THE GOOD, THE BAD AND THE UGLY OF THE SPRING BUDGET 2023 AND WHAT IT MEANS FOR THE SME AND SCALE UP COMMUNITY
The unpredictability of the UK economy continues unabated, with today’s unexpected rise in inflation to 10.4% alongside further casualties in the banking system. This all shortly after Jeremy Hunt, Chancellor of the Exchequer, delivered his inaugural Spring Budget with the intention of delivering stability, certainty and calm.
Those in the SME sector and Scale-Up communities were no doubt hoping for more help from the government, as higher taxes, rising costs and labour shortages continue to present major challenges.
The headline grabbers focused on extra childcare support, energy and green subsidies, but this was coupled with the abolishment of the pensions allowance to discourage early retirement and a rise in tax on company profits. A useful summary for SMEs can be found here put together by Emily Coltman FCA, Chief Accountant at FreeAgent.
The SME community is one that thrives on innovation, so one of the potential highlights is the continuation of the R&D scheme, explained further by Andy Royce, R&D Senior Manager from R&D tax credit specialists Kene Partners:
“The Spring statement showed some positive aspects towards building a more coherent R&D scheme but stopped short of providing much needed clarity. It is unclear how large an impact the additional relief for ‘R&D-intensive’ SMEs will have, given the 40% expenditure intensity requirement and its applicability to loss making companies only. If the potentially intended merger of the RDEC and SME schemes proceeds in 2024, this may only serve to add additional complexity for a short period, for little benefit to innovative businesses.”
Acknowledging some encouraging announcements for SMEs, Tax Partners at Azets, a UK Top 10 accountancy firm, believe this was a missed opportunity by the Chancellor to be bold on key issues, most notably failing to address a complicated tax regime for SMEs which is restricting growth and preventing investment. Praveen Gupta, National Head of Tax, Azets, comments:
“I think what we’ve seen is the start of an election campaign, with a Budget focussed on growth. It’s great to hear that we are likely to avoid a technical recession this year – and that the OBR forecasts a return to growth in 2024. There is also opportunity for SMEs in the new tax policy for capital expenditure, a £9 billion benefit to businesses each year; the enhanced R&D scheme for SMEs; and the abolition of the pension lifetime limit.
“However, we still have a complex tax regime for SMEs in the UK. I was surprised when the OTS was closed last year, and I believe more can be done to simplify it. HMRC has also been in sharp focus this year, with response times down and taxpayers, SMEs in particular, finding it hard to get swift answers. I was surprised that the Chancellor did not address this in his Budget statement, but pleased to learn that more investment is being made to increase service levels and chase down debt.
“Overall, I think this was another missed opportunity by the Chancellor to be bold in support of SME and mid-market businesses.”
Building on the success of its launch event, the Evening Standard’s SME XPO 25-26 April 2023 at ExCeL London, once again invites founders, entrepreneurs, and business leaders to attend an action-filled two-day programme and exhibition connecting the scaleup community, a vital part of the UK economy.
