Business

Budget delivers small wins for business - but inevitable tax rises loom

The Chancellor confirmed a 50 per cent rates cut for eligible retail, hospitality and leisure businesses - but local companies remain in the dark about whether this measure will be mirrored by the Stormont Executive
Angela Keery

WHEN the Chancellor confirmed a hike in corporation tax rates in an announcement aimed at beginning to balance the books in the spring, many thought it may be the most significant fiscal moment of the year.

But since then, we have seen several major announcements including a climb in national insurance contributions and the dividend tax rate to fund an uplift for health and social care services and the suspension of the triple lock on pensions, to name a few.

It was to that backdrop, and with rising inflation and unprecedented public debt on his desk, that the Chancellor delivered an autumn budget and spending review last week, the first such multi-year breakdown of capital spending settlements since 2015.

As advisers, we know the pace of change can be overwhelming for businesses as they work through the real-term impacts on their profitability and capacity to invest and grow their business. A number of key announcements were made, however, that will have implications on their finances.

As anticipated, the Chancellor did confirm a long-awaited review of business rates, including a 50 per cent cut for eligible retail, hospitality and leisure businesses. Despite the headline of a £7 billion rates slash, however, Northern Ireland companies remain in the dark about whether this reduction will be extended by our own Executive.

More promising for local firms is the extension of annual investment allowances, which will remain at their current level of £1 million. Previously anticipated to end in December of this year, the Chancellor confirmed the measure, which allows companies to deduct qualifying capital allowances from their profits before tax, will remain in place until March 2023 to encourage further investment.

Underpinning all of this is a potential significant tax liability following the reforms to basis period rules, which define the accounting period for which businesses pay tax in each year. Sole trader and partnerships know that when the income tax periods transition to new rules in April 2024, many of them will be on the countdown to a hefty tax bill in January 2025. Add to this the uplift in the National Living Wage and you have a looming sense of rising costs hanging over already stretched employers.

Despite these concerns, however, official forecasts from the Office for Budget Responsibility suggest that there is light at the end of the tunnel. The scar of the pandemic on GDP is now estimated at two percent, a full percentage point lower than anticipated, arming the Chancellor with more spending power than anticipated.

For Northern Ireland, this translated into £15 billion a year for the Executive, a commitment that the Treasury states is a 2.2 per cent rise and which will include a £1.6 billion boost for public services.

For companies, avenues of opportunity do exist within a number of policies announced by Rishi Sunak last week. Reduction in Air Passenger Duty from 2023 will aid greater regional connectivity for firms hoping to do more business across the UK, while simplification of alcohol duties will reduce costs for hospitality.

While they may be small wins, these measures are a welcome relief for businesses. The Chancellor delivered a balanced budget that kept many of the anticipated tax changes at bay for now, but there is little doubt that he is delaying the inevitable.

:: Angela Keery is tax director at Baker Tilly Mooney Moore in Belfast

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