Insights: Spring Budget 2023 commentary

The Chancellor’s alliterative theme of the Spring Budget 2023 was the four E’s of Enterprise, Employment, Education and Everywhere. Such enthusiastic references to E’s had those of us of a certain vintage rolling back to the early 1990s and the taboo chart-topper, Ebeneezer Goode.

As we take a closer look at the Budget statement you can expect plenty of tenuous links to 90s dance music as we paraphrase Mr C of The Shamen and ask: are Mr Hunt’s E’s any good?  

Spring Budget 2023: a good E for very big and very small businesses

Anyone hoping for an exciting, eco-friendly, equitable or eleemosynary budget was left disappointed. From a corporate tax perspective, it can be argued that the Budget borrowed from individual tax policies of the last decade to squeeze the metaphorical ‘middle’ of the UK business spectrum.

The increase in Corporation Tax to 25% will affect all companies with profits of more than £50,000, impacting all but the very smallest of businesses. But the compensatory measure of Full Expensing (effectively an unlimited capital allowance at 100% to replace the tax super deduction) will only benefit 1% of companies since 99% will have qualifying capital expenditure relieved at 100% by the new £1m Annual Investment Allowance.

Hence it is likely to be the chunky cross-section of small and medium-sized UK businesses that will be bearing the weight of this Budget. Therefore, one can legitimately question whether Mr Hunt’s E for Enterprise will be good for anyone other than the biggest of businesses.

Spring Budget 2023 commentary by Craig Coyle of Consilium Chartered Accountants.

R&D tax rates: positive news for R&D-intensive businesses

The reduction in the R&D rate for SMEs announced in the Autumn Statement will be effective from April 2023. Whilst there is a potential increase in the repayable credit for R&D-intensive SMEs who are loss-making, this will only benefit companies for whom 40% or more of their total expenditure is qualifying R&D expenditure. A niche that relatively few businesses will occupy.

Consequently, there may be some interesting accounting decisions for those close to the line on that test in the coming months. Reconsidering when R&D expenditure is allocated over the coming months could be a worthwhile exercise for companies not quite meeting the 40% threshold.   

From 1 August 2023, R&D claims will require to be more detailed and for most businesses, that will require more input from professional advisors.

There were no other significant corporate tax changes of immediate effect, and so the verdict from this perspective must be one of naughty, naughty, very naughty.

Spring Budget 2023: a missed opportunity for Enterprise Management Incentive

Consultations around Enterprise Management Incentive (EMI) share options that could have enhanced this relief have made only very minor changes of interest to lawyers and accountants only. More fundamental changes to make the scheme available to more companies than those who are fortunate enough to be able to benefit from it remain elusive.

Spring Budget 2023 commentary - what did the Chancellor's decisions mean for UK businesses and individuals?

Personal tax changes: happy faces for those with £1m+ pension pots

From a personal tax perspective, the headline change is the 50% increase in the annual allowance for pension contributions from £40,000 to £60,000. Combined with the scrapping of the lifetime pension allowance, this is good news for those everywhere with £1m+ pension pots.

Although the tax-free lump sum will now be frozen at £268,000 rather than being 25% of the pension pot, pension contributions will remain tax efficient, particularly from an Inheritance Tax perspective. Pension funds for those with pots above £1m are likely to become the new vehicle for passing wealth, tax-free on to the next generation.

A final reminder that the capital gains tax annual exemption reduces from its current level of £12,300 to £6,000 from 6 April. Those with assets with latent gains within or close to the level of the exemption may wish to consider a disposal before the end of the current tax year.

Tax advice and support for businesses and individuals

As always, the Tax team and I here at Consilium Chartered Accountants are available to discuss any queries regarding the changes implemented in the Spring Budget 2023. In many respects, time is of the essence as the end of the current tax year looms for businesses and individuals. 

To arrange a confidential virtual or in-person meeting please contact Craig Coyle.

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Craig Coyle
Tax Advisory
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