Business cheers news that investment tax break could be permanent
Business groups have welcomed the news that Jeremy Hunt is considering making a £10bn investment tax break permanent as part of this month’s Autumn statement.
It could also see the Chancellor making the so-called full expensing policy, which gives firm tax breaks for investing cash into their firms, more generous, according to a report in The Sunday Times.
Mohammad Jamei, economic policy director at the Confederation of British Industry, said it could see a permanent 21 per cent boost to business investment and a two per cent uplift in GDP by 2030.
“Extending full capital expensing beyond the current window could be a game changer in terms of unlocking the vital business investment we need to drive economic growth,” he said.
“Given the current weakness of the UK’s economic performance, this is the kind of ambitious move businesses and investors are looking for to support a step-change in productivity,” he added.
The London Chamber of Commerce also welcomed the news speculating the move could be made permanent.
“This would be a critical signal to send to business and the wider markets that Britain remains open for business,” James Watkins, the group’s head of policy and public impact, said.
Extending the policy beyond the current 2028 cut-off point, upping the number of types of investment it applies to, better targeting relief at key sectors, and even making it permanent, are all options currently being discussed by Treasury officials, according to the report.
The policy was launched at April’s Spring statement as a swap for 2021’s ‘super-deduction’ programme, and meant to support firms with the 19 to 25 per cent corporation tax increase.
Companies can claim back IT and machinery investments in the year of purchase, rather than over multiple years, giving them a 25p saving for each £1 spent.
But the Office for Budget Responsibility (OBR) has said previously that the scheme comes at a cost of £10bn to the public purse, although supporters of the policy argue the figure is an overestimation and closer to £3bn.
A UK government spokesperson said: “We’re making the UK the best place in the world to do business by offering the lowest corporation tax in the G7, a smart regulatory system and a simplified tax system to save firms time and money.
“Growing the economy is one of our top priorities, which is why we’ve introduced full expensing, an effective £27 billion corporation tax cut which results in a 25p tax saving for every pound invested, as well as a new £500 million per year R&D scheme system for 20,000 UK SMEs.”