Spring budget focuses on support and growth opportunities for SMEs

The UK government’s budget looks to simplify the tax regime and enable more R&D investment support for small businesses.
Chancellor of the Exchequer Jeremy Hunt holds the budget box on Downing Street in London on Wednesday. He later delivered the government's budget plan to the House of Commons.
Chancellor of the Exchequer Jeremy Hunt holds the budget box on Downing Street in London on Wednesday. He later delivered the government's budget plan to the House of Commons.

The UK government's spring budget, unveiled Wednesday, included measures designed to help businesses, particularly small- and medium-size entities, increase investment.

The budget, announced by Chancellor of the Exchequer Jeremy Hunt, includes £27 billion in capital allowances for business, with a "full expensing" policy for businesses to write off the cost of certain capital spending against taxable profits, a government fact sheet said.

The chancellor also confirmed that the UK's main corporate tax rate will go up from 19% to 25% from April for businesses with profits over £250,000.

R&D scheme

The new research and development (R&D) scheme for 20,000 SMEs in the UK, worth around £500 million per year and starting in April, will focus support measures for businesses most affected by the rate changes introduced last year, according to the government. This will be targeted specifically at loss-making R&D-intensive SMEs where R&D expenditure is worth 40% or more of their total expenditure.

"Eligible loss-making companies will be able to claim £27 from HMRC for every £100 of R&D investment," the fact sheet said. The pharmaceutical and life sciences, digital-based technologies, manufacturing, professional, technical, and scientific industries are set to qualify for enhanced support, the fact sheet said.

Andrew Harding, FCMA, CGMA, chief executive–Management Accounting at AICPA & CIMA, together as the Association of International Certified Professional Accountants, welcomed the increased R&D tax credits in the chancellor's budget announcement.

"This was a budget for troubled times," Harding said in a statement. "I see glimmers of hope for the future, and I am pleased by some of the measures it included. I especially welcome the increases to R&D tax credits in the budget. These have the potential to help businesses unlock the productivity improvements we need to see."

Small businesses are also expected to benefit from proposed tax system simplification. This includes changes to the Enterprise Management Incentives scheme to simplify the process to grant share options and reduce the administrative burden on participating companies, the fact sheet said.

Labour market measures

The budget also contained measures focusing on the labour market, described in another government fact sheet. The budget will increase support for parents with childcare responsibilities, universal credit claimants, people with disabilities and long-term health conditions, older workers, and other groups in need of extra support.

In England, working parents "will be able to access 30 hours of free childcare per week, for 38 weeks of the year, from when their child is 9 months old to when they start school", the fact sheet said. This will be rolled out in stages from April 2024.

The government will also raise the Annual Allowance for pensions, the annual limit on tax-relieved pension savings, from £40,000 to £60,000 from April 2023, the fact sheet said.

Harding said that the measures on pensions and childcare "should help address the supply side issues that we have argued are holding back the economy".

Education and skills

Targeted education and skills programmes will also receive funding from the government. The programmes are designed to allow young people to "reskill in high-value sectors" and allow for older workers looking to re-enter the labour market to join "accelerated apprenticeships", the government said.

"The 'returnerships' for [people over 50] is an interesting idea which could help people reskill and get back to employment," Harding said. "That will be important if we are to fill the skills gaps which currently exist in the UK workforce. We have long advocated for extensions of apprenticeships to mid- and late-career workers."

Read AICPA & CIMA's budget submission to HM Treasury.

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