Spring Budget 2023 - a budget for growth?

Increasing the annual allowance by 50% to £60,000 was expected, while removing the lifetime limit was not.  These changes are good news for savers, but higher earners will continue to be restricted in the amounts that they can save.

There were significant spending announcements about early education and childcare, but recent talk about the tax treatment of nursery care did not lead to changes.

Business investment received a range of support with unexpected and good news for those undertaking research and development. After a period of bashing, the SME scheme is boosted by an increase in the cash back available to those companies investing heavily in R&D, with recovery of 27% being introduced from 1 April.  

Delaying the restriction on overseas R&D expenditure by a year to 1 April 2024 will be very gratefully received given the very tight UK labour market. The impact of this restriction has been flagged for some time and an earlier change would have been more positive, but better late than never.

The headline rates of Theatre, Orchestra and Museums and Galleries Exhibitions tax reliefs are all extended to 31 March 2025.

As ever, the devil will be in the detail but, as he said in the autumn, Mr Hunt does seem to have listened, at least in this area.

A lack of business investment has been bemoaned by governments for many years and many attempts have been made to influence behaviour through the tax system, by various levels of Annual Investment Allowance (AIA) and, most recently, by the 130% ‘super-deduction’ introduced in 2021.

The super-deduction comes to an end on 31 March but at last the £1million AIA limit becomes permanent; although while taxes, like death, may be certain, reliefs are rarely permanent.

The super-deduction will be replaced by a 100% first year allowance, expressed as ‘full expensing’, for qualifying plant and machinery and a 50% allowance for special rate expenditure. As with the super-deduction, these allowances are only available to companies.

Whether this new allowance represents the cut in business tax that Mr Hunt extolled is not clear, but it is good news for companies that invest heavily in plant and machinery.

There was also good news for those investing in shares and for employee share option schemes.

The Seed Enterprise Investment Scheme (SEIS) becomes more attractive, with increases in the amount companies can raise to £250,000 and the amount individuals can invest to £200,000. Slightly larger and older companies will be able to benefit, with the asset limit increasing to £300,000 and the age limit of the qualifying trade increasing to three years.

The limit on Company Share Option Plan (CSOP) share options is increased from £30,000 to £60,000 per employee and the scheme will be more accessible to growth companies.

Frequently overlooked conditions for Enterprise Management Incentive (EMI) share option schemes will be eased. It will no longer be necessary to include share restrictions in the option agreement and the need to declare that an employee has signed a working time declaration will be removed. These straightforward conditions seem to cause problems in far too many schemes, particularly where schemes have been ‘rolled over’, and this change should allow otherwise ‘good’ schemes to operate as they were intended.

A range of other relatively minor changes were announced today, two of which may be of interest.

Separating couples will now have three years after the year in which they cease living together to make no gain/no loss transfers between them; a move which should take a little of the strain from a stressful time. Assets transferred as part of a formal divorce settlement will have an extended period for no gain/no loss treatment and principal private residence claims may be possible where a spouse or civil partner retains an interest in the former matrimonial home.

For those with carried interest, it will be possible to bring forward tax liabilities onto an accruals basis so that individuals can better match UK and overseas tax liabilities and be able to obtain double tax relief overseas for their UK tax liabilities.

All in all, not much was announced today about the tax system. This year’s Autumn Statement is likely to be the last ‘fiscal event’ before the next election, so how much powder has been kept dry?