Friday, December 3, 2021
Cars

Opinion: Budget 2021 – roadmap needed for global competitiveness


budgetInstead of pressing ahead with immediate tax increases to recover the cost of the pandemic, Chancellor Rishi Sunak has an opportunity to set out a fiscal roadmap to support manufacturers in driving economic recovery and becoming more competitive globally, says Andrew England, tax partner at Menzies LLP.

Many manufacturers have been hit hard by pandemic-related supply chain disruption over the past year, and this has been compounded by more red tape and lengthy delays at UK/EU borders following Brexit and the government should provide targeted support to minimise border disruption in the Budget.

With the end of the Coronavirus Job Retention Scheme (CJRS) and other pandemic-related business support in sight, future tax rises are anticipated but raising the headline rate of Corporation Tax now could have a major impact on businesses that have been struggling to keep production lines operating effectively due to the impact of new coronavirus workplace rules and restrictions.

Sunak promises ‘once-in-a-generation’ infrastructure investment

As well as hitting the sector when it is already struggling, raising Corporation Tax by just one or two percent could discourage inward investment, just at a time when the UK needs to be welcoming businesses with open arms.

Instead, the Chancellor should be using his first post-Brexit Budget to target support at helping manufacturers to onboard the technologies they need to compete globally. For example, the removal of the EU State Aid cap on R&D tax relief means the Chancellor could do more to incentivise investment in robotic process automation and other technologies that could improve efficiency and productivity.

ALSO READ  2 dozen vehicles, stolen tools recovered in auto theft investigation - 9News.com KUSA

At the moment, many manufacturers are not aware of, or taking advantage of, the valuable R&D tax credits that can support investment  in digital technologies, such as AI systems, robotics and other forms of automation. This may even apply when buying off-the-shelf solutions, which need to be adapted for implementation on the factory floor. More could be done to add clarity and encourage manufacturers to make more use of the reliefs available.

The Government has already agreed to extend the £1m Annual Investment Allowance limit to 1 January 2022, which will be benefit businesses incurring capital expenditure. However, more could be done to increase the limit, extend the period or support significant investment for example by allowing repayable credits where losses are made.

The Chancellor could do more to incentivise investment in robotic process automation

This Budget is also the Chancellor’s first opportunity to assert the UK’s independence from the EU, so enhancing tax reliefs and capital allowances to target support for manufacturers could help the sector to become more competitive.

More targeted support should also be considered to address skills shortages, which are damaging the prospects of many UK-based manufacturers. For example, grants could be introduced to support manufacturers in delivering bespoke training to bridge the skills gap that exists between school leavers and industry requirements.

Further support for early-stage and fast-growth businesses could also benefit emerging disruptive businesses in the manufacturing sector. The Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) both provide an important source of funding, and the Chancellor could consider allowing entrepreneurial investors to claim income tax relief up to a maximum value of £250,000 (from the current £150,000) for a temporary period.

ALSO READ  Forget Hertz and Avis. Here’s One Car Stock That Could Go Up 50%, J.P. Morgan Says

Andrew England, tax partner at Menzies LLP



READ SOURCE

Leave a Reply

This website uses cookies. By continuing to use this site, you accept our use of cookies.