Businesses receive £9billion tax break to offset the big rise in corporate rates

Businesses will be able to take advantage of a £9bn tax break announced by Jeremy Hunt in a bid to bolster Britain’s competitiveness.

The Chancellor unveiled a package that will allow companies to offset 100 percent of their investments in the UK against their tax bills.

Known as “full cost,” the measure was introduced to replace the “super deduction” — a tax relief measure that allows companies to claim 130 percent of what they spend on equipment for the business against their taxable profits. It expires at the end of this month.

The new tax break will take effect from early April and will cost nearly £8bn this year, £10.7bn in 2024 and £8.7bn in 2025, resulting in an average annual cost of around £9bn.

This means it will offset around half of the controversial corporate tax increase, from 19 to 25 per cent from April, which is expected to raise around £18 billion a year.

Matthew Fell, interim director-general of the Confederation of British Industry, said: ‘Full capital spending will keep the UK at the top for attracting investment and set us on a vital path towards a more productive economy.’

The chancellor also announced an “increased” tax credit for small and medium-sized companies if they spend 40 percent or more of their total expenditure on research and development (R&D). They can claim credits worth £27 for every £100 spent.

The Treasury estimated the policy will cost £40 million in its first year, rising to £285 million the following year and £455 million the year after.

Mr Hunt also announced tax cuts for creative industries, including theatres, orchestras and museums, as well as companies that develop audiovisual equipment.

The measures were introduced after several business leaders pleaded with the Chancellor to replace the super deduction and offset the impact of the corporate tax increase.

The Chancellor also unveiled 12 new investment zones in the UK, which will offer tax breaks and other benefits for businesses.

Jon Richardson, head of tax policy at accounting giant PwC, said the budget provided “much-needed support for the UK’s competitiveness” and that businesses would be “relieved” that the Chancellor had taken action to cushion the blow from corporate tax increases and the mitigate corporate tax increases. end of the super discount.

“Combined with more R&D incentives, this puts the UK in a competitive position compared to the other G20 economies – albeit not the most pro-business tax environment ever,” said Mr Richardson.

The Chancellor has unveiled a package that will allow companies to offset 100 per cent of their investments in the UK against their tax bills

However, some argued that the changes to business investment rules and tax rules had not gone far enough. Kitty Ussher, chief economist at the Institute of Directors, said the full expense regime was “very welcome,” but she urged the Chancellor to make the measure permanent after the 2026 expiration date.

The comment came as the Office for Budget Responsibility predicted that while the full expense allowance would cause business investment to “rise sharply” next year and into 2025 if companies push spending forward to take advantage of the measure, it “falls back” after that. expires in 2026.

Ms Ussher also said the Chancellor’s decision to focus tax cuts only on R&D was “disappointing” and “could lead to less innovation across the economy”.

Others were more critical of the budget, with the Federation of Small Businesses (FSB) saying the announcements “would leave many feeling shortchanged.”

Martin McTague, National President of the FSB, said: “The enhanced tax credit for R&D is an important step towards fostering innovation.

However, the vast majority of companies falling outside the 40 percent intensity threshold will feel baffled by the policy change since last fall…

“While there are some positive words in today’s budget, the government’s lack of support for small businesses in critical areas is distressing.”

Meanwhile, Yael Selfin, chief economist at auditing giant KPMG, said the entire expense regime’s focus on machines was “too narrow” and that due to its temporary nature, it only served to “drive forward investment, but not reinforce the overall long-term trend.” ‘