The investment-led recovery measures announced by Chancellor Rishi Sunak at Wednesday’s Budget, provide a “well-needed tax relief boost” and cost capping extensions provide “essential certainty” for businesses, according to Mark Jenkins, CFO at MHR International.
“The range of freezes, tax rates and reliefs will now make it easier for CFOs to forecast accurately through financial modelling and analytics within clear parameters,” he said in an email.
Sunak announced a “super-deduction” coming into effect next month, which allows businesses to reduce their tax bill by 130 percent of what they invest – up to 25p for every £1 spent. This is estimated to be worth £25bn to UK companiesand this relief will last until the end of March 2023.
“I am particularly inspired by this announcement whereby innovation investment for the next two years will deliver a well-needed tax relief boost,” said Jenkins. “This will encourage businesses like ours to look at creating new opportunities at a time when the natural tendency would be to keep holding our breath for a little longer.”
The cost capping measures, announced by Sunak, allows companies to build reserves for future tax liabilities including the hike in corporation tax to 25 percent on profits in April 2023, according to Asif Muhammad, CEO of Main Course Associates, a restaurant consultancy and accountancy firm.
“The two key parts for us are: being able to invest and utilise the super deduction benefits and being able to train staff for more senior positions, with skills training expenses to a large extent footed by the government.
Furthermore, the furlough extension gives those in the hospitability sector a “top-up” and new recovery loan schemes will see businesses “eagerly” awaiting criteria, said Muhammad.
A Brexit recovery boost
Sunak also announced eight new freeports across England – in East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames and Teesside – providing a “significant incentive” for firms to do more in the UK and help drive further investment within IT services and other businesses, according to Rob Pursell, CFO at NSC Global.
“This is likely to reduce the requirement for us to move some of our warehousing and network equipment staging to the EU,” he said in an email. “This could allow us to keep jobs and operations centralised in the UK by avoiding complexities and costs on the import and export of goods currently created by the Brexit deal.”
Short-lived relief for some
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Despite the “generous budget” bringing much-needed certainty to those in the property sector, it remains “limited” as business recovery will take “much longer”, according to Jace Tyrrell, CEO of New West End Company.
“The announcement delivers too little for major commercial centres missing out on tourism and office workers where rebuilding traffic, trade and tourists will require years of effort,” he said in an email. “Targeted relief and support is needed for centres such as London, Birmingham and Manchester, where recovery will take much longer – sit cannot be a one size fits all approach.”
The Chancellor’s additional support for hospitality and retail including an extension to the VAT cut to 5 percent until the end of September, followed by a 12.5 percent rate until March 31, 2022 is “crucial” for businesses. However, the business rate holiday doesn’t fix the “broken system”, according to Phillip Slavin, CFO at Quintain.
“The Chancellor’s latest Covid budget is understandably focused on promoting recovery whilst remaining cognisant of high public borrowing levels,” he said in an email. “It is a budget for 12 months not 5 years, and that is probably the right approach with the end of the pandemic in sight, but still a way away.
“However, the Chancellor has only extended the business rates holiday until June, we continue to support the British Property Federation in their call for a full year extension – and a new business rates regime in the autumn which fixes a broken system.”