By Ben Simmons
In a letter to the Chancellor ahead of this month’s Budget, the Institute of Chartered Accountants in England and Wales (ICAEW) has asked for incentives that will encourage businesses to invest as a means to helping drive economic growth.
ICAEW’s recommendations are also intended to help rebuild business confidence, essential to sustaining and accelerating the UK’s recovery from a year of slow growth.
Last month’s ICAEW/Grant Thornton Business Confidence Monitor showed that businesses expect capital investment to grow by just 0.9% over the next 12 months. Additional ICAEW research also shows that 64% of companies are holding on to cash and that 30% of businesses with no current cash surplus intend to create one this year. This suggests a caution amongst businesses, worrying for Government when attracting new investment is so critical.
ICAEW is urging the Chancellor to abandon plans to reduce the Annual Investment Allowance (AIA) from 100k to 25k when real business investment has only grown by 1.1% in the last year, compared with the Office of Budget Responsibility’s forecast of over 8%.
Michael Izza, ICAEW Chief Executive, said: “At a time when businesses should be investing some of their reserves in their economic future, Government is cutting back on the allowances which encourage them to do so. That’s why we think the Chancellor should retain the Annual Investment Allowance and send a signal to businesses that they can feel a bit more confident about the economic outlook.
ICAEW is also calling on Government to take additional steps that will accelerate improvements in the levels of service that businesses receive from HMRC. As one of the primary points of interface between business and the state, HMRC continues to struggle and is affecting businesses’ ability to ‘get on with the job’. Simple measures such as more use of email and quicker responses to postal queries could make a significant difference.
Michael Izza adds: “Every extra hour that a small business spends dealing with HMRC is an hour that could be invested in growth. Poor levels of service at HMRC create a burden on businesses of all sizes, especially SMEs. Even HMRC has admitted that it does not have enough people with the right skills in the right place. Government must ensure that it gives HMRC the resources it needs to collect tax and support business.”
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