George Anastasi, Senior Policy Manager
The Financial Times this week reported that the Chancellor, Jeremy Hunt, is considering new tax breaks for business investment at next week’s Budget to replace the outgoing super deduction scheme.
The economic landscape is now dramatically different compared to when the scheme was launched, with higher interest rates, a cost of living crisis, and a Government much less likely to make big spending commitments.
Business groups and trade associations like ours have been cautioned that any new scheme will not be as generous as the super-deduction, but it is nonetheless very welcome that action on capital allowances, a key priority for the FLA, may be announced.
The FLA has submitted extensive proposals on what should follow the super-deduction. In fact, we led a campaign with several of the UK’s major trade associations, including Make UK, the BVRLA, EAMA, FPB, Logistics UK, MTA, CECA and the FPB, to call for a new green super deduction to replace the existing complex capital allowances regime for green assets. We have also recommended that leasing and short-term hire are included in the finance options as SMEs value the flexibility of having these products within their funding mix.
Separately to the joint campaign, the FLA also called for simplification and reform of the wider capital allowances regime. It appears some progress in this area is likely, with rumours that new commitments on capital allowances could be revealed in the Budget.
These measures have the potential to significantly unlock business investment, particularly into assets supporting the UK’s transition to net zero. Businesses look to leasing and hire purchase to acquire expensive assets they need, and in challenging economic conditions, like those we are currently experiencing, the finance our members offer becomes especially important for SMEs.
As we do for every fiscal event, the FLA team will be sending an analysis to members as soon as possible after Budget. We will also continue to liaise with other business groups and of course with HM Treasury on any new proposals to ensure they support our members and support businesses, regardless of the type of finance they choose to use. We look forward to seeing what measures are announced to boost investment.
Published 10 Mar 2023