Spring Statement: Relief needed for SMES to invest in the future
Chancellor Rishi Sunak is set to announce his Spring Statement on March 23rd, amid a period of tension that has all eyes on the government’s plans to stabilise the country’s economy, as well as the concerns of many business leaders. Alongside addressing the long-term effects of the pandemic and the urgent actions needed to support Ukraine amidst the intensifying conflict, the Chancellor is also under pressure to announce relief for SME business owners, to encourage investment in the future and allow for a return to more confident and ambitious planning.
However, the expected ‘mini budget’ may not bring the answers that owner-managers are desperately seeking. As inflation hits a 30-year high and taxes increase, and the government seeks to recoup costs on pandemic spending, it seems unlikely that the Chancellor will do anything drastic to ease the burden of business leaders just yet.
While there are no expectations for any major ‘headline grabbing announcements’ in this Spring Statement, SME leaders will be hoping for some relief and will be looking for their advisors to comb through the finer details to understand how the statement will affect them and their financial planning for the year ahead. Experts at chartered accountancy firm Haines Watts have outlined what they believe will be revealed in the upcoming announcement.
The Spring Statement is often referred to as the ‘mini budget’ as it is viewed to be more of an update on financial situations rather than any major tax changes and most of the heavy lifting was done in the Autumn Budget.
Martin Mann, head of OMB tax at Haines Watts said: “There is an awareness that the Government must address the cost of the pandemic which either means reducing expenditure or raising taxes or both.
“Capital taxes, particularly capital gains, remain an area of concern for many clients who are trying to finalise transactions before the Spring Statement out of fear that rates will increase as many people predicted. There is a concern that valuable reliefs such as business property relief is on the Chancellor’s radar for reform.
“The need to catch up and recoup after the huge outlay caused by the Covid pandemic may once again create speculation that tax increases are on the agenda in the Spring Statement. However, the decision to go ahead with the Health & Social Care Levy (‘HSCL’), the concerns over rises in cost of living with higher energy prices, increases in inflation and interest rates, will give the Chancellor cause to decide whether now is the right time for further tax increases, as we recover from a difficult two years.”
Although the bleak economic makeup that has taken hold of the start of 2022 has left some business owners feeling hopeless, if forms of relief were announced in the mini budget, it would be welcomed with open arms. SME business owners would welcome bigger corporations paying higher taxes, as to offer some kind of relief for those lower down the food chain.
David Fort, managing partner at Haines Watts said: “Hopefully, the Spring Statement will bring much needed stability to encourage SMEs to invest in the future. I would like to think a windfall tax for energy companies will be announced, however, I am not certain that this will happen. The windfall tax would directly hit the PLC world, and hopefully provide some relief for the SME community as a result. A windfall tax would be beneficial, so we had more clarity on how much the PLC world paid in tax as a percentage in comparison to SMEs. PLCs deal with HMRC and can move profits offshore, something that SMEs do not have the capability to do. In an ideal world, PLCs would take their fair share of tax.
“As we come out of the pandemic, businesses have found themselves being hit from all sides. With wage rises, general inflation, NIC, Corporation Tax and new costs associated with blended working, some form of relief would be welcomed by business owners. The relief would hopefully incentivise entrepreneurs to confidently invest in the future.”
Although relief for SMEs would be welcomed, a balancing act by the Chancellor is most likely. After freezing income tax, inheritance tax, and Capital Gains Tax thresholds in last year’s Autumn Budget, it would not be a surprise if a change were to be made to pensions tax relief.
Ian Haynes, tax director at Haines Watts said: “The tightrope act of keeping the populace happy and balancing the government purse is an unenviable one, made none the easier given the current political landscape. Businesses want to see continuing support from the government as many struggle to pick up the pieces from the last two years, despite high inflation and the threat of interest rates on the rise. Personal tax clients want clarity and transparency if there will be changes announced that will have a direct impact on their earnings, investment income, and pensions.”
