Spring Budget 2024: Insight and Predictions

Ryan’s Wishlist for the Spring Budget

With less than a week to go until Jeremy Hunt delivers his Spring Budget on 6 March, alongside a full fiscal statement from the Office for Budget Responsibility (OBR), we asked our tax experts ‘what policies could the Chancellor bring in that would boost UK businesses and the economy?

Nigel Holmes, Director, Research and Development, Ryan

Given that the current Chancellor increased corporation tax from 19% to 25% less than a year ago, and today’s figures have shown that business related taxes are a cash cow for HMRC, it is unlikely that a reduction in corporation tax will be on the cards. However, there are several other measures that could be introduced at the spring statement to boost the UK’s entrepreneurial spirit, such as making Research & Development (R&D) tax relief more accessible to businesses. A fresh look on the process of claiming reliefs is needed if the UK is serious about encouraging innovation and R&D growth. There is a lot of discussion around legitimate claims being declined. This is concerning as it could deter some businesses from making a claim or participating in R&D altogether. More needs to be done to make the process easier for businesses to understand and simpler for them to claim the reliefs they are entitled to. 

Ben Knock, Managing Director, VAT, Ryan

Raise the VAT registration threshold for SMEs. If a business generates more than £85,000 in taxable turnover, they must register for Value Added Tax (VAT). Many small businesses do not wish to register for VAT as it means that they will have to increase their prices, which could make them less competitive. As a result, some companies will avoid making more than this amount – without realising the VAT system will actually allow them to recover the VAT on their own purchases.

However, the reality is that the £85,000 threshold has been frozen since 2017/2018 and has not increased in line with inflation. To encourage SMEs to continue growing, the Chancellor should seriously consider increasing this figure. 

Bring back VAT-free shopping for tourists. The OBR has confirmed it is carrying out a cost versus benefit review of tax-free shopping, and that it will publish its findings ahead of the spring statement. We agree with the rest of the industry that bringing back VAT-free shopping for overseas visitors will not only help retailers, but it will have a positive knock-on effect across the UK’s entire hospitality sector.

Dean Needham, Manager, Capital Allowances, Ryan

Consider taking full expensing to the next level. Last year the Chancellor announced that full expensing would be made a permanent staple of the UK’s business landscape. This was a huge victory for companies as it means they can save up to 25p in tax for every £1 of capital investment into new plant and machinery (Main Rate Pool items), which is generously uncapped.

Could there be room for the Chancellor to take full expensing even further? This could include allowing unincorporated entities, such as sole traders and partnerships, to benefit from the recent capital allowances incentives. Alternatively, the government could allow loss making entities to benefit from them sooner by creating a system similar to the R&D tax credit incentive (surrendering losses for a tax credit). Both could expand the scope of the government’s plans to stimulate growth in the economy.

Jon Williams, Senior Director, Grants, Ryan

Whilst there's widespread expectation that there will be tax cuts to stimulate the economy in the forthcoming Budget, there continues to be an equally strong appetite from the business community for further clarity regarding the national and regional incentives programmes that will be implemented in 2024. In particular, will there be further support for regionalisation of R&D grant spending to fulfil the government's stated ambition to allocate 40% of its budget outside of the South East. In previous budgets, for instance, we've seen explicit support for key emerging technologies, such as quantum computing or advanced manufacturing, and for regions such as the North West and the East Midlands. Several regions and industrial sectors are currently eagerly awaiting the Budget to determine if they also be beneficiaries of the UK's desire to remain internationally relevant as a supporter of breakthrough innovations.

With the longer timeframes and risks associated with increased scrutiny of R&D tax credit claims from HMRC, SME businesses are increasingly exploring grant options as a complementary alternative. Alongside sector-specific innovation funding announcements, we also expect to see further commitments to capital grant schemes that support the government's ambitions in the Net Zero arena, underpinning its climate pledges. 

We’ll be watching the Spring Budget 2024 live on the day so look out for our post-budget commentary and thoughts.