Hunting for Everyone, Everywhere, All at Once
Spring Budget 2023
Spring Budget 2023
Tim Sarson, Head of Tax Policy at KPMG in the UK, said:
“The Chancellor has delivered a Budget with significant fiscal loosening. He managed to address many of the concerns circulating in the headlines, but there were still some gaps.
“On business taxes it had been clear that the Corporation Tax rate rise would go ahead. But in an attempt to ease the pain of this, combined with the loss of the super-deduction, the Chancellor announced the introduction of full expensing for qualifying spend on plant and machinery for the next three years. The aim is to make the measure permanent when fiscal rules allow. Whilst this replacement for the super-deduction will be welcomed, the temporary nature demonstrates a continued lack of long-term strategy which can be damaging to investment.
“We knew the Government was concerned about economic inactivity and here we saw other large announcements. The Government is providing 30 hours a week of free childcare for eligible working parents of children aged nine months up to three years in England. It is also extending the annual allowance for pensions savings to £60,000 and abolishing the pensions lifetime allowance.
“As expected, household finances are being helped by a freeze to fuel duty, together with an extension of the 5p reduction for a further year, and a continuation of the Energy Price Guarantee for a further three months.
“But there were other areas where the pickings felt lean. The Investment Zone initiative sounded fairly minimal, with 12 investment zones each able to access interventions worth up to £80million over five years. The limitation of full expensing to plant and machinery spend excludes large sectors such as infrastructure and construction. Major business rates reform seems to have been kicked down the road once again. And there were no measures to address some of the cliff-edges and distortions in the tax system, such as the VAT threshold.
“Looking through the costings, the Budget consists of a plethora of smaller announcements. The most expensive tax measure is full expensing, but this is a timing difference and shows a healthy positive number in year five as the effect reverses.
“Rarely have we seen a Budget where pretty much every announcement had been trailed in advance. The only rabbit was the abolishment of, rather than increase in, the pensions lifetime allowance.
“Overall, it reflected a calmer approach following months of political and economic upheaval. The real revelation will likely come in the Autumn as pre-election policies are unveiled.”
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