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Chancellor must encourage investment, say ICAEW

Next week’s budget could provide the Chancellor with an opportunity to encourage business investment, and he should consider implementing incentives which will drive economic growth.

The results of last month’s Institute of Chartered Accountants (ICAEW) Grant Thornton Business Confidence Monitor indicated that businesses expect capital investment to grow by 0.9% over the next 12 months.

64% of businesses were found to be holding onto cash rather than spending it, while a third of businesses with no cash surplus are intending to create one this year, indicating a feeling of caution amongst businesses.

The ICAEW believes that the Chancellor should now consider amending plans to reduce the Annual Investment Allowance from £100,000 to £25,000 in light of news that real business investment has only grown by 1.1% in the last 12 months - in comparison to forecasts of over 8%.

Commenting on the proposals, David Swallow, president of the Northern Society of Chartered Accountants 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.”

The ICAEW also believes that the Government needs to take additional steps to improve the levels of service that businesses receive from HMRC, which they believe is affecting their ability to do business. They believes that simplifying measures, including more use of email and quicker responses to postal queries could make an enormous difference.

He added: “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.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .