Spring Budget 2024: Companies and other businesses

Simon Crookston, Partner, Corporate Tax

Having stability for business is important, particularly at a time when there is a great deal of change in the political and tax landscape for businesses, both internationally and in the UK. The Chancellor provided stability for business in his Budget by making minimal changes from a corporate tax perspective.

While the Chancellor's announcement in areas such as the 2p reduction in National Insurance is welcome for employees, there was limited other incentives or investment reliefs to incentivise businesses to invest, innovate and grow.

There were positive announcements for the creative sector and the extension of Full Expensing to cover leased assets was welcome, however there was a lack of detail on these policies so businesses are unable to plan accordingly. Historically the interaction between capital allowances and leased assets has led to very complex tax legislation in this area to prevent the development of tax avoidance schemes.

The Chancellor also announced in his Budget the continued focus on Tackling the Tax Gap with a further announcement of consultations and measures in this area. What does this mean for businesses - potentially an increased compliance burden in the foreseeable future.

What was also noticeably absent from the Chancellor’s statement was any additional tax incentives to encourage further growth and investment in sustainability and green initiatives for the UK's 5.6 million private sector businesses.

If you require further information or support, get in touch or speak to your usual Crowe contact.

Our tax specialists identify the key tax changes and outline practical support for you and your business.

Full Expensing and Leased Assets
Partnerships and National Insurance Contributions cuts – do they go far enough?
Defined Contribution performance scrutiny and publication of UK level of investment

Full Expensing and Leased Assets

Author: Stephen Metheringham, Director, Capital Allowances

Following the introduction of permanent full expensing and 50% first year allowance on asset expenditure, as part of his spring Budget statement, the Chancellor announced his intention to publish draft legislation for full expensing to apply to leased assets. Billed as ‘a £10 billion tax cut for business every year to help them invest for less’, he did add that it will be introduced ‘when affordable to do so’.

With the myriad of anti-avoidance legislation and mixed availability of tax relief around leased assets, this announcement comes as a welcome surprise and recognises that leasing new assets can be a funding route choice for many businesses.

The proposed expansion of full expensing will provide a flexible approach to allow businesses to invest in state of the art and green technologies without the requirement for outright asset purchase. This will also provide accelerated tax relief to the asset owner providing such assets for leasing. It is assumed that disposal by the asset owner will follow the current full expensing disposal rules, which has an impact in the year of disposal.

With the draft legislation to be published ‘within weeks’, it is assumed it will form part of the current HMRC consultation pieces around full expensing simplification and Leasing Working Group, and hopefully provide clarity on all asset expenditure.

Partnerships and National Insurance Contributions cuts – do they go far enough?

Author: Nicky Owen, Partner, Head of Professional Practices

As anticipated from recent speculation, National Insurance Contributions (NIC) for partners (and the self-employed) became reality and the rate will be reduced by a further 2% from 6 April 2024.

This additional reduction brings Class 4 NIC down to 6% from 9% and coupled with the abolition of Class 2 NIC will result in a maximum saving of £1,323 per year.

For firms that hold tax reserves on behalf of partners, this will offer some assistance in their cashflow forecasting.

This reduction in NIC is under the banner of acknowledging and recognising the contribution the self-employed provide to the economy.

Partners in professional practices are part of a sector that provides a valuable and important contribution to the economy, in which case this proposal really does not go far enough. However, they will benefit from the family friendly changes announced.

Defined Contribution performance scrutiny and publication of UK level of investment

Author: Shona Harvie, Partner, Pension Funds

The Chancellor announced plans to monitor underperforming Defined Contribution (DC) schemes and to disclose the extent of DC UK investment.

DC scheme proposals

A requirement to publicise contract-based scheme historic performance information on default arrangements, including comparing performance with other arrangements.
The Value for Member framework will be extended across the market to contract-based schemes.
The FCA and The Pensions Regulator (TPR) will work together on framework. DC schemes that perform poorly will not be allowed to take on new business, with TPR and the FCA having a range of intervention powers including winding up schemes.
A requirement for DC pension funds and local authority schemes to disclose their level of investment in the UK.

Lifetime provider

In the Autumn Statement 2023 there was a call for evidence on employees having the legal right to have their pension contributions paid into their existing pension arrangements. In the response to the consultation there were concerns raised about the practical implications of such a policy. The government confirmed in the Budget its commitment to exploring this policy.

ESG ratings

Providers of ESG rating will be regulated by the FCA.

While these are just proposals, those charged with the governance of all DC arrangements should continue to ensure that they offer Value for Money to their members. Regulation of ESG ratings providers may to improve trust in these ratings.

Talk to us

If you have any questions regarding how the Spring Budget impacts you or your organisation, or would like to discuss the possible opportunities, please get in touch.