It was a Budget that must have left most business owners wondering why they gave up their lunch break to watch it. Put simply – there wasn’t that much in it for them.
The increase in the VAT registration threshold is positive but upping it by more than £5,000 would have been preferable, and I was pleased to see the Recovery Loan Scheme extended by two years under its new name – the Growth Guarantee Scheme.
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The announcement on the extension of full expensing to leased assets was universally welcomed but slightly underwhelming. Ultimately, the Chancellor could have gone further; not only should he have extended the full expensing regime to leased assets immediately, but he should also have looked at how he could support investment in used assets.
A lot of work has been put in by the asset finance industry with HM Treasury on the arguments for including leased assets in the regime, but the Chancellor gave a tepid commitment to consult and implement when ‘fiscal conditions allow’, rather than a concrete way forward.
This delay is unnecessary and ultimately a mistake. Organisations that provide leased assets, such as plant hire firms, play a vital role, supplying essential equipment to a wide range of industries, including construction, manufacturing and infrastructure, amongst others.
Enabling these firms to lease the latest, greenest technologies ultimately improves their productivity and efficiency, creates safer working conditions for employees and drives the overall competitiveness of the UK economy.
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By GlobalDataDelaying the extension of full expensing keeps rental firms and the companies that lease assets at a disadvantage to those that can buy new. Given the expectation of an election in the coming months and a potential new Government, my concern is that we might not see it happen at all.
That would prove detrimental to ultimately extending the scheme to used assets.
Governments have always focused on the new and shiny; the opening of the brand-new factory with the latest equipment, the picture opportunity of Ministers operating new high-tech machinery.
That’s fantastic and we, of course, need continued business investment in all parts of the economy across the county, but the engine room of the economy is those smaller SMEs that typically purchase used assets.
Many SMEs choose not to acquire new equipment and operate in the used market leaving larger corporate businesses to buy new. This secondary market keeps the whole asset lifecycle in place and is an essential part of ensuring lenders can collateralise long-term views and really helps to fund new technologies, such as green.
Offering the same tax incentive to invest in used plant and machinery creates a fairer environment and also encourages growth amongst SMEs, which make up 99% of all UK businesses.
The full expensing scheme enables businesses to purchase new assets to deduct the cost of investment from their tax bill. Extending this incentive to used assets would drive investment appetite, free up capital for other purposes and improve cashflow for smaller companies.
If we want to see real growth in the economy and improved productivity, then SMEs have to be incentivised to invest.
John Phillipou is the Managing Director of SME Lending, Paragon Bank
