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The accountancy sector has primarily welcomed plans to make full expensing permanent for businesses as well as a 2% cut in employee national insurance, as unveiled by the chancellor Jeremy Hunt in the Autumn Budget yesterday (22 November).
Professional body ACCA has said that encouraging investment in businesses and incentivising it through improved capital allowance expensing is “a step in the right direction to promoting longer term and stable economic growth that the UK needs”.
Commenting on the National Insurance contribution cuts, Christine Cairns, tax partner at PwC, said: “The cut to employee NIC functions as a significant and welcome 2% cut to income tax within the band affected. Its introduction three quarters of the way through the tax year is an unusual step that will be welcomed by those who benefit although it could cause an administrative headache for payroll operators.
“Notwithstanding the cuts, significantly there were no increases to any tax thresholds, meaning the effects of fiscal drag will continue to bite, offsetting in part the savings achieved.”
As part of the measures unveiled, Hunt also confirmed the merger of the current research and development expenditure credit (RDEC) and small or medium enterprise (SME) schemes for accounting periods beginning from 1 April 2024. The intensity threshold in the additional support for R&D intensive loss-making SMEs will be reduced from 40% to 30%, bringing approximately 5,000 more R&D intensive SMEs into scope of the relief.
On R&D schemes, Rachel Moore, innovation incentives partner, PwC, said: “On one hand it is a welcome simplification, but there is still much uncertainty on who will be entitled to claim R&D under the new rules. This will undoubtedly result in some significant winners and losers, with the subcontractors hiring skilled R&D staff expected to lose out based on current draft rules.”
Other measures include a future consultation on the taxation of remote gambling, freezing alcohol duties, an extension of the business rates 75% relief for retail, hospitality and leisure sectors for one year, a freeze in the small business multiplier for 12 months, the reduction from 35% to 25% of the tax charge arising on authorised surplus payments to sponsoring employers of a registered pension scheme, and an increase in the funding for HMRC to help improve the collection of tax debts.
Paul Falvey, BDO tax partner, said: “Some service sector industries, for example, which may not benefit to any great extent from the capital allowances regime, will face increased costs due to the increase in the National Living Wage, particularly if they have high numbers of younger workers on the payroll.
“Leaving aside the issue that full expensing, although very welcome for those affected businesses, is an acceleration of a relief rather than a tax cut, what was lacking in today’s announcement was any sense of a future roadmap for businesses taxes, which so far this year are up over 16% year-on-year. Many will be disappointed not to have heard any more about planned reductions in the headline corporation tax rate for example.”
