Our friends at RSM, a Patron of Liverpool Chamber, were kind enough to host a selection of Liverpool Chamber members at a Spring Budget breakfast event, where their expert advisors gave the lowdown on the Chancellor’s latest announcements and what it means for businesses and business owners.
Fiscal topics including tax, investment and pensions were discussed, as well as specific opportunities for the Liverpool City Region, including investment zones and renewable energy investment.
Here, we share the main highlights of RSM’s insights and the thoughts of some of the delegates around the table.
David Hawley, Tax Partner at RSM, said:
“From a tax perspective, it was a fairly underwhelming Budget with very few significant measures. The expected rise in Corporation Tax, from 19% to 25%, went ahead as planned.
“There were some more intriguing elements for the wider region, with projects in Liverpool, North Wales and Greater Manchester offering hope for future growth.
“The Chancellor talked about building Europe’s most dynamic economy and was keen to highlight consistent growth – minus Covid – since 2010, stressing that more people can now earn £1,000 per month tax-free, which compares favourably to other nations. However, there were several policies area omitted altogether, which was surprising.”
Rob Adams, associate Tax Director at RSM discussed new changes and opportunities around business investment, saying:
“I’ve heard much mention of ‘full tax relief for capital expenditure’, but what does that mean in reality?
“There is certainly a major change on freestanding plant where, from April 1, investments made by companies in qualifying plant and machinery will qualify for full expensing relief, i.e. a 100% first year allowance for most assets. This is only likely to have serious benefits for larger businesses.
“There is still no allowance given against land and it’s restricted to 3% for buildings. Allowances for building fixtures, such as lighting or heating, are more generous. The annual investment allowance limit will continue permanently at £1m per annum.
“Investment zones could offer a significant opportunity for business investment but, as always, the devil is in the detail. The concept involves a larger geographical area, with a focus on specific sector such as technology or data, with tax sites within. It’s not dissimilar to the idea of a Freeport and it has some hallmarks of ideas heralded by previous administrations, but we must wait and see.”
Nicola Clough, Tax Director at RSM, added:
“One of the notable features of the current income tax structure is that those who earn between £100,000 and £125,000 enter a new tax bracket but also lose their personal allowance, meaning they are effectively taxed at 60% on that portion of their earnings.
“The annual allowance for pensions has been increased from £40,000 to £60,000. However, a word of warning – if a new government is elected in the next two years, and you have put more money into your pension pot, you could face unexpected penalties in the following year if the rules are changed again.
“There were no fresh measures around capital gains tax, inheritance tax or stamp duty holidays.”
Graham Bond, office managing partner at RSM in Liverpool and Chester, gave his thoughts on the second major change to pensions policy.
“The lifetime allowance on pension savings has been scrapped so people will now be allowed to put as much as they can into their private pension scheme without being taxed, thus removing the current £1m threshold.
“This is clearly good news for those with higher earnings and is part of the government’s attempt to dissuade experienced senior doctors from leaving the profession because their additional pension contributions were being taxed.
“However, we must also consider whether this move will actually encourage more people to retire earlier, swiftly putting more money aside in the event that the rules might change again in a few years’ time. This would have the counter effect to that which the government intends.”
What our delegates think:
Christine Vaudrey, Group Director of strategy at Torus, said:
“Covid changed a lot of people’s views on life and on work. Many decided to pursue new passions or simply retire early and spend more time with their families. I can understand that the government is trying to encourage experienced, skilled labour back into the workforce, but it’s difficult to see many of those people suddenly decide to move back into work having already left it behind.”
Alison Lobb, Managing Partner at Morecrofts Solicitors and Chair of Liverpool Chamber, added:
“Across the professional services sector, lots of firms are struggling to replace experienced staff who have decided to retire early or take a different route. The training and investment that is then required to fill those spaces can be really onerous.”
Mark Borzomato, CEO at River Capital, said:
“The Budget appears to be strong at a macro level on large infrastructure projects, but there was disappointingly little for SMEs. The temporary ‘super-deduction’ on capital expenditure didn’t have its desired effect of making businesses want to start a new project. If they are small, they can’t afford to do it, and if they’re big, they’re too big to be guided by the relief.
“It was good to see a renewed focus on tech and innovation and there are clear opportunities there for Liverpool, but again those businesses are often smaller in size and carry relatively few employees, so there’s definitely a disconnect in some of these new policies.”
John Miller, Director of Sure Steps Day Nursery, discussed the realities of the Chancellor’s announcement around extended childcare funding. He said:
“The extension of childcare support is undoubtedly good news for working parents and could make a big impact to their lives. However, the challenge is that the current infrastructure in terms of capacity and workforce isn’t where it needs to be to make this work. We currently have a sector-wide problem of insufficient labour and skills and it can take three years to train a fully-qualified member of staff. Most nurseries currently have multiple staff vacancies in a highly competitive labour market and whilst many currently have little space for additional children, those that may don’t have the staff required.
“The existing funding from government is inadequate, so unless their proposal addresses this for the additional funded places, then the problem will only deepen. For this new policy to be successful, we would like to see the introduction of training bursaries for the wider workforce and new opportunities to recruit students from school or colleges, alongside investment in the facilities required to make this work.”
Paul Cherpeau, Chief Executive of Liverpool Chamber agreed, saying:
“John is absolutely right and it’s a further example of the so-called Missing Middle.
“SMEs, such as an established family business that employs around 50 people, are not given enough consideration or support and I would have liked to see more action to help those tiers of business, which are so crucial in city region like Liverpool.”
Justin Kyriakou, ICAEW Regional Director, said:
“The reaction from our members has been fairly positive, with a general sense of stability and sustainability underpinned by an OBR forecast that was much more positive than anticipated. It was particularly pleasing to see talk of an industrial strategy again, which has been missing now for some time.
“Corporation tax was a missed opportunity and we were very surprised by the abolition of the lifetime allowance. We agree it may unintentionally have the opposite effect of encouraging people to leave the workplace earlier than planned. There was also little encouragement around business energy prices and it is difficult to see the childcare provisions having much impact until 2026.
“Members also welcomed the changes in R&D relief but don’t expect a significant uptick. The major challenge has been getting claims processed through HMRC, which is seriously understaffed and is suffering from significant backlogs, so we must hope this situation changes soon.”
Paul Cherpeau concluded:
“The UK has not fared well recently when translating strategy to operational delivery, and I hope that childcare funding does not become another example of that. More funding and a clear delivery map will be needed if the government is to hit its targets over the coming years.”