SMEs need proposals that encourage growth, not just to balance the books

Recent British Chamber of Commerce research shows that more than 75% of companies are failing to increase investment, due to a lack of confidence in the economy.

Chancellor Jeremy Hunt is expected to offer only limited help for companies in his Spring Budget on 15 March, with no immediate tax cuts likely because of tight constraints on the public finances amid an expected economic downturn - which has so far not to really materialised. All this at a time when, from April 2023, businesses will be carrying the highest tax burden since the Labour government after the Second World War.

We sit down with MHA Head of Banking & Finance Greg Taylor to look at the areas where SMEs could expect some changes:

An extension or revamp of the ‘super-deduction’ tax break for business investment.

The Chancellor and his Treasury team are understood to be looking at a successor to the “super-deduction” tax incentive introduced by Rishi Sunak. This was a £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 at the end of March 2023.

On this, I agree with the CBI which has suggested that companies initially should be able to write off 50% of the cost of any capital spending against tax, with the arrangements becoming more attractive as public finances improve. This would give businesses an incentive to invest at a time when corporation tax is due to rise from 19% to 25%.

Whilst Liz Truss got a lot wrong, reversing the corporation tax rises was the right thing to do. It’s unlikely that Jeremy Hunt will do this, so a revised super-deduction tax break is the next best thing.

Reform of the business rates system to remove the upfront financial pinch, and boost business start-ups.

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, but it would help many businesses!

Funding support to become greener & more energy efficient.

Personally, I would ask the Government to focus tax relief on investment in green plant and machinery. Additionally, with the Government cutting subsidies for companies on their energy bills from April 2023, I would like 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, which is a good idea.

A last word…

We need to see proposals from Government that encourage growth, not just to balance public finances. Should the Chancellor not deliver a budget that incentivises & enable business to have the confidence to invest in growth, it risks tipping the UK into an avoidable recession.

Find out more

For further guidance on any of the tax measures discussed in this article, please contact your usual MHA advisor or Contact Us.

Visit our dedicated Spring Budget 2023 hub for the latest insights.

You’ll find resources and practical guidance on any new tax measures and spending policies announced, to help you prepare and manage the potential impact on you and your business.