There is much anticipation in advance of Wednesday’s Spring Budget – the first for Chancellor Jeremy Hunt – as he announces the Government’s plans for economic growth and sets out new rates for business and personal tax.
The last time Mr. Hunt carried the ‘red box’ into the House of Commons he had only been in the post a month and was focused on reversing his predecessor’s infamous ‘mini budget’ announcement in September 2022.
Whilst UK Government Ministers remain tight lipped about what to expect on Wednesday, in his ‘Bloomberg Speech’ at the end of January the Chancellor did frame his four pillars for growth as Enterprise, Education, Employment and Everywhere, and set out his ambition to see the UK as having the ‘most competitive tax regime of any major country’.
Enterprise
Plans to increase the main rate of corporation tax to 25% from 1 April will put our rate of corporation tax at double that of our closest neighbours in the Republic of Ireland and will once again impact the competitiveness of companies operating here. This was something that the Prime Minister was asked directly about on his recent visit to Coca-Cola in Lisburn, where he stated that the budget would provide some clarity.
To counter the charge that this makes the UK less attractive to investors, we could see a corporate tax roadmap that outlines future cuts over the next three to five years.
With the super-deduction of 130% for qualifying capital expenditure ending on 31 March, there are rumours that a more generous capital allowances regime could be announced. This would be very much welcomed, particularly by those businesses who have ordered plant and machinery to avail of the super-deduction but to have the supply chain crisis significantly delaying their capital goods delivery time and subsequent tax relief.
Education
With the HSBC acquisition of Silicon Valley Bank’s UK arm this week, a potential crisis in the UK tech sector has been avoided, at least for now. With approximately 3,300 UK clients, of which many are start-ups developing innovative new technologies, this acquisition provides some level of security for the tech sector here. The Chancellor will be keen to use his Spring Budget to provide reassurance to avoid any ripple effect in others small banks.
The Chancellor is looking to re-create ‘Silicon Valley’ in the UK and the future of work will need to ensure that our education system here is fit for purpose. Employers could see increased reliefs for liaising with education providers or bringing in more apprenticeship schemes.
Employment
BDO NI clients across Northern Ireland in various sectors have one major common issue – recruitment and retention of staff. Recent UK Government estimates suggest some 6.6 million people of working age are now economically inactive with only a quarter of them actively looking for work.
A consultation in relation to National Insurance contributions for those returning to work is very likely, but many employers would prefer to see additional support as pressure to increase wages due to the cost-of-living crisis continues.
Over the weekend the Chancellor has also stated that he wants to tackle the ‘barriers to employment’, so expect some government announcements on support for those struggling with childcare costs and a focus on how to move people into work.
Everywhere
The latest OECD changes, particularly around Pillar One and Pillar Two, are always a guaranteed feature. The UK’s rate of tax is already more than the global minimum rate of 15% tax, so focus will be on the Pillar One proposals in relation to the taxation of the digital economy. As usual, there will be increased anti-avoidance legislation for globally active entities and some clarity on the new Transfer Pricing ‘audit trail’ requirements, would be welcome.
BDO Northern Ireland is an audit, tax and business advisory firm which has provided expert support to clients for more than thirty years
