A leading small and medium-sized enterprise (SME) tax expert has urged firms to take advantage of incentives to invest in their businesses or sell up before a likely “tax grab”.
Aileen Scott, head of tax with accountants Azets in Scotland, said SMEs should act soon.
Harsher rules could be introduced in the spring Budget, alongside the withdrawal of several attractive tax breaks, she warned.
Anyone thinking of selling their assets or shares would be wise to bring forward their plans.”
Aileen Scott, Azets.
In his autumn Budget, Chancellor Rishi Sunak confirmed the economy was forecast to return 6.4% growth by the end of 2021.
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But inflation is expected to rise to 4% next year and interest rates are likely 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.
“We would encourage business owners to take advantage of every available allowance.
“The annual investment allowance, for example, has been retained at £1 million, and we would encourage businesses to take advantage.”
This particular tax break provides 100% capital allowances on qualifying expenditure.
Asset disposal rules may change
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.
Ms Scott said: “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.”
She added: “SMEs should continue investing in research and development (R&D), given 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.”
National debt a priority
Other rising costs facing businesses include an increase of 1.25% on National Insurance contributions, while corporation tax will increase to 25% from April 2023 for businesses generating profits of more than £250,000.
Ms Scott said: “The government has incurred significant borrowing costs and it has been made clear that reducing the national debt is a priority.
‘Likely target’
“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.”
