The expected hike in corporation tax and scrapping of super deduction tax allowance are two of the main areas of concern for North East businesses.
Amongst those forecasting that such measures will act as a disincentive to investment and growth is Bob Borthwick, a director at Teesside recycling experts Scott Bros.
He is largely looking for Spring Budget inaction from chancellor Jeremy Hunt in three key areas: maintaining corporation tax at 19% rate rather than its anticipated rise to 25%, retaining super deduction tax allowance and no increase in fuel duty.
He said: “Scott Bros. is a family-run firm that has been able to grow and establish itself as a key contributor to Teesside’s circular economy by constantly reinvesting its profits in new equipment and technology. One example is the £6m it has spent to create one of the UK’s largest wash plants, which takes construction waste and converts it into commercial grade aggregate and sand for the building industry.
“Without super deduction tax relief, which rewards investment in plant and machinery, Scott Bros. would have been forced to limit the scope of its plans and in turn its future growth strategy.
“In addition, any rise in fuel duty, coupled with an expected increase in corporation tax will have a detrimental impact on SMEs across the country – reducing the amount of cash available to invest and innovate, reigning in ambition, limiting the rewards while at the same time extending the risks.”
Gavin Cordwell-Smith, chief executive of Hellens Group, which incorporates several property, construction, manufacturing and social enterprise businesses with interests across the North East and Yorkshire, said: “We were fortunate to benefit from the government’s super-deduction capital allowance when investing in our facility in Catterick.
“I both hope and expect that an extension of this programme, which accelerates investment and delivers productivity, will be announced in some form. However, because of the anticipated hike in corporation tax, in order to continue to incentivise investment the 130% deduction will need to be retained.”
Aman Chahal, CEO of Stockton-on-Tees headquartered TaperedPlus, a national leader in the design and supply of flat roofing and insulation systems, said: “I’d like to see Metro Mayors, such as Ben Houchen here in the Tees Valley, handed greater fiscal devolution. This will enable them to create greater financial incentives to attract and stimulate businesses within their areas. We also need to see greater progress made on the proposed investment zones, which along with Freeports, have huge potential to drive the levelling up agenda.
“Despite its success, capital allowance super deduction is destined to disappear on March 31, largely due to the huge burden on the government’s coffers. However, financial incentives are still required to give businesses the confidence to invest in plant and machinery, so I’d like to see an announcement on a more durable replacement tax relief scheme. Although realistically this is likely to be less generous.
“I also believe the planned rise in corporation tax will have a negative impact on the economy, so I’d like the chancellor to set out his long term strategy to achieve his vision of establishing a competitive tax regime.”
Paul Blight, Head of Wealth Management at Newcastle-based Tier One Capital, said: “The chancellor is in the fortunate position of having more room for manoeuvre at this budget than he had thought likely. There is around £30 billion more to spend than he thought. This offers an opportunity. But making the most of it will require a delicate balance between appeasing factions of his own MPs and acting in the national interest.
“Those who had supported Liz Truss will hope that he is able to follow through on tax cuts that can help their core affluent voter base in the South of England. Yet when inflation is running hot more tax cuts threaten to exacerbate that problem and will not get support to those struggling the most.
“His other option is to use the headroom to settle public sector pay disputes and provide financial support to families which can genuinely grow the supply-side of the economy. For example, adding significant support with childcare costs for under twos could enable many parents to return to the workplace early, alleviating the labour shortages which are holding back British business.”
Karl Pemberton, managing director of Teesside-based Active Chartered Financial Planners, said: “I’ve seen several predictions for this week’s budget that are largely positive, including some continued help towards energy bills, a possible further freeze to fuel duty, and removing the cap on doctors pensions to ease the strain on the NHS.
“However, the proposal I certainly hope doesn’t make it out of the red dispatch box is the potential rise in corporation tax. The feedback I’ve heard suggests that it will discourage businesses from investing and recruiting to try and counter the effects. I think it’s a bit of an own goal, and Mr Hunt would gain more from encouraging businesses rather than punishing them.”
Sim Hall, managing director of Darlington-headquartered STEM specialist recruitment firm Populus Select, said: “If the government truly wants to make the UK a ‘Science Superhouse’ as it says, then it needs to use this budget to set out its stall. If we are to compete globally for investment and innovation, we urgently need to do more to attract big players.
“I work with science and engineering firms across the world and my clients tell me that other countries are doing a lot more than the UK to attract cutting edge firms, with the EU and US introducing huge subsidies.
“Changes to corporation tax should be scrapped. At the very least, the blow could be softened with a continuation of the super deduction scheme and further support on research and development spending. That would go a long way, but alone may not be enough to put the UK at the forefront of an increasingly competitive playing field.”
Lee Watson, tax partner at Clive Owen LLP, which has offices in Darlington, Durham, Middlesbrough, and York, said: “From an income tax perspective, we are not anticipating movement in terms of rates and allowances. However, the chancellor needs to incentivise those retiring early to remain or return to the workplace. Could he achieve this by giving a further allowance to individuals to use against their pension income, if they also have income from employment?
“In addition, there are suggestions that the amounts that can be saved into pension and receive tax relief, could be increased. The chancellor is under pressure to reduce the corporate tax rate from 25%. I cannot see a total reversal back to 19% but could we see an uplift in the thresholds at which the 25% rate starts to help companies with smaller profits. If he did that, it could mean that those smaller companies would only attain 19% relief on capital expenditure, so could the super deduction be retained in some capacity?
“Overall, we are not expecting a significant give away but with an election in 2024, the chancellor needs to set a tone of positivity to the electorate.”
