The Chancellor’s Budget generated an interesting package for regional manufacturers, which will undoubtedly be scrutinised in fine detail by firms throughout Worcestershire and the Black Country.
While welcome measures such as furlough extension were well-trailed, there were still a number of surprises.
Generally, the Chancellor has pulled back or deferred punitive tax rises, trusting in a sharp uptick in recovery of GDP as predicted by the OBR and the tax revenues that this will generate, coupled with the fiscal drag of freezing income tax rates, to fund his continuing Covid recovery measures.
The introduction of the 130% super deduction on Investment, from first look, seems to absolutely answer the call that we were crying out for. To attract investment, enhanced relief above 19% was required and the effective 24.7% tax incentive for capital expenditure is a welcome introduction. Introduced for the next two years, it will incentivise business to invest in new machinery and processes to improve productivity and competitiveness.
Given that the headline rate of corporation tax rises in two years anyway to 25% for larger profit makers, it does actually advance the tax relief to largely that level earlier.
A surprise came in the form of no immediate corporation tax increase. However, the rate rise in two years’ time, with the reintroduction of both the small company and marginal tax rates, will provide a level of complexity that will not be welcome for many and one which, when it does arrive, will drive decisions on investment, revenue expenditure timing and indeed maybe even timing of business to manage profit streams given that a marginal rate of corporation tax is always effectively greater than the full rate.
There doesn’t seem to have been the much talked about reform of Entrepreneurs Relief yet, and so the drive to carry out corporate transactions before this is even further curtailed, removed, or the 20% rate is changed, will continue.
The measures announced to launch the European infrastructure bank, increase funding for apprenticeships and the Help to Grow schemes look eye-catching, as do the measures to stimulate R&D, ‘Green’ products and offshore wind too as there is a clear drive to ‘modernise’ both manufacturing and the products that the sector produces.
The establishment of eight new freeports sends a clear signal that the country is open and keen to support international trade in the post-Brexit and post-Covid era.
Our Manufacturing Survey called for more help post-Covid to assist recovery and the new Recovery Loan scheme to replace CBILS and BBILS is welcome, though we are thin on detail as to repayment holidays, personal guarantees or servicing support and there is no sign at all of reintroducing the £1000 per employee job retention grant which so many manufacturers were banking on before it was ‘postponed’. So maybe this is now defunct?.
What is possibly a new source of funding is the extension of loss relief carry back, but this is only relevant where losses were sustained in the past and tax paid.
What we do know for certain after this and every Budget is that the Chancellor has not made business planning any easier. It’s important to talk through your options with your professional advisers and examine the options from all angles.