91探花

Flora Barnes, corporate tax director at 91探花 gives her take on yesterday’s budget:

It was a quiet budget from a business tax perspective. With the chancellor focusing on reducing the tax burden, businesses might have hoped corporation tax would be addressed, especially since the yield from corporation tax has doubled from £40m to £80m over this government, even before the 6% increase in the rate from 19% to 25% in April 2023.

However, after the Autumn Statement focus on ‘110 measures for businesses’ failed to move Conservative poll ratings, it may be that the Chancellor has his attentions elsewhere. Changes to corporate taxes take time to be felt by businesses, and even longer to be felt by voters.

There was big news for some key sectors though, including extending oil and gas windfall taxes, additional reliefs for the creative sectors, particularly film and theatres, and some big (but vague) changes for the NHS. Key local initiatives were also announced in various areas of the country.

Businesses might have hoped to hear for a delay on the new R&D regime (due to come in from next month) as suggested by the House of Lords economic affairs committee, or some additional information on the Pillar 2 Global Minimum Tax, but no mention was made of either. The only reference to capital allowances was a promise to extend full expensing to certain leased assets “when fiscal conditions allow”.

With the turnover threshold for VAT registration frozen at £85,000 since 2017, the unexpected rise in the threshold to £90,000 seems like good news. However, this increase does nothing to address the ‘cliff edge’ effect, where many small businesses are ensuring their growth is limited to just below the VAT threshold, and is still well below inflation.

Buried in the detail were some interesting nuggets, including a commitment to assess the cost of additional compliance arising from fiscal events, indicating the Treasury recognises the increasing compliance burden. A number of interesting consultations have also been launched, including on business rates and vaping. But for most businesses, the biggest impact this budget will have is the need to adjust their payroll - yet again - for the 2% national insurance rate cut.