The Chancellor spoke of a 'cloud of uncertainty' and the urgency the government faces in trying to lift it, so the fiscal measures he discussed are an extension to the announcements he made in the Autumn Budget of 2018, rather than the introduction of anything radically different.
Nonetheless, today’s Spring Statement was delivered at a time of relative economic buoyancy and a thriving labour market in the UK. The Chancellor made some positive noises around investment into key infrastructural areas such as science, innovation, housing and the environment, but there was little by the way of significant updates to taxation or broader spending plans.
The latest economic figures certainly give the Chancellor room to manoeuvre when it comes to a forthcoming three-year spending review, which will take place once we know the terms of our exit from the EU. While it may be the Chancellor’s intention to use this spending review to “fire up [Britain’s] economic plan and unlock a brighter future”, it is difficult to predict whether he will be given the opportunity, depending on which direction parliament chooses to take.
Partner, Private Clients
The future’s bright…Those of us that remember a certain advert with that strap line could be forgiven for being sceptical, but the Chancellor seems convinced that, despite the uncertainty surrounding Brexit, the economy is robust and he is building a Britain fit for the future.
What businesses actually want is stability and certainty around the economy, and a tax system that can help entrepreneurs and SMEs navigate the deal, or no-deal, which we end up with.
SMEs are the backbone of our economy. Figures from the Centre for Economic and Businesses Research (CEBR) in 2015 showed SMEs would contribute £217 billion to the economy by 2020, with one of the biggest areas of growth being in Manchester. In light of this, I would urge the government to listen more carefully to what these businesses need, rather than continuously moving the goalposts.
The recent changes to Entrepreneurs’ Relief (ER) and Research and Development (R&D) tax repayments are prime examples of this. Such changes give smaller businesses more issues to factor in to their plans and budgets when they could be concentrating on running their business.
SMEs are resilient enough to weather the storm, but it will be a welcome relief once the cloud of uncertainty that is Brexit has moved on.
Partner, Corporate Tax
Today’s Spring Statement saw the Chancellor outline his ambition that Research & Development (R&D) spend should be 2.4% of GDP by 2027. This is welcome news for companies in the UK, with the government underlining its continued enthusiasm for advances in innovation across the UK.
The government’s announcement today to invest over £200 million in ‘technology infrastructure’ will support some of this future investment in R&D; £81 million for a national Extreme Photonics Application Centre, £79 million for a new supercomputer and a £45 million upgrade to data storage cloud at the European Bioinformatics Institute. The government is giving researchers access to the technology they need to make advances in their fields. At this stage it is unclear how these measures directly benefit companies across the UK that are undertaking research and development in their businesses.
The government wants to ensure the UK retains its place as a global partner of choice for science and innovation collaboration. A key ethos that has underpinned the UK’s success in recent years has been collaboration between businesses, industries and sectors. This is reflected well through an ongoing government investment in R&D via Innovate UK and ‘The Catapult Programme’, which was created to work with businesses and transform the UK’s capability for innovation in specific areas. The companies that form part of the ecosystem and community of the ‘Catapults’ will undoubtedly welcome this investment and the government’s commitment to be a lead player in international research and innovation via collaboration.
R&D tax credits are a great way to invest in UK companies. These credits are really valuable to many companies but unfortunately have sometimes been subject to abuse. In the Spring Statement the government repeated its intention to tackle this abuse and a consultation of the proposed measures is expected shortly.
It is right and important that the abuse of the SME scheme is tackled, but this must be done in a way that does not have unintended consequences for companies that are genuinely investing in R&D that drives innovation. Many companies rely on the tax saving and repayments that R&D tax credits offer and it is important that through the consultation, they remain able to shape the future to ensure this tax credit retains its value.
Partner, Head of Tax
It was a relatively upbeat Spring Statement with a focus on how well Britain is performing against a slowing world economy. Making sure our world leading entrepreneurs, creators and innovators keep Britain at the forefront of the technological revolution is an easy aim to get behind.
However, other than an announcement that holders of PhDs would not be subject to Visa caps, there was little specific detail on how the challenges of attracting investment and talent into the UK post Brexit would be addressed.
Promises about the UK remaining a low tax economy in the future will surely be conditional upon the terms in which Brexit is delivered. A 68 page report on the steps taken by HMRC to tackle tax avoidance which was published today on the HMRC website is impressive, with over 100 anti-avoidance measures introduced since 2010 listed. But this report adds nothing helpful for our UK small businesses which represent 95% of all businesses and employ a fifth of the workforce. What they are asking for is certainty. Rather than HMRC focusing on picking up errors – which accounted for £9.2 billion of the tax gap in 2016-17 – and hoping that Making Tax Digital (MTD) will resolve these, we should move to a simpler tax system, which is easier and cheaper for small businesses to comply with.
If we added to this a wider advance clearance procedure so that taxpayers know upfront what HMRC think is the right amount of tax to pay where there are difficulties in legal interpretation – £5.3 billion of the tax gap – then we would be moving a long way towards the certainty and simplicity that our UK entrepreneurs crave.
In the Autumn Budget of 2018, the government decided to get tough with the tax bogeymen represented by the global tech companies. However, instead of pulling forward its plans to tax them from 2020 to this year, it has announced it will now be looking into the digital regulatory environment. Perhaps, it is waiting for others to take the lead on digital taxes.
The Chancellor said he wants Britain to be “a great place to do digital business”. But it was disappointing that there was little emphasis on reforming the UK’s complex and antiquated tax system, which makes little provision for the digital economy. A post Brexit reboot Britain needs a clear vision of what it needs its tax system to be.
Buoyant tax receipts could have given the Chancellor the opportunity to set out his vision for a post Brexit Britain, with a rebooted tax system. Unfortunately he played a straight bat -focused on spending and gave few hints about modernising our antiquated tax code.
Partner, Head of Share Plans and Reward
While today’s Spring Statement touched upon Britain’s productivity, it was disappointing the Chancellor did not use the opportunity to address the issue more widely and reaffirm the government’s commitment to supporting employee share ownership.
The findings of the Nuttall Review in 2012 are well known, but given the uncertain business landscape post-Brexit and the UK’s productivity crisis, the Spring Statement represented an excellent opportunity to look at employee share schemes again as a way of improving business resilience, creating jobs and promoting a greater diversity of business models.
The Chancellor talked of a wider spending review post-Brexit and we can expect some significant movement in this area. Additionally, the Labour Party have submitted their own share ownership proposals, should there be a change in government. As ever with any future proposals the devil will be in the detail, but suffice to say, we envisage employee share plans playing a vital role in the future of post-Brexit Britain.
Partner, Head of Property and Construction
While the Chancellor made an effort to address the issue of housing supply by announcing a new £3 billion Affordable Homes Guarantee scheme in the Spring Statement, more still needs to be done to address the shortage which remains an important issue. In addition to this, there was also a general consensus that the planning process was not fit for purpose and that Stamp Duty Land Tax (SDLT) is hurting liquidity in the residential market.
In the Autumn Budget of 2018, the Chancellor announced the introduction of a new capital allowance for new non-residential structures and buildings – a measure designed to respond to a long standing request from business to fill a gap in the available tax reliefs for capital expenditure on commercial property. In his Spring Statement, the Chancellor has published (and invited consultation on) secondary legislation reflecting how some elements of the relief have evolved following representations from industry, the property sector and the interested professions.