Businesses buoyed by permanent UK tax break

British business leaders were unanimous in their praise for the government on Wednesday after Chancellor of the Exchequer Jeremy Hunt announced that a tax break for businesses investing in machinery, IT and equipment would be made permanent.

Big Ben tower with Houses of Parliament and Westminster bridge in autumn, London, UK
The 'full expensing' capital allowance, which allows companies to claim back 25p in corporation tax for every £1 invested, was due to expire in March 2026.The decision to make the tax break permanent will encourage growth and allow firms to invest in AI and automation which will help companies tackle the long-standing problem of poor productivity in the UK.
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Key announcements in the Autumn Statement

The government's Autumn Statement, delivered by the Chancellor to the House of Commons, also extended business rate relief for many small firms, including hospitality businesses.Mr Hunt told MPs that his plans represented "an Autumn Statement for the face of global challenges”. He said that making 'full expensing' would cost £11 billion a year and represented the "largest business tax cut in modern British history".He added: "It means we have not just the lowest headline corporation tax rate in the G7 but its most generous capital allowances." The manufacturers' organisation Make UK, which has been at the forefront of calls for the tax break to be made permanent, said it was "the single biggest measure the government could take to transform business investment".

Business and manufacturers react

Verity Davidge, director of policy at Make UK, added: “Business investment has long been the Achilles heel of the UK economy. If we are to break this cycle, try and kick start growth and, improve our productivity then making a step change in investment is a critical factor."Rain Newton-Smith, chief executive of the Confederation of British Industry (CBI), said the Chancellor was "right to prioritise ‘game-changing’ interventions" that would fire the economy.She added: “Helping firms to unleash pent-up investment is critical to getting momentum into the economy. Making full expensing permanent will give firms the stability they need to press on with decisions on investment whilst keeping the UK at the top table internationally for investment incentives."There was a similar welcome from the Institute of Directors (IoD), which first called for 'full expensing' to be made a permanent fixture of the tax regime in July 2022.However, the IoD said it would like to have seen more substantive measures to address skills shortages, which remain a key concern of UK businesses at a time when the nation still has almost a million job vacancies.Roger Barker, the IoD's policy director, “This Autumn Statement was all about making full expensing permanent. This measure represents a significant reduction in the overall burden of business taxation, and is to be welcomed. According to our members, full expensing is already exerting a positive impact on investment decision making. Of firms with capital budgets above £1 million, nearly a quarter have told us that they have altered their investment plans as a direct result of the policy. We had been calling on government to make this policy permanent and are, therefore, delighted that the Chancellor has listened."

Support for SMEs

Shevaun Haviland, director-general of the British Chambers of Commerce, also applauded the Chancellor's proposals to help businesses tackle current economic challenges.“The decision to make full expensing permanent will be a boost to companies wanting to invest. Our research shows that 34 per cent of businesses have already benefited from the policy, rising to 47 per cent for manufacturers," she said. “Smaller firms will be relieved to see a package of measures that alleviate the cashflow problems they face, such as continued business rates relief for hospitality, retail and leisure, and new rules to help them get paid on time. “Business investment is the lifeblood of local economies, creating jobs and supporting public services. The Chancellor has today taken a step in the right direction, but nothing can be taken for granted and we must all continue to focus on encouraging companies to grow.” On business rates relief, Tina McKenzie, policy chair at the Federation of Small Businesses (FSB), said: “Business rates are one of the absolute worst taxes faced by small firms. Size matters when it comes to rates, and the Chancellor is absolutely right to have concentrated his firepower on helping the smallest firms at the heart of so many communities.“Thousands of pubs, cafés and small shops in high streets across England will be pleased today with the bold, measured and targeted support from the Chancellor to help them through troubled times and build towards growth."

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