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Fantasy Budget: Initiatives to support businesses

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From raising the VAT threshold to increasing investment, Gareth Anderson from Allica Bank has drafted a Spring Budget wish list that focuses on support and growth for small businesses.  

1st Mar 2024
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The Spring Budget is less than a week away, and it’s set to be one of the most significant political moments between now and the next general election. There is already speculation around tax cuts, ISAs and reforms to pension rules. With finances tight, the Chancellor has a difficult balancing act to strike.

While Jeremy Hunt prepares to answer questions about whether short term tax cutting can be a win and if there will need to be cuts to public spending to deliver this, I have asked myself what do I want to see from this Spring Budget?

Ideally, it would be a Budget that focuses on creating good conditions for business investment, productivity and skills growth. I’d also like to see a budget that prioritises public needs in health, education and climate change. Lastly, I’d like a budget that has a clear long-term vision and plan for reducing public borrowing.

My wishlist is long, so I’ve decided to focus on the initiatives that would support established businesses. Creating the conditions for growth and providing help to business owners. As head of business management at Allica Bank I get the privilege of hearing directly from businesses and understand the obstacles and opportunities they’re facing.

Here are the budget announcements that I’d want to see:

Increase the VAT threshold from £85k

Every small business owner I talk to always says that they need to stay below the threshold, and it becomes a deterrent to growth. Increasing the VAT threshold will be a way to signal to small businesses that the government wants SMEs to grow and be successful.

Removal of the seven-year EIS restriction

Under current HMRC rules a company trading for more than seven years cannot raise Enterprise Investment Scheme (EIS) qualifying investment. Whilst the view has been that more mature companies are better placed to access funding via the capital markets, this is not always the case, and removing the restriction would provide a potential boost to some of the most innovative and high growth UK companies.

Increase investment appetite

Whilst making full expensing permanent in the Autumn Statement was a welcome announcement, it has arguably reduced the urgency for business owners to make capital expenditure investment before the relief has gone. This, coupled with rising costs and interest rates, along with reduced trade prospects post Brexit, has meant many businesses have sought to delay their plans in acknowledgement that the tax benefits will still exist in the future when they do deploy capital again.

Applying full expensing to leased assets, providing renewable energy assets with a faster rate of capital allowance relief and revisiting restrictions on how businesses can use tax losses when expensing could all help support increasing investment appetite. 

Further reform to pensions

The Chancellor established a number of consultations in the Autumn Statement looking at how defined benefit (DB) pension surpluses could be used by corporate sponsors. Enabling surpluses to be returned to their corporate sponsors has the potential to free up billions for UK businesses to deploy capital investment.

Reform of the apprenticeships levy and increased funding for workforce skills

Currently too complex, inflexible and poorly targeted, the apprenticeships levy needs urgent reform to enable businesses to access the funding to create skills and career opportunities without feeling straightjacketed.

As accountants, what would be on your budget wishlist? What would you like to see and how would this help support your SME clients? Let me know in the comments section below.

 

Replies (4)

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By RobbieT
01st Mar 2024 11:25

Increase PA / NI threshold to £15k, BR/HR threshold to £75k, link these to inflation like state pensions are.
Increase VAT registration threshold to £100k and link to inflation.
Match HICB threshold with BR/HR threshold
Remove the PA taper for >£100k income
Restore £10k 0% dividend threshold
Increase the CT marginal rate lower threshold to £250k

Thanks (3)
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By indomitable
01st Mar 2024 13:15

Slash civil service spending and personnel by at least 10%
Halve the number of MP's in parliament - but pay them better - and get better quality MP's in there
Reduce Corporation tax to 17.5%
Increase the threshold of the personal allowance to maybe £15K
Increase the basic rate band of income tax to £75K
Scrap inheritance tax

All the above uncosted of course but it is a wish list!!

Thanks (0)
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By petestar1969
01st Mar 2024 14:37

I don't agree on raising the VAT threshold. I agree with someone I saw on BBC Breakfast who suggested the VAT threshold should be reduced to £20,000.

This would put everyone in business on a level playing field because, lets face it, any business with turnover of less than £20,000 isn't really a business, its a hobby.

With everyone on a level playing field, growth would naturally happen.

Thanks (1)
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By seonaid anderson
01st Mar 2024 17:24

A turnover tax is never going to provide a fair playing field as some businesses have very low overheads whilst others have to earn £100K before they make any profit at all for the owners.

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