In his second budget speech, UK chancellor Rishi Sunak outlines his plans to help the economy repair. Below we have collated the latest reactions from the industry.
ACCA UK: ‘Fragmented’ budget does not give businesses certainty
Association of Chartered Certified Accountants (ACCA) UK head Claire Bennison said: “We are pleased the Chancellor has continued support for businesses, but this seems like a fragmented Budget that fails to provide a longer-term roadmap to recovery for them. Many owners will still lack any clarity about their route back to stability and the government’s agenda beyond the next few months.”
Tax measures: corporation tax
ACCA UK head of policy Glenn Collins said: “Corporation tax increases in 2023 may help to raise extra money in the future, but in the long term only greater economic growth is going to pay off Covid debts.
“Some of the Chancellor’s measures will help with growth, but all of them come with administrative costs for the business owners trying to juggle tax alongside every other aspect of their operations.
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“The rollercoaster of rates and changes in corporation tax in recent years has not helped businesses plan. Each of the measures announced is potentially helpful in isolation, but in the real world, they are going to interact with each other and with everything else that business owners have going on.
“Business rates relief for hospitality is welcome, but without increased demand from customers it looks set to taper off all too quickly. Likewise, the proliferation of VAT rates across time and products in the sector will be a mixed blessing for smaller concerns who feel the deadweight cost of administrative changes more than their larger competitors.”
On company directors
Collins said: ‘The Chancellor is looking to rebuild public finances by asking businesses the government has supported to pay extra, rebuild communities and take on risk, but that will also affect those freelancers and directors that have been ignored and not received assistance. Why are they ignored and once again left out of the support packages?”
The economy and public finances
ACCA chief economist Michael Taylor said: “We welcome the improved economic outlook reflected in the updated OBR forecasts. Based on a strong second half of the year as consumer spending rebounds, the OBR now expects the level of economic activity to return to its pre-pandemic level by the middle of next year. GDP growth is forecast to be 4% this year and 7.3% in 2022 which is in line with consensus forecasts. But government borrowing will remain very high at £234bn (10.3% of GDP) for 2021/22. The public sector debt to GDP ratio rises to a peak of 109.7% by 2023/24, a remarkable 25% of GDP higher than in 2019/20 – a measure of the huge fiscal cost of Covid-19.”
AAT welcomes skills investment and small business support
Phil Hall, Head of Public Affairs & Public Policy, AAT, said: “AAT were particularly pleased to see the furlough scheme extended to September, as well as continuing and expanded grants for self-employed people and small businesses. The Chancellor’s commitment to investment in skills and training – including the Kickstart and Restart programmes and the Lifetime Skills Guarantee, as well as pledges to double apprenticeship incentives to £3,000 and triple the number of traineeships through a £126m investment – should also help more people around the UK to gain the skills they need to develop and thrive in their careers.
“Additionally, the government has recognised that small and medium-sized businesses are key to the UK’s economic recovery, and we welcome the raft of measures announced to support them over the coming months, including cash grants to help businesses reopen this spring, the continuing business rates holiday and extending the VAT cut for the hospitality and leisure sectors. SMEs have been particularly badly hit by the pandemic and these measures will help them to weather the storm and get back on their feet. The new Help to Grow schemes will also support SMEs to build management and digital skills needed for a rapidly changing business environment.
“However, there were some areas where the Chancellor did not go far enough. For example, we had hoped that he would write off genuine Bounce Back Loans for SMEs. The government has admitted up to 60% of these loans could be written off, with the Public Accounts Committee suggesting the figure could be as high as 80%. AAT has long recommended that all legitimate Bounce Back Loans be written off, which would enable a speedier recovery by boosting much needed investment and growth. This is something that we will continue to press the Treasury to consider.”
More support for the self-employed
“AAT has repeatedly called for more help for the self-employed during this crisis, so is pleased that the Chancellor has today confirmed millions of workers will have access to grants of up to £7,500 – claiming 80 per cent of average monthly profits up to a maximum of £2,500 a month.
“Making an additional 600,000 self-employed people eligible by accepting claims from those who had filed a 2020 tax return by midnight last night, is also something that AAT had campaigned for and very much welcomes.”
Corporation tax to increase to 25% by 2023
“Last year AAT welcomed the retention of the main rate of Corporation Tax at 19% as the planned reduction to 17% would have meant losing £6bn of much needed revenue for no discernible gain. After a year of unprecedented economic shocks caused by coronavirus, and to a lesser extent Brexit, the Chancellor is right to consider increases rather than reductions.
“Our Corporation Tax rate will never be as low as the likes of Barbados, Hungary or Montenegro, but these countries are not the UK’s international competitors. We currently have the lowest Corporation Tax rate in the G20 and even with a small increase to 25% from April 2023, we will continue to enjoy a lower than average Corporation Tax rate amongst G20 countries – and still the lowest in the G7. This decision is one that strikes the right balance between raising substantial sums of money to invest in public services and pay down debt without stifling investment and innovation.”
Freezing personal tax thresholds
“Since 2010 the personal allowance at both the basic and higher rates has risen considerably, so much so that in response to the 2018 Budget, AAT stated that no further increases should take place. This was primarily because they are very expensive, disproportionately benefit higher earners and approximately three quarters of higher earners benefitting from an increase to the higher rate are male.
“AAT was already opposed to any further increases in the thresholds but this position has been solidified by the serious economic consequences of dealing with Covid-19. The Chancellor’s announcement today that personal allowances will be frozen at £12,570 and £50,270 until April 2026 is therefore an understandable, measured and necessary change that will bring in several billion pounds for the exchequer.”
VAT reductions and freezes for business
“Continuing with the reduced 5% rate of VAT for hospitality and tourism for an additional six months should help two of the most seriously impacted sectors of the economy, as will the subsequent interim rate of 12.5% for another six months after that.”
“Although the decision to freeze the VAT threshold at £85,000 for two years provides certainty for businesses, there is increasing recognition that a lower VAT threshold may be needed in the future. This is partly demonstrated by an AAT member survey last month, which found 37.5% of AAT members favour a reduction compared to 33% who want to retain the current threshold.”
Grant Thornton UK comments on the budget
Karen Campbell-Williams, Head of Tax, Grant Thornton UK LLP, said:
“Today’s Budget was always going to be the springboard into the long road to recovery from the ongoing pandemic. And, as expected, the Chancellor had to begin to take steps to balance record public spending, the likes of which has not been seen in peacetime.
“While an increase in corporation tax was always expected, many were anticipating a more staggered rise across a number of years, not a sharp jump. But, as the rate change won’t be effective until April 2023, this should allow time for companies to accurately forecast and plan for the impact to their cashflow. The increased rate, while steep, is still a reasonable rate and does keep the UK at a competitive level compared to other countries in the G7. Companies with lower profits will be sheltered through the new small profits rate and marginal rate provisions so that the new rate will be progressive, with only 10% of companies expected to pay the higher 25% rate.
“In planning for the future, businesses will now need to consider the impact of the new loss carry-back rules, the super-deduction for qualifying capital expenditure and the interaction with their future deferred tax liabilities given the increase in the headline rate of corporation tax. In certain circumstances this could, for example, lead to a decrease in earnings per share (EPS) and so early attention to forecasting is critical to manage wider stakeholder expectations.
“We expect that the new super-deduction will have a positive impact on company investment levels, with the range of assets covered under the relief broad in scope. This is a positive move to encourage investment from 1 April and kick-start economic growth.
“The extended loss carry-back rules will be a valuable support for companies that have been particularly impacted by the pandemic, in sectors such as hospitality and travel.”
BDO on the new HMRC taskforce
Dawn Register, Head of Tax Dispute Resolution at BDO comments:
“Catching tax cheats will be a key part of the government’s action to repair the public finances. In a bold move to hire over 1000 new HMRC investigators, the target is to claw back fraudulent pay outs. Given the speed and scale of the response to COVID-19, it is undoubtedly the case that fraud has increased. HMRC has a rich pool of data to identify suspicious claims and grants, and we expect a flood of new enquiries.
“Given the switch to online and paperless transactions, this is a new focus to tackle fraud, including on electronic sales suppression and forcing information from digital platforms. Post-Brexit, the focus on OECD standard information exchange and cooperation continues to be a central theme to ensure the UK gets a ‘fair slice’ of the international ‘business cake’.
“HMRC powers and technology will be further enhanced by additional money and resources to HMRC to recoup money spent during the pandemic. New steps to tackle tax avoidance and evasion are estimated to raise £2.2bn between now and 2025-26.”
Haysmacintyre: Chancellor delays tough tax decisions for another day
Katharine Arthur, Head of Private Client, haysmacintyre, says: “Today’s Budget indicates that many of the Chancellor’s tough tax decisions are being left until another day. Despite much talk over recent months on the potential of a wealth tax, or changes to capital gains tax, it seems these are not a priority just yet.
“However, although the freezing of income tax and inheritance tax thresholds may not appear to be a significant change on the surface, it will in fact mean that many people could end up paying a higher tax rate than they typically would, as we would expect the thresholds to increase at least in line with inflation.
“The Chancellor’s announcements will not come as a great surprise to many; but with the UK economy still facing an eye-watering level of debt, we should expect some significant tax changes to be announced further down the line. The OTS is set to release its second report into proposed changes for capital gains tax over the coming weeks – and it will be interesting to see if the Chancellor acts on these recommendations at a later date.”
Chris Evans, Vice President and UK country manager at Intuit QuickBooks commenting on the ‘Help to Grow’ scheme announced in today’s 2021 Budget:
“It’s hugely promising to hear the Chancellor announce vital, practical support for small businesses in the new ‘Help to Grow’ scheme. We know from our own research(1) that through the pandemic, being able to digitally pivot has been critical for survival: 73% of small businesses told us they became more digital in 2020 and of these, 88% said it was key to their ability to continue operating. Providing access and support now for businesses to enhance their technological capabilities ensures they are able to ride on the digital wave that has helped so many to stay afloat during the pandemic.
“As the backbone of the UK economy, small businesses deserve our support and we simply must recognise that their contribution goes far beyond pure economic factors. Particularly over the past 12-months we have seen the vital role they play in supporting local communities. Our research estimates small businesses gave a £18billion contribution in 2020 through initiatives such as volunteering and cash donations. We simply can’t afford to lose these businesses from the UK landscape: to do so would impact on all of us.”
EY: New skilled visa routes will help position UK as a leading Tech and FinTech market
Seema Farazi, UK & Financial Services Immigration Leader at EY, comments on the Chancellor’s announcement of a new FinTech visa: “The UK Government has today taken a decisive and affirmative step forward to position the UK as a leading hub for tech and FinTech by launching a new scale-up visa route. Supporting the growth of UK tech and FinTech is fundamental for the sectors’ global success and will also aid the UK’s economic recovery as we look to counter unemployment and increase skills in growth areas.
“A tailored visa route into UK scale-ups will have far-reaching positive implications and will support the tech sector as it looks out to the global marketplace. It is crucial the UK leads the way in attracting skills from all over the world as well as creating homegrown talent. Today’s announcement will drive progress in establishing the UK as a leading scale-up market.”
TheCityUK: Changes to corporation tax need to be matched with a commitment to streamlining and simplifying the UK’s tax code
Commenting on the budget TheCityUK CEO Miles Celic said:
“The Chancellor’s Budget is rightly focused on supporting the economy through the pandemic and boosting long-term growth and productivity. The focus on innovation, investment and infrastructure across the whole of the UK reflects many of the priorities our industry has long called for.
“Our industry is already the biggest contributor to Britain’s public finances. However, the UK cannot forget it exists in a highly competitive global landscape. Changes to corporation tax need to be matched with a commitment to streamlining and simplifying the UK’s tax code, and we welcome the review of the bank surcharge which has long placed UK headquartered firms at a disadvantage to those in New York and in Asian centres. We look forward to seeing further detail on this proposal.
“Our industry will welcome the measures outlined today to put the UK at the forefront of the green finance revolution and to make sure we can find and train the highly skilled talent we need from within the UK and internationally. Our ecosystem will also welcome the commitment to act swiftly on the recommendations of the Hill and Kalifa reviews, which are needed to make the UK the best place in the world to start, grow and list the companies of the future.”