Amid continuing talk lately about whether the UK could – after all – manage to avoid falling into recession during 2023 after it had long been predicted, the Confederation of British Industry (CBI) has urged the Government to use the upcoming Spring Budget to make the moves that will help inspire growth.
A key demand of CBI Director General Tony Danker has been for Chancellor of the Exchequer Jeremy Hunt to replace the “super deduction”, which is a soon-to-expire policy that reduces a business’s taxes by 25p for every pound it invests.
The Government has not confirmed there will be any replacement for the investment tax-relief, which is set to cease at the end of March. So, with the Spring Budget scheduled for the 15th of next month, all eyes will be on the Chancellor to see whether he decides to extend this incentive.
Incentives to invest being withdrawn “just at the time we need them most”
The CBI said that although the Government’s focus so far on ensuring stability had “cleared a path for the country to focus on growth”, the Spring Budget represented an “opportunity to get the UK out of any recession sooner rather than later and transform the UK into a high-growth, innovation economy.”
However, the business organisation expressed concern that investment incentives such as the “super deduction” were “being pulled away just at the time we need them most”. Corporation Tax, too, is set to go up in April from 19% to 25%, which will exert fresh pressure on firms across the UK.
The CBI argued that “full expensing” – whereby businesses could immediately claim back the cost of investment against tax liabilities – would help rescue the UK from a “low-growth trap”, bolstering business investment by as much as £40 billion a year by 2026.
By contrast, Mr Danker said, failure to replace the “super deduction” would “have a huge impact on investment and leave the UK falling behind its competitors”.
Is there much chance that the Government will heed the CBI’s call?
The short answer, it would seem, is no, at least according to reporting of the story. The Yorkshire Post cited “Treasury sources” as suggesting that the business organisation would not see the Chancellor announce any extension to the “super deduction”, which has reportedly cost the Treasury around £25 billion over two years.
The Government also said back in May about the notion of extending the tax break that “no other country in the G7 has implemented this on a permanent basis” – a hint that the “super deduction” was always meant as a time-limited policy to help power the UK economy out of the COVID-19 crisis.
Is your own business looking ahead with dread, or instead optimism, to the nearing Spring Budget announcement? Whatever the exact situation for your firm, the TS Partners team would be pleased to talk to you about how our tax compliance services in Newton Abbot, Plymouth or Wellington could help give your business fewer pressing worries in 2023.