FinanceUrgent Comment on Chancellor’s Spring Statement From Blick Rothenberg

Urgent Comment on Chancellor’s Spring Statement From Blick Rothenberg

Low unemployment

Andrew Sandford, Audit, Assurance & Advisory Partner said: “Low unemployment levels are symptomatic of shortages of staff in a number of key markets”

Debt

Andrew Sandford, Audit, Assurance & Advisory Partner said: “Level of debt is eyewatering. Those who have misused CBILS and bounce-back loans are costing the wider economy. Wider enforcement/action is urgently required.”

Labour and skills shortage

Heather Powell, Head of Property & Construction said: “House builders and the construction industry have been grappling with a labour and skills shortage. The industry needs to ensure that they participate in the consultation about how to reform the apprenticeship levy and improve adult vocational training to ensure that it addresses their industry needs and delivers the workforce the industry needs for the next 30 years.”

Capital Allowances

Andrew Sandford, Audit, Assurance & Advisory Partner said: “Changing capital allowance rates in the future will delay capital expenditure in the short term with tax rate increasing to 25% on 1 April 2023.”

Tax simplification

Andrew Sandford, Audit, Assurance & Advisory Partner said: “With NICS and income tax bands equalised, why not have just one tax if the chancellor is serious about tax simplification”

National Insurance Contributions (NIC)

Nimesh Shah, CEO said: “Has Rishi Sunak got the maths wrong? The NIC threshold isn’t increasing by £3,000 – it’s increasing by £2,690 (£12,570 – £9,880). This is worth just over £350 per annum, but only £267 next tax year.

“Aligning NIC threshold to the personal allowance simplifies the tax system – introducing it from July is ridiculous and complicated!”

Robert Pullen, Private Client Partner: “The Chancellor has been able to pull another rabbit out of the hat, despite a difficult economic backdrop. Extending the lower NIC threshold will save almost £400 per year, although this will be eroded by the HSC levy. With NIC rates now aligned, it may be only a matter of time before NIC and Income Tax are aligned”.

Small businesses

David Hough, Audit, Assurance & Advisory Partner said: “It was unlikely that the Chancellor would reverse his decision to increase National Insurance rates beginning in April 2022 but for small businesses the increased payroll costs could not come at a worst time. With inflation already running at over 6% this increase has the impact of higher costs but will also lead to larger companies increasing their prices putting additional pressure on smaller ones. The biggest losers are those in energy intensive sectors, such as manufacturing, for whom the additional costs of gas and electric are going to push them to the limit.”

Fuel duty

Simon Sutcliffe, Customs & Excise Duty Partner, said: “Great news for car driving households as fuel cut by 5% until March. Let’s hope that petrol retailers pass on the saving.”

Savings on energy saving material

Andrew Sandford, Audit, Assurance & Advisory Partner said: A shortage of builders and skilled labour will reduce the effectiveness of the VAT reductions on solar and other energy like heat pumps.

Heather Powell, Head of Property & Construction said: “Achieving carbon zero by 2050 is dependent on a massive improvement on the energy efficiency of UK homes. The Chancellor has announced that the Red Tape and restrictions imposed by the EU on the installation of energy efficient systems such as solar panels and heat exchange pumps are to be abolished – and that VAT is reduced to 0% on these products that reduce the UK’s carbon footprint – for five years.  An estimated saving of £1,000 for households – and an incentive to get it done in time to make a difference our impact on the environment.”

Energy Saving Material

Alan Pearce, VAT Partner said: “The 5% reduced rate of VAT that currently applies to eligible energy saving materials will be reduced to zero. In addition, the strict limitations introduced by the EU will also scrapped. These meant that the VAT relief was often limited to certain residential properties and to eligible persons such as those in receipt of benefits and the over 60s.

“The Chancellor appeared to sweep these restrictions aside and open up the relief to all. It will be interesting to see if the withdrawal of ‘red tape’ will also extend to larger refurbishment projects that include an element of eligible energy saving material. At present, the relief only applies if the work being undertaken is a specific contract for the installation of eligible energy saving material. Where supplied as part of large refurbishment or extension to a property (so that the energy saving materials was not the main supply) the 5% would not have applied. Therefore, the detailed legislation for the new zero rate will need to be closely scrutinised to see if this limitation has also been scrapped.”

Charities

John Havard, Consultant: “Charities should budget for income drop in 2024 when the basic rate cut impacts on what the charity gets via gift aid.”

National Insurance Contributions

Robert Salter, Director: “The planned increase in the NIC threshold to £12,570 – a rise of approximately £3,000 – is welcome.

“However, unless Mr Sunak is actually also changing the underlying basis upon which employee NICs are typically calculated – that is each pay period rather than based on one’s cumulative annualised earnings – the reality is that this change will do little to impact one of the core problems with the NIC system for lower earners. Many lower earners are zero hours contractors or only employed for relatively short-term seasonal work and the way that the NIC system works means that such individuals will in many cases continue to be liable to NICs even though their annual earnings are actually well-below the headline annual figure of £12,570 which Mr Sunak announced.

“The reality is that Mr Sunak has only changed the NIC position for employees – for employers, the NIC burden will increase from April 2022 as previously announced, because of the introduction of the ‘Health & Social Care Levy’. This increase in the NIC burden which falls on employers has been – with some justification – been called a ‘tax on jobs’. In this respect, it discourages smaller employers from taking on new staff, while it potentially encourages larger employers to consider, for example, the off shoring of some work to cheaper locations.

“While the Government has announced some small changes in this area – e.g., the increase in the employer payroll allowance to £5,000 (from £4,000 at the moment), it is difficult to see this marginal increase being of much value to employers at the present time.”

Training & Development of Staff

Robert Salter, Director: “While it is good that Mr Sunak has announced a review of the way in which the tax system supports employers looking to provide training to their staff – and this could see, for example, changes to the Apprenticeship Levy being announced in the Autumn – the reality is that the UK tax system (unlike the system in many other European countries), presently provides no tax relief for individuals who are looking to spend their own time and money on ‘upskilling themselves’.

“This ongoing failure on the part of successive British Governments to encourage people to actively invest in their skills and developments, by providing them with tax relief for the costs they incur on such self-funded training, goes a long way to explaining the relatively low level of skills and training which is found in many areas of the UK economy. The Government’s failure to provide support and flexibility in this regard, does indicate that their motto about ‘people knowing best how to spend their money’ can be sadly hollow in practice.”

Get in Touch

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Related Articles

Latest Posts