Accountancy body ACCA has welcomed the direction of the Chancellor’s statement but warned key ingredients of tax reform and HMRC improvements were missing from today’s announcements.
Responding to the Chancellor’s statement, Lloyd Powell, Head of ACCA Cymru/Wales, said:
“Today’s announcements broadly focused on the right issues for the longer term, such as encouraging investment in net zero and expanding our labour market. However, given the months of turmoil, many firms are still likely to feel hesitant about the road ahead. While there was some welcome news on investment incentives, there was little to cheer on tax, but we do have a commitment to a review of our overly-complex tax system. While moves towards greater stability are welcome, many of these changes won’t deliver results in the short term, so it was disappointing to see the planned increase in corporation tax proceed.”
Additional commentary from Lloyd Powell, Head of ACCA Cymru/Wales:
HMRC under increasing strain
“This Budget presents a missed opportunity to deliver a greater holistic review of the tax system. Too many aspects of the current system are overcomplicated, leaving room for error, and throwing up many challenges for HMRC to resolve at a time when they are cracking under the strain. Complexity adds costs for government, accountants, businesses and individuals; and the ‘benefit’ to the Exchequer is often minimal or non-existent.
“What we wanted to see was less complexity, bringing simplicity and stability to the tax system. It’s particularly disappointing to see no real additional funding for HMRC will be provided considering current service levels, resourcing and administrative demands.”
Higher Corporation Tax goes ahead, but with even more complexity on the way
“While we welcome the certainty given to the Annual Investment Allowance, pausing April’s planned increase in Corporation Tax would have provided a welcome short-term boost for business. The increase in the rate and the incremental relief within that adds complexity to the system. The change to capital expensing will not have an impact on the vast majority of businesses. The changes announced further complicate the tax system at a time when we need a simpler, more stable tax regime for business.”
Pensions changes removes barrier driving early retirement
“Given the shortage of skills and labour across the economy, measures to support more people into work are helpful. Previous pension tax-free allowances were too low, discouraging people from staying in the labour market. The Chancellor has today announced he will increase the tax-free allowance and abolish the Lifetime Allowance, previously set at £1.07million, allowing workers to invest as much as they like in their pension pot. This radical change is welcomed for simplification and certainty – it removes a barrier that was previously causing concern and pushing many into early retirement.”
Energy support for businesses – longer-term thinking required
“Current instability in energy pricing is making it harder for businesses to plan ahead, hindering investment plans. SMEs, in particular, need certainty and support from the government to avoid adding to economic instability with weak forecasts. While the government has already announced the Energy Bills Discount Scheme, the limited support almost certainly holds back the investment potential of firms, especially when it has never been more important for smaller firms to improve their energy efficiency.”
Fiscal drag resulting from personal allowance freezing
“The fiscal drag created by freezing personal allowances to 2028 is disappointing. The reduction in dividend allowance brings a large number of people into the scope of HMRC notification but few, if any, will have any tax liability. This puts more pressure on an already overstretched HMRC for very little tax revenue and creates little benefit for the Exchequer. HMRC and the government must look at more modern ways to tackle tax rates which offer better streams of revenue.”