Chancellor’s Budget focuses on raising the bar for skills
Gareth Anderson, Head of Tax at EY in the South East, said: “The £3bn for post-16 and adult education, including skills ‘bootcamps’, T-levels, and funding for special educational needs is welcome. However, the focus should also be on raising the bar for other areas of the economy to reduce the widening skills gap. Increased accessibility and availability of training is critical if the region is to achieve its economic growth targets.
“In this Budget, the Chancellor has recognised the need to invest in future talent in evolving sectors, in addition to more traditional sectors – due to the genuine concern about a widening skills gap across the UK and it potential impact on its attractiveness to investors and businesses. The focus on creating opportunities for traineeships and apprenticeships in vocational areas is critical, as is ensuring opportunities are feasible to all sizes of businesses, with apprenticeship uptake encouraged, supporting industries across the South East.
South East hospitality and leisure sector set to benefit from 50% Business Rate discount
“The announcement that South East-based businesses operating in the retail, hospitality and leisure sector could benefit from a 50% Business Rate discount for the next 12 months is a welcome relief to many who continue to struggle post-COVID. The Chancellor’s announcement will benefit up to 90% of businesses operating in this sector.
“Beyond this, the Chancellor removed next year’s inflationary increase and finally addressed a long-awaited anomaly that penalised improvements for greening buildings, something that has been on the “to do list” of at least the last three Chancellors.
“With revaluations moved to every three years, the Chancellor has improved the system. However, beyond the immediate cut, this still leaves retailers paying almost five times more in business rates than their share of the economy. The half price offer for the next year will help, but does not address the long-term issue.”
Budget looks to aid investment in R&D in the UK
“Pre-Budget, the Chancellor pledged £1.4bn to encourage foreign investment into UK businesses and attract overseas talent. This was welcome news, especially as the region saw a decline in the number of inbound Foreign Direct Investment (FDI) projects it attracted in 2020, according to EY’s UK Attractiveness Survey published in June.
“The number of FDI projects in the region fell from 83 in 2019 to 72 in 2020, according to the report, with activity in the digital tech sector pausing on account of the pandemic. It’s imperative that international investors see the UK and its regions as a place to do business, with a supportive enterprise culture and the draw of skilled people.
“The announcement of an expansion of tax reliefs for domestic R&D investment until April 2023 could help incentivise South East-based businesses in areas such as manufacturing, digital technology, health science and emerging technologies to invest more widely in R&D.
“It’s imperative that international investors see the UK and it’s regions as a place to do business, with a supportive enterprise culture and the draw of skilled people.
Keeping the yo-yo going – a further temporary increase in the Annual Investment Allowance
“In a Budget that was light on tax incentives for capital investment, there was some welcome news in the form of a further temporary increase in the limit of the annual investment allowance (AIA) from £200,000 to £1,000,000 for qualifying expenditure on plant and machinery incurred during the period from 1 January 2022 to 31 March 2023. The AIA, a 100% capital allowance for qualifying expenditure on plant and machinery up to a specified annual limit, has been a feature of the UK legislation since 2016. Its predecessors were nicknamed the yo-yo tax relief, as Chancellors were renowned for increasing and decreasing it to stimulate investment.
“The Chancellor has extended the period of the “temporary” relief through to the start of the new 25% rate of corporation tax. Given that much of the expenditure in this period may also be covered by the “super-deduction” announced in the Spring, the cost of the extension is far less than in normal times. Nevertheless, it will be valuable to those purchasing second-hand equipment, something excluded from the Chancellor’s incentive in the Spring.”