Azets: ‘Tax grab’ likely in 2022
Accountancy firm Azets is urging businesses to take advantage of incentives to invest in their businesses or sell their business, and whilst they still can, ahead of an expected ‘tax grab’ during the 2022 budget.
Aileen Scott, head of tax with Azets in Scotland, is predicting harsher rules could be introduced in the Spring, along with the withdrawal of several attractive tax breaks.
In the Autumn Budget, the Chancellor confirmed that the economy is forecast to return 6.4% growth by the end of 2021, however inflation is forecast to rise to 4% next year and interest rates are expected to increase with businesses having to bear a range of higher costs.
Aileen Scott said: “For many SMEs, the Covid support measures available today won’t be sufficient to offset rising costs and we would encourage business owners to take advantage of every available allowance.”
“The Annual Investment Allowance, for example, has been retained at £1m, and we would encourage businesses to take advantage of the allowance which provides 100% capital allowances on qualifying expenditure. The ceiling for Business Asset Disposal Relief – formerly known as Entrepreneurs’ Relief – has also been left untouched at a 10% capital gains charge up to the first £1m. Anyone thinking of selling their assets or shares would be wise to bring forward their plans as the allowance could well be reduced or removed entirely.”
Ms Scott added: “SMEs should continue investing in Research & Development (R&D), given that the R&D tax relief scheme has been expanded to include cloud computing and data costs, and a refocusing of reliefs towards innovation in the UK, targeting domestic R&D expenditure from April 2023.”
Other rising costs facing businesses include an increase of 1.25% on National Insurance Contributions and Corporation Tax will increase to 25% from April 2023 for businesses generating profits over £250k.
Aileen Scott concluded: “The government has incurred significant borrowing costs and it has been made clear that reducing the national debt is a priority. Businesses will be a likely target and in particular those tax reliefs that deny the Exchequer valuable revenue.
“Pensions allowances are another potential target, so it might pay for owner managers to maximise their pension contributions, which are deductible against corporation tax. As ever, we would encourage businesses concerned about the prospect of a ‘Tax Grab’ to plan ahead and seek professional advice.”