What it means for business owners

The Spring Statement is out and our experts have checked the fine print to provide you with a detailed analysis of what the impact will be for you and your business. Here are some of the key updates summarised:

What it means for business owners

The Spring Statement is out and our experts have checked the fine print to provide you with a detailed analysis of what the impact will be for you and your business. Here are some of the key updates summarised:

Increase of Employment Allowance relief

In his announcement, Mr Sunak unveiled an increase to the Employment Allowance – a relief which enables smaller businesses to reduce their employers National Insurance contributions bills each year – from £4,000 to £5,000 starting from 6 April. This measure aims to partially offset the National Insurance hike, which is set to go ahead as previously planned. This news comes on top of 50% business rates relief for eligible retail, hospitality, and leisure properties being introduced this April.

Research and Development relief reforms

The government has recognised that existing R&D relief needs to be enhanced to make the UK a global innovation leader. From April 2023, all cloud computing costs associated with R&D (including storage) will qualify for government relief. The government will also legislate so that expenditure on overseas R&D activities can still qualify where material factors make overseas research necessary or regulatory or other legal requirements requiring overseas activity. The government has also announced plans to expand the definition of R&D for tax reliefs, including data, cloud computing and pure mathematics.

Business Rates reliefs brought forward

The Chancellor also announced that two new business rates reliefs will be brought forward by a year to come into effect in April. There will be no business rates due on a range of green technology used to decarbonise buildings, including solar panels and batteries, whilst eligible heat networks will also receive 100% relief. This move forms part of the government’s wider Net Zero strategy and its aim to become a world leader in energy transition.

Fuel Duty reduction

Following outrage around rising fuel prices, the Chancellor announced a much-anticipated reduction in fuel duty at 5p per litre and effective from 6pm on 23 March, giving immediate relief to individuals and businesses dreading their next fuel bill. Factoring VAT into the savings, this amounts to a reduction 6p per litre.

Our summary

Last October, when Chancellor Rishi Sunak announced his Autumn Budget, the sentiment of his announcement was one of optimism, as the country emerged from the worst of the pandemic and looked to a brighter future. Fast forward to March and the tone of his Spring Statement is starkly different.

Prefaced with somewhat premature warnings that the war in Ukraine would impact the UK economy significantly for years to come, and reminders that The Office for Budget Responsibility (OBR) is still a long way off recovering from pandemic spending, the Spring Statement didn’t instill optimism or inspiration for business owners.

With immense pressure on businesses and individuals to cope with increased costs of energy and fuel that pushed inflation to a 30-year high on the morning of the Chancellor’s announcement, what was needed from the ‘mini-budget’ was a significant relief package, widely suggested to include a backtrack on National Insurance increases.

The key changes relating to businesses saw some beneficial tax cuts, but time will tell if these are enough to protect organisations from ongoing fiscal challenges.

Our team have put forward their analysis of the Spring Statement below.

Tax Director, Edinburgh

Ian Haynes

It’s probably fair to say that the main thrust of the 2022 Spring Statement was tax cuts. On the day that inflation was announced at a 20 year high of 6.2% with a forecast of upwards of 8% expected, Rishi Sunak had to do something to keep the people happy.  His answer was the Tax Plan.

The worst kept secret of the mini-Budget was the planned reduction in fuel duty.  At 5 pence per litre and effective from 6pm on 23 March, this is a valuable saving that will have a direct impact for anyone who drives a petrol or diesel car.  Many such drivers may have found themselves unable to fill up their car at un-manned pumps in recent weeks, as the £99 maximum spend is currently not high enough due to soaring prices; perhaps this will now change?  My big question on this has to be – ‘what will happen in March 2023 when this reduction ends?’.

Another helpful tax cut was to reduce the 5% VAT charge on insulation materials, solar panels, heat pumps and so on down to 0%.  VAT registered traders will absorb these changes, but will this be sufficient to encourage the population to invest in what are still generally expensive green energy solutions? 

While the incoming Social Care Levy will remain, he announced that the national insurance contributions (NICs) threshold would be increase by £3,000 to bring the income tax and NIC thresholds in line.  This has been speculated about for many years, so is welcomed, but taken with the increased NIC from the Social Levy, the real impact is likely to be minimal.  It’s also note-worthy that this will only apply from July 2022, and NICs are not cumulative, so unless things change, there will be no adjustment made from April to when this takes effect.

The big finale was the reduction to the basic rate band from 20% to 19% at some point in 2024; this being described as the ‘rabbit out of the hat’.  I applaud a reduction to the tax rates, but aside from dealing with the delay of introducing this move, what will be the real outcome if workers are still going to be paying 1.25% more NICs while everyone will get a 1% income tax cut.

Other ‘tax cuts’ – or perhaps tax breaks is a better way of putting it – for those in business should be expected; a widened scope for R&D claims, more allowances for capital expenditure for businesses, business rates being limited and an increase to the Employment Allowance.  All of these will of course help reduce outgoing costs but all involve a business spending to save.  I would have liked to see more done for small and medium sized businesses who are still feeling the backlash of lockdown to help them now in real terms.

I hate to say it, but as always, ‘the devil is in the detail’ with any Budget announcement, and those details will be unpacked over the coming days and weeks.

Partner, Swindon

Martin Gurney

There was a widely held belief that the Spring Statement by the Chancellor would be relatively benign, and, to some extent, the Chancellor did not disappoint in that respect. The Government continues with its strap line that borrowing our way out of difficult times is not the answer, and therefore all Budgetary measures announced must be funded in another way. However global economic and political conditions have created supply chain problems and inflationary pressures which the Chancellor recognises is adversely affecting households and businesses. Government borrowings are currently predicted to be below forecast, and therefore the Chancellor felt that he was able to implement new measures to ease the burden.

Tomorrow is promised to no one, and therefore there is always scope for the Chancellor to retract future changes in the light of prevailing economic conditions, however, there has at least been some attempt to alleviate the burden of households and businesses in these challenging times.

Managing Partner, Manchester

David Fort

The Chancellor’s Spring Statement was largely focused on supporting individuals through the increased cost of living. While this was an essential consideration for his strategy, he has entirely left business owners out of the discussion. Business leaders across sectors are massively disappointed that there were not more changes to support both the long and short term issues that they are facing as a result of difficult economic circumstances.

The Chancellor talks endlessly about improving the economy, but his Spring Statement included nothing helpful to the economy or enterprise. He missed an opportunity to incentivise and offer hope to business owners and prove that he means what he says when he describes this government as one that is on the side of enterprise.

If the government truly wants to grow the economy, they need to give businesses tangible support now, not leaving them to wait until the autumn.

The business community had hoped for a five-year plan that would help guide their decision making and investment strategies in the long term. I accept that as a country we have been through big traumas, but help was sorely needed by businesses too. To an extent, owner-mangers are still enjoying the post-lockdown bubble of positivity that was the tone for the last Autumn Budget and some extended support this March would have gone far in maintain this confidence that ultimately encourages investment that boosts the economy. If you give owner-managers incentives and opportunities, then they will run with it and help to grow the economy at much needed times.

Give businesses a route plan of what is coming, and they can plan accordingly. The silence they received yesterday was a disappointment that will have consequences over the months to come.

Tax Partner, Newcastle

Jonathan Scott

The chancellor’s Spring Statement shows that the UK Government is fully behind boosting innovation and increasing productivity, despite all of the noise in the marketplace over the last few months. We look forward to seeing how the chancellor plans to reform R&D relief later in the year, and whether he intends to make the scheme more generous.

Coinciding with this, the new rules that come into play from 1 April 2023 will not only tighten up on quality, but also encourage the onshoring of R&D expenditure and keep innovation focused within the UK.

In all, the upcoming review of the R&D tax relief schemes will ensure that the UK remains a globally competitive hotbed of innovation, whilst safeguarding the future of this important incentive for forward-thinking businesses.

Head of OMB Tax, London

Martin Mann

In a response to growing concerns over the ‘cost of living’ the Chancellor made some changes which he hoped would provide immediate support to households and business. While these will be welcome, it should not be forgotten that the overall tax burden is on the increase and these changes will come in alongside increases in national insurance and corporation tax and a freeze in personal tax allowances, previously announced.

In relation to businesses, there are some welcome announcements on reduction in fuel duty, business rates and increasing the Employment allowance. There are also plans to make reforms for R&D tax credits and to consider a replacement for the Super Deduction in April 2023 to provide incentive for capital expenditure investment. Some of these promises are for the medium to longer term and many businesses will have hoped the Chancellor could have gone further now to help support them during these difficult times many of whom are facing a hike in corporation tax rates in 2023.

Interestingly, the Chancellor has shied away again from reforming capital taxes and moving capital gains tax rates closer to income tax which has been the focus of speculation for some time. Valuable reliefs such as business asset disposal relief and business property relief remain unchanged for the time being. This is good news for those trying to complete sales or undertake succession planning.

The announcement of a new ‘Tax Plan’, which was light in substance and work in progress, demonstrates that tax is very much on the agenda. It appears from the language that reducing the tax burden for the remainder of this parliament is the focus of the Chancellor, which is going to be a challenge given the economic and world circumstances at this point in time. The books have to be balanced so any ‘giveaways’ have to be fully costed and dare say paid for by someone and although the government appears to be investing more into tackling fraud and compliance, the feeling is that some further fundamental tax reforms are on the horizon to fulfil the Government’s ambitions. Interesting times ahead in the world of tax and now more than ever it is important that individuals and businesses are well advised.

Get in touch

We have digested all the details of the Spring Statement with your priorities in mind, so if you’re considering how these changes will affect you and your business, get in touch with your Haines Watts team today.