Blog

Budget 2021: Will the Chancellor set the UK on the road to recovery with new post-Brexit freedoms?

lightbulb graphic

As Chancellor Rishi Sunak’s hands are no longer tied by EU state aid rules, he must use the Government’s Brexit freedoms to make fiscal changes aimed at promoting recovery, support wealth creation and ultimately generate more jobs.

With an ever increasing speculation that suggests the Chancellor will introduce tax hikes to help pay for the pandemic, our specialist are becoming concerned, as doing so would make it challenging if not impossible for private companies to lead the way to economic recovery.

Alternatively the Chancellor should look to use his first post-Brexit budget to formulate a tax regime that encourages innovation and entrepreneurial investment, while looking to establish the UK as a place that businesses and individuals want to stay, invest and grow.

Richard Godmon - Menzies Accountant

Richard Godmon, tax partner, said:

“Now is definitely not the time to increase corporate taxes or remove incentives for entrepreneurship, as this will do nothing to help the 900,000 small businesses in the UK that are at risk of failing by April1. There will be a time to recoup some of the cost of the pandemic, but promoting economic stability must come first.”

What are the tax reliefs the chancellor is now free to change without EU approval?

Among the tax reliefs that the Chancellor is now free to change without EU approval, are R&D tax relief and the Patent Box regime. He could also, for example, allow relief for loss-making businesses in a similar way to R&D tax credits, enabling them to offset losses against last year’s PAYE liability. This would allow some of the hardest-hit businesses to access a tax refund to support them on the road to recovery. Enhancing the Patent Box regime, which allows UK-based companies to pay a lower rate of corporation tax on profits generated from patented technologies, would help to encourage inward investment and create jobs.

Richard Godmon adds: “This Budget is the Chancellor’s first opportunity to assert the UK’s independence from the EU. Enhancing tax reliefs in a way that would target support for struggling businesses could deliver a much-needed economic boost and protect jobs.

“The Chancellor could also provide more fiscal support in disadvantaged areas of the country, supporting its ‘levelling up’ agenda, through the creation of more Enterprise Zones. Free from EU constraints, he could go much further to incentivise investment and economic regeneration in these areas by extending the Stamp Duty Land Tax holiday beyond the end of March and broadening the scope of capital expenditure that might qualify for this year’s £1 million Annual Investment Allowance.”

Will there be additional support for early-stage and fast-growing businesses?

The Chancellor could also introduce additional support for early-stage and fast-growing businesses, this could be provided by enhancing the appeal of the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) for entrepreneurial investors. These schemes are an incredibly important source of funding for businesses. For example, for a temporary period, the Chancellor could allow entrepreneurial investors to claim income tax relief on their investment up to a maximum value of £250,000, up from the current £150,000.

For further Brighter Thinking predictions into the Spring Budget, visit our hub below:

Posted in Blog, Healthcare, Hospitality & leisure, Manufacturing, Not-for-profit, Property & construction, Retail, Technology, Transport & logistics, Recruitment, Legal Services, Financial Services