The 2018 Budget needed to deliver in a number of key areas: it needed to encourage investment, promote technological advancement and entrepreneurial behaviour, as well as provide the economic conditions to promote innovation and develop talent. It was therefore pleasing to see the Chancellor announce a number of measures that should support that goal of economic empowerment, in spite of an uncertain backdrop due to the on-going Brexit negotiations, which are not ideal circumstances for policymaking or business planning.

Looking at the areas that had significant focus, both in the Chancellor’s speech and subsequent published papers, these included the annual investment allowance (AIA), entrepreneurs’ relief, the enterprise allowance, the employment allowance, IP tax relief, and research & development tax relief.

The maintaining of entrepreneurs’ relief and reforms to AIA were particularly vital for improving the chances of the businesses of tomorrow getting their ideas off the ground.

Entrepreneurial spirit

Despite tightening of its conditions (with the qualifying period doubled to two years), entrepreneurs’ relief remains an attractive and essential tax incentive that drives UK innovation and entrepreneurship. However, corporate finance professionals are already seeing a number of M&A transactions being placed on hold to ensure participants can qualify for entrepreneurs’ relief in due course.

While it is understandable that the Chancellor needed to tweak the relief to ensure it was benefitting those who needed it, entrepreneurs’ relief reform would have been welcomed even more so had the Chancellor abolished the minimum shareholding requirement altogether. This move would incentivise all employee shareholders and not just the C-suite.

A more targeted employment allowance can only help but, with employment levels already at record highs, will it help organisations attract and recruit talented people? With that in mind it is encouraging to see the Chancellor acting where he can to incentivise new business startups and investment in research and development in the UK - two important areas of potential job creation.

The annual investment allowance increase, from £200,000 to £1m (for two years), to stimulate business and investment was another welcome move. The allowance means that businesses can deduct qualifying expenditure from taxable profits and will mean increased investment in business equipment and machinery; this was something that business has long lobbied for, so has been well received already.

The UK needed a Budget that increased the level of household income and encouraged consumer spending, but we also needed to send a strong business message, too. We are pleased that the proposal to raise personal allowances and the higher rate threshold will encourage consumer spending, perhaps even with the retail sector in mind, where proposals to regenerate the nation’s high streets were also announced. Those measures effectively present a tax cut for an estimated 32m people - a win for the Chancellor on the personal tax side.

Red tape reduction

Non-profits make a huge contribution to the fabric of UK society and we had one eye trained on potential developments in this sector. The proposed simplification of tax for non-profit entities might not go far enough, but it should prove a helpful start in reducing some of the administrative burdens that have lingered up to now. Such administrative distractions only serve to stretch resources as compliance issues must be overcome, in turn deflecting non-profits from focusing on the good, impactful work they do.

With such a seismic economic event less than six months away, this was always going to be a difficult Budget for the Chancellor. It is not unlikely that we will see a further Budget sooner than next Autumn given the complexities around leaving the EU, as well as the political uncertainty and potential instability that we may see in coming months, so the Chancellor should probably keep his red briefcase relatively close to hand.

About the author

Nigel Bostock is chief executive of Crowe UK