancellor also called for the creation of a “new business culture”, explaining that the country’s low rates of innovation lead to a lag in productivity growth compared to other countries. “The amount businesses spend on R&D as a percentage of GDP is less than half the OECD average,” he said. “This despite the fact that we spend more on tax breaks than almost any other country.”

As a result, Sunak promised to reform R&D tax credits to incentivize companies to invest more in this area. These will also be expanded to include data, cloud computing and pure math. CBI’s Danker welcomed many of the reforms promised by the Chancellor, but questioned how long businesses will have to wait.

He says: “We are ready to work with the Chancellor on key productivity transformation measures such as write-offs, R&D reforms and a revised apprenticeship tax. These measures are at the heart of UK competitiveness. In reality, we cannot wait until October to revive growth. The government must begin to act immediately.

Support for small businesses

With many small businesses struggling with the effects of inflation, Sunak reiterated the government’s commitment to cut business rates. From April, retail, hospitality and leisure businesses will get a 50% discount on their business rates, which Sunak says will save them up to £110,000 each . Employment Benefit is also set to be raised to £5,000 from April. Sunak claimed the tax cut would be worth up to £1,000 to half a million small businesses across the country.

Ussher, however, expressed disappointment that the changes to the Job Allowance were not accompanied by a review of the 1.25 percentage point hike in employers’ National Insurance contributions, which begins in April. She says: “While the Job Benefit increase is welcome at the margin, it pales in insignificance compared to the rate hike from major employers, which is raising costs and driving up inflation. in already difficult times.”

Federation of Small Business national chairman Martin McTague meanwhile described the spring statement as a “good start”, adding: “We are very pleased to see the Chancellor adopt our main demand for this statement from the Spring: Increase Employment Allowance to help small employers pay national insurance costs.

He also welcomed a year-long fuel tax cut of 5p per litre, which he said would help provide ‘crucial relief to our struggling small employers’. However, McTague hopes the fall budget will further address the challenges facing small businesses with respect to inflation, rising energy bills and hiring pressures.

He adds: “Today we have seen a reduction in VAT on net zero investments for households, which is good for the small businesses involved in setting them up. But a street shop or local bar cannot access the same support as consumers when dealing with the same energy supplier, and they should have access to the same assistance to reduce energy consumption and support the transition to net zero.

Other previously announced programs, including a government subsidy on “mini-MBAs” and a 50% rebate for companies investing in new software, have also been referenced under the government’s SME support program.