Although most of the headlines had been trailed in advance, yesterday’s budget still served up enough surprises to hold our attention. While the tone was positive with talk of prosperity, levelling up and the benefits of Brexit, many of our clients will have been left wanting more.
Below are the Ashcroft partners’ comments and here is our detailed analysis of all of yesterday’s announcements.
Surprise tax cut
There are always two sides.
Adrian Wilson – Partner
Having had most of the tax increases in the Spring budget yesterdays was (mercifully) light on any further tax surprises; indeed, Rishi managed to dishy up a surprise tax cut in the form of reducing the taper rate applied to universal credit meaning someone working but in receipt of benefits will keep 45p instead of 37p in the £.
He has spent more than was anticipated but has spent it wisely on more “levelling up” initiatives.
The one person who might not have enjoyed yesterday’s budget as much as you would think could well be Boris. This was another very assured, slick and, in places, witty canter through the fiscal proposals for the near term from Rishi, leaving late stand in Rachel Reeves with little to cavil at other than the usual response that the budget rewards the rich.
Angie Sleat – Partner
Yesterday’s announcement included some welcome news for our clients in the hospitality sector, with the one-year 50% business rates discount for companies in the retail, hospitality, and leisure sectors, coupled with a cut in alcohol duty for draught beer to encourage the public back to our pubs and bars. These measures will certainly help with the post-Covid recovery for our clients affected, but I wonder if they will actually be better off after factoring in the increase in the national living wage.
I had to smile at the news of an immediate extension to the deadline for residents to report and pay CGT after selling UK residential property to 60 days after the completion date. In my experience the previous 30-day window was more of a challenge for HMRC than it was for the taxpayer! That £180 million investment in HMRC that was promised back in March certainly hasn’t been apparent so far.
Dominic Anthony – Partner
One of the few tax announcements in this budget involved the UK’s generous Research and Development tax incentive. It has long been a frustration that the legislation had not moved with the times but now, in addition to software licences, qualifying expenditure will include data and cloud hosting costs which better reflects the costs incurred in this activity.
The flip side? It was confirmed that from April 2023 qualifying expenditure will focus on expenditure incurred in the UK in contrast to the current provisions which allow worldwide expenditure to be allowable by UK companies. This will be a blow to the many companies using lower cost overseas resources and put ever more upward pressure on the cost of already scarce UK science and technology talent.
More reform needed
Tom Gallop – Partner
So another budget slips by with little or no mention of capital gains tax and certainly not the significant reform anticipated by many. Business owners seeking to sell their companies before a hike in CGT rates can breathe a sigh of relief, for now at least.
M&A activity is likely to remain strong for the foreseeable future and the Chancellor’s upbeat forecasts and general bonhomie will have done nothing to dampen this, but for companies grappling with labour shortages and supply chain disruption, the picture could change over the next few months.
Richard Crane – Partner
Whilst Rishi’s speech sounded welcomely upbeat there was little in it for the agri sector per se. The extension of the £1m Annual Investment Allowance limit is good – but not wholly unexpected. Rates reform should be helpful for diversified farmers and it will be interesting to see if the solar relief has any impact, it can only help (a bit).
What is more important perhaps is what was not in there regarding any adverse changes to capital taxes so vital to the sector and the Chancellor’s words around commitment long term lower taxes – but don’t hold your breath. Finally let’s hope he did enough to keep him in post! I think he did, but Boris??