A mixed picture for business investment

James Shipp
James Shipp

We knew in advance of the Chancellor’s statement yesterday that he was going to stick with the increase in corporation tax from 19% to 25%, a move which will bring in an extra £17 billion a year to the Treasury. So, it was inevitable that he would feel he had to give a portion of that cash back to business to encourage investment.

James Shipp

The end of this month sees the demise of the ‘Super-Deduction’, which has allowed businesses to offset 130% of capital expenditure on new plant against taxable profits; from April they will be able to offset 100% of the cost.  For those larger businesses who will be paying 25% corporation tax, the net effect is almost exactly the same; for smaller businesses who will be paying 19%, the loss of the Super-Deduction will be a blow.

Mr Hunt has tried to sweeten the pill by allowing full expensing of capital expenditure without limit, for at least three years.  Like the Super-Deduction, this is only for incorporated businesses (so won’t be a big benefit in the agriculture sector, for example, where most businesses are partnerships or sole traders), and only applies to purchased new equipment, not second-hand plant and not leased kit.

The Annual Investment Allowance (which allows 100% offsetting of expenditure up to £1 million year) will still exist, and this is available to unincorporated businesses, and for second-hand and leased equipment.

For those companies which spend more than 40% of their turnover on R&D, which may well include some of those on the Norwich Research Park, there is further good news, as they will be able to claim 27p in the £ against that research spend from HMRC.

So, the picture for business investment is mixed: higher business taxes and the loss of the Super-Deduction, set against the new full expensing concession and other measures such as the further freezing of fuel duty.

A shame, though, that when announcing the really big prize of new Investment Zones, once again East Anglia was conspicuous by its absence from the list of locations being proposed.

Read the Spring Budget 2023 summary here.

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