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SMEs warned of ‘tax grab’ in new year Budget

Rishi Sunak

Rishi Sunak is expected to hit businesses

An SME tax specialist is urging business owners to take advantage of incentives to invest, or to sell up ahead of an expected ‘tax grab’ in the 2022 budget.

Aileen Scott, head of tax in Scotland at accountancy firm Azets, is predicting harsher rules in the Spring, along with the withdrawal of several attractive tax breaks.

In the Autumn Budget, the Chancellor forecast economic growth of 6.4% 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.

Ms 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.

Aileen Scott

Aileen Scott: harsher rules

“The Annual Investment Allowance, for example, has been retained at £1m and 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.

Ms 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.”

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