In a pivotal move, UK Chancellor Jeremy Hunt's decision to permanently implement a significant corporate tax break, known as 'full expensing,' has received widespread endorsement from tax experts and business groups. Hunt, presenting this policy shift in his Autumn Statement, asserts that the move will incur an annual cost of £11 billion ($13.8 billion) for the government. The 'full expensing' initiative, introduced in April as a replacement for the prior 'super deduction' scheme, aims to cushion the impact of the rise in corporation tax from 19% to 25% and stimulate increased investment from UK companies.
Under this tax break, companies can reclaim the entire cost of investments in IT, machinery, and other assets in the year of purchase, providing a saving of up to 25p for every £1 spent. Hunt emphasized the significance of this decision, stating, "This is the largest business tax cut in modern British history. It means we have not just the lowest headline corporation tax rate in the G7 but its most generous capital allowances."
The move to make 'full expensing' a permanent fixture follows appeals from over 200 companies and trade associations, including influential entities like Make UK, the Confederation of British Industry, the Institute of Directors, the Institute for Fiscal Studies, and the Chartered Institute of Taxation. The Treasury contends that this decision positions the UK's plant and machinery capital allowance regime as the most competitive in the G20.
Experts and industry figures have voiced their support for the chancellor's decision. Marc Wright, head of entrepreneurs at Investec Wealth & Investment, expressed enthusiasm, noting that the permanent implementation of 'full expensing' should foster growth and productivity well into 2024 and beyond. This move is expected to provide stability and certainty, potentially encouraging a surge in capital investment.
In addition to the permanence of 'full expensing,' Hunt utilized the Autumn Statement to extend financial incentives for investment zones and tax reliefs for freeports, extending the duration from five to ten years. To further incentivize investment, he announced the establishment of a new £150 million investment opportunity fund.
Hunt, emphasizing the broader impact of these growth measures, anticipates an increase of around £20 billion in business investment in the UK economy within a decade. While the chancellor's announcement has garnered positive responses, the long-term effects on the UK economy and the business landscape will become apparent over time. The decision aligns with the government's broader strategy to stimulate economic growth and position the UK as an attractive hub for business investment.
By fLEXI tEAM