Predictions of a government tax grab as government borrowing soars and interest rates rise: SMEs could be hardest hit

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A THAMES VALLEY-based SME tax expert is urging businesses to take advantage of the new extended schemes while they still can, ahead of rising inflation and a likely ‘tax grab’ by the Chancellor this year.

Paul Attridge, tax advisory partner at Azets, predicts tougher rules could be introduced this spring, along with the withdrawal of existing support measures.

In the autumn budget, the Chancellor confirmed that the economy is expected to return to pre-Covid levels, and that unemployment is also at a lower level than initially expected – expected to peak at 5.2% instead of the 12% previously planned. The Office for Budget Responsibility forecast for business investment also rose.

Despite a business-friendly budget, Mr Attridge foresees new challenges for SMEs, with inflation expected to average 4% next year and demand outstripping supply in most sectors, which will lead to manufacturing delays and product shortages.

Many SMEs are struggling to recover following the end of the furlough scheme and soaring energy needs which are weighing on prices.

Mr Attridge said: “For many SMEs, the supports available today will not be enough to offset rising bills over the next 12 months.

“SMEs should seek professional advice to ensure they take full advantage of all available allowances, with inflation set to continue to rise and the extended stimulus loan program ending on June 30, 2022.”

The Chancellor also announced a series of reductions in business rates, with the retail, hospitality and leisure sector benefiting from a 50% reduction on business rates, worth around 7 billion of pounds sterling.

Paul Attridge urges SMEs to take advantage of these schemes, with increases of 1.25% in National Insurance contributions already confirmed from April 2022 and corporation tax rising from 19% to 25% from April 2023, as well as planned changes to Inheritance Tax (IHT) and Capital Gains Tax (CGT) following recent simplification reviews by the Tax Simplification Office.

“Businesses need to plan ahead, with spring fast approaching and no confirmation on what additional measures may be introduced in the next budget,” he said.

“Soaring public borrowing and the continued rise in interest rates will force the government to increase tax levies in order to meet crippling costs.

“As always, SMEs could be the hardest hit and need to optimize their financial situation for a possible tax bite as early as April 2022.”

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