BDO: What we expect and hope for in today’s Budget
Our tax policy over the past decade has largely ignored the UK’s mid-market businesses despite this section of the economy being a significant source of tax revenues and widely regarded as the engine room for future economic growth. This fact needs to be acknowledged, with more targeted reliefs and incentives aimed at stimulating this fundamental element of the UK economy.
Although the government may find it hard to resist some sort of tax giveaway to create a feel-good factor ahead of the General Election, I fear that there may be no announcements of significance for businesses, with the coalition parties wanting to keep its powder dry ahead of 7 May and for a post-election Budget.
So what are we likely to see? I anticipate further announcements on tax evasion and avoidance as this will no doubt be seen as good political capital. In addition, with increased expectation, responsibility and scrutiny heaped on HMRC, there may also be extra funding made available to ease the strain and to reduce the tax gap. We can also expect more detail on the Diverted Profits Tax, announced in last year’s Autumn Statement, Transfer Pricing and Country by Country Reporting (CBCR), all aimed at ensuring that international businesses pay their way. In addition, with the significant fall in the oil price over the past few months, I expect some form of relief for the beleaguered North Sea oil and gas companies.
We would like to see more action for businesses. In an ideal world the government would act upon BDO’s mid-market manifesto, which incorporates our policy recommendations for supporting mid-sized businesses.
Some of the suggestions within its pages include measures to encourage investment in new factories and an improvement in the terms of Entrepreneur’s Relief to reward all employees who risk money investing in their employing companies.
A temporary reduction in employers’ National Insurance (NI) for the manufacturing industry would be a bold step towards achieving the government’s target of doubling exports by 2020.
An increase to the annual investment allowance for expenditure on plant and machinery would, in addition, provide a significant incentive for mid-market businesses to invest in the capital assets that drive future growth and stimulate the significant long term capital investment that the economy desperately needs.
Not all of these predictions may be covered in the Budget or our recommendations taken forward, but I would hope that this, or future governments will do more to encourage mid-market businesses – the unsung heroes of the UK’s economy.
More information on BDO’s Budget analysis can be found at www.bdo.co.uk/budget.