Businesses across the East Midlands will be hoping for a message of ‘no change’ when it comes to the annual investment allowance (AIA) at Wednesday’s budget according to a Nottingham tax expert.
Simon Browning, tax partner at UHY Hacker Young, believes that the region’s strong manufacturing base will be keeping its fingers crossed when George Osborne delivers his speech on Wednesday (8 July) that the current level of AIA will be maintained in the medium term.
The AIA, which allows businesses to deduct the full value of qualifying fixed assets, was doubled to £500,000 in the Chancellor’s 2014 budget as well as being extended into this year – something Simon believes has continued to encourage growth in the region. It is planned to reduce to £25,000 on 31 December 2015 but the Chancellor did confirm during the general election campaign that it would not drop to such a low amount.
He said: “The East Midlands has long been a traditional manufacturing stronghold in the UK and tax relief such as the AIA has been really important – particularly recently while times have been tough – in allowing for businesses to commit to growth and invest in their equipment.
“The extension and increase in the level of AIA in last year’s budget was, in my opinion, one of George Osborne’s key drivers of growth and it would be a huge backward step should the government decide to reduce it significantly.
“By giving businesses up to £500,000 in tax relief, it has given many the confidence to invest in their business when they may otherwise have been cautious and if the Chancellor was to make a significant reduction I think it could easily hamper growth not only here in the East Midlands, but across the country.”
According to the latest figures released by the Manufacturing Advisory Service (October 2014), confidence in the domestic market place is high with 64% of businesses based in the East Midlands reporting increases in sales during the previous six months and 73% expecting to experience growth by year end.
“It’s really important that the government continues to encourage growth in this sector,” added Simon. “It is hugely influential in terms of the economy in the East Midlands and I am sure that collectively fingers will be crossed that the Chancellor recognises this on Wednesday.”
