Chancellor Kwasi Kwarteng backs enterprise in bid to fire up economy

The chancellor has outlined measures to boost business investment, in addition to scrapping plans to raise corporate taxes.

In a mini-budget that shocked the markets – the pound fell below $1.09 for the first time since 1985 – Kwasi Kwarteng vowed to make the UK ‘a nation of entrepreneurs’.

In addition to scrapping the proposed increase in corporate tax from 19 percent to 25 percent due in April, and introducing an “unprecedented set of tax incentives” for business, he unveiled a package to boost investment.

The annual investment deduction – tax credit for companies putting money into new factories and machinery – was permanently set at £1 million.

This has taken a yo-yo in recent years, complicating investment planning for industries that are machine-intensive, such as agriculture and manufacturing. It was set to fall to £200,000 a year by April next year. But Kwarteng said it will “stay at £1million forever”.

Shevaun Haviland, Director General of the British Chambers of Commerce, said: ‘Businesses will be happy. It is a crucial tool that gives them the confidence to continue investing and gives their plans more certainty.’

The pro-business tone marked a significant shift after tax hikes under Rishi Sunak and Boris Johnson’s infamous ‘F*** business’ commentary in 2018.

Craig Beaumont, head of external affairs at the Federation of Small Businesses, said: “What we saw was a change of tone from previous f*** cases, high-tax conservatives, a myriad of measures supporting every business in this country. It’s definitely a clean break.

“The Truss government is off to a flying start. The Chancellor has rightly acknowledged that abolishing taxes on jobs, investment and entrepreneurs is essential.” Kwarteng switched to help startups and expanded venture capital trust and corporate investment schemes that offered tax credits to investors buying new shares in privately held companies. He will ‘speed up’ pension cap reforms to allow pension funds to invest in riskier UK assets.

The moves have been warmly welcomed by the investment community, with Stephen Page, chief executive of SFC Capital, saying they will have “pitched the ears of entrepreneurs, angels and venture capitalists.”

At the same time, Kwarteng said limits on the seed capital investment plan and companies’ stock option plans would increase to “make them more generous.” Among the former, companies will now be able to raise £250,000, 66 percent more than before. Kwarteng said: ‘We want this country to become an entrepreneurial, shareholder democracy. These are crucial steps towards making this country of entrepreneurs.’

Russ Shaw, of Tech London Advocates, said: ‘Thousands have taken advantage of these investment programs and they have been hugely successful in supporting equity investment in UK companies.’

Alex Davies, chief executive of the Wealth Club, said: “The announcement will bring much-needed money to start-ups at a time when we really need it.”

• Reforms of the IR35 accounting rules are being scrapped to simplify the tax system. IR35 was intended to prevent freelancers from working as a full-time employee for a company or municipality without having to pay the extra tax that this entailed. Changes in 2017 and last year put the burden on organizations to assess whether these employees were self-employed or employees. Some said the changes, which will be reversed in April, could hurt the self-employed and freelancers.