A CUMBRIA-BASED business advisor and tax expert has called on government to use next week’s budget to give businesses the confidence to invest in growth.
Rachel Marsdin, tax partner at Kendal-based accountants and business advisors MHA Moore and Smalley, believes the chancellor should extend the annual investment allowance, a tax break for business investing in plant, machinery and other business equipment.
Rachel, who advises business owners across the region, said: “I will be interested to see if there’s a time extension for the annual investment allowance. This is due to reduce from the current limit of £1m back down to £200,000 at the end of the 2020/21 tax year.
“However, after the last few years of Brexit uncertainty have caused many businesses to put their spending plans on hold, I think SMEs need to be given the chance to catch-up on investment.
“Therefore, I would not be surprised to see the chancellor extending this rate by another year or two to help business owners who are keen to invest in the growing their business.”
Commenting on what else might be in the budget, to be unveiled on March 11, Rachel said: “People may be expecting big changes in the budget because this is a new government with a large majority. However, I think this has the potential to be more low-key than anticipated.
“My reasoning for this is that we still have trade deals to negotiate. Is the chancellor really going to make sweeping changes to tax rates that may hamper the government’s negotiating position with the EU or other nations?
“For example, if we wanted to strike a trade deal with the US, one of the conditions might be having the same or similar corporate tax rates to gain access to that market. So, if the chancellor was to lower them now, it might create a barrier for those negotiations.”
Rachel believes other tax changes in the budget may include changes to Entrepreneurs Relief. She added: “The likely changes to Entrepreneurs Relief have been well documented and I think we will see a review of what assets qualify, a reduction in the allowance threshold, or an increase in the length of time assets need to be held for. They will want to make this tax break more beneficial for entrepreneurs who are innovating and creating jobs, rather than those looking for fast investor returns.
“If the chancellor was to make radical changes, then reducing the top rate of income tax down to 40 per cent might be something he would look at. Even though this would be viewed as benefitting the wealthy, there is usually less desire to try and avoid tax if the tax system is not seen as punitive.”
