Budget Q1 2024 – industry reactions

As part of his Spring Budget statement, the UK Chancellor of the Exchequer Jeremy Hunt has announced that draft legislation will be published within weeks to extend full expensing – a £10 billion tax cut for business every year to help them invest for less – to leased assets, when affordable to do so.

Today’s Spring Budget included support for SMEs to invest and grow through a £200 million extension of the Growth Guarantee Fund, helping 11,000 small businesses to access the finance they need.

An increase in the VAT registration threshold from £85,000 to £90,000 will also take around 28,000 small businesses out of paying VAT altogether.

Hunt noted that, “Business investment has risen from an average of 9.3% of GDP under Labour to 9.9% under the Conservatives. This year it will be 10.6% of GDP – generating £30bn more in business investment than if it had continued at Labour levels. And it is still going up.”

Unfortunately, the Spring Budget came as a disappointment for the EV and automotive industry, with the exception of the fuel duty freeze.

The Chancellor did not address the 15% VAT disparity between home and public charging, Benefit-in-Kind rates for 2028/29, vehicle excise duty for zero-emission vehicles and grants for electric vans.

Industry response:

John Phillipou, Managing Director of Paragon Bank’s SME Lending Division and Chair of the FLA, welcomes the extension of the full expensing regime and the RLS scheme for two further years: “The extension of full expensing for leased plant equipment and machinery is a sensible decision that will stimulate new investment from rental companies who rely on leasing as the right product for their replacement cycles. These businesses are a major facilitator of economic growth; many businesses don’t want expensive, depreciating assets sitting on their balance sheets, or don’t have the cash to buy assets outright. Leasing provides a convenient and cost-effective way for them to obtain the assets they require for a specific contract or project, so this move is welcomed.

“We would now like to see the full expensing regime extended to used assets. Many SMEs choose not to acquire new equipment and operate in the used market leaving larger corporate businesses to buy new. This used market keeps the whole asset lifecycle in place and is an essential part of ensuring lenders fund new technologies, such as green. So, offering the same tax incentive to invest in used plant and machinery creates a fairer environment and will also encourage growth amongst SMEs, which make up 99% of all UK businesses.”

“It’s also a welcome addition to the Spring Budget that the Chancellor has extended the RLS scheme for a further two years, this will offer support to many SME businesses who are looking to grow their business and should have a positive impact on the wider economy.”

Stephen Haddrill, Director General of the Finance & Leasing Association, said: “This is a great outcome from a long-term campaign by the FLA. It’s excellent that the Government recognises that leasing is the funding route of choice for many businesses and makes a vital contribution to investment. We welcome this transformative move. Its affordability will be covered through increased investment and higher productivity, and its introduction should be as fast as possible.

“We are also delighted that a replacement for the Recovery Loan Scheme has been confirmed in the Growth Guarantee Scheme. We look forward to working with the British Business Bank to get that vital funding out to small businesses.”

NACFB Chair, Paul Goodman, said: “In an underwhelming speech lacking anything approaching a bigger vision, there was very little within the cautious statement that hadn’t already been trailed this week.

“However, the NACFB welcomed a response to our calls for clarity over the new Growth Guarantee Scheme and looks forward to continuing a fruitful partnership with the British Business Bank to deliver the new scheme to SMEs via the intermediary community.

“The NACFB will continue to pressure policymakers to reinvigorate the underused Bank Referral Scheme and ensure that small businesses seeking growth finance have access to a broader range of funding solutions.”

Louis Taylor, CEO of the British Business Bank, said: “The Growth Guarantee Scheme will build on the work of the Recovery Loan Scheme, helping smaller businesses to access the right type of finance they need to grow and thrive. This type of guarantee scheme supports lenders in providing a wide range of finance for smaller businesses, and so is a vital ingredient in the smaller business finance landscape.”

Gerry Keaney, BVRLA Chief Executive said: “Today’s commitment to extend full expensing to the rental and leasing sectors is a monumental step forward to rectify an historic injustice. The BVRLA has been an active voice in achieving this change and welcomes the opportunity to engage further in delivering this long overdue alignment in tax policy.”

“However, at a critical time for the transition to zero-emission vehicles, no news is bad news. Today we heard nothing on charging, VED, Benefit in Kind, VAT on public charging, grants for electric vans, or a consumer education campaign. The Chancellor is leaving our sector in limbo.

“The Government needs to be braver in unlocking the billions of pounds in zero emission investments required across the whole road transport sector, from fleets, small businesses and private motorists.”

Neil Rudge, Head of Enterprise at Shawbrook, said: “SMEs could benefit significantly from today’s announcements in the Chancellor’s Spring Statement, especially those that rely heavily on leased equipment. Currently, full expensing is only available for assets that are purchased outright. Allowing it to apply to leased assets will mean that businesses could soon claim the entire cost of leased equipment against their tax bill in the first year, instead of spreading the cost over the lease term. This could free-up cashflow for businesses to invest in other areas and to fuel growth. This policy change creates an exciting opportunity for businesses to think about re-starting investment initiatives that may have been put on hold in light of recent economic challenges.”

Ed Rimmer, CEO of Time Finance said, “There was positive news today to stimulate business investment, adding to the big news in last year’s Autumn Statement that full expensing would become permanent. This £10bn tax cut, dubbed a game changer by the CBI, was intended to stimulate £20bn of investment per year for the next ten years. The limitation of this measure last year was that it excluded businesses who simply didn’t have the capital to invest in new plant and machinery. Today’s announcement that this tax cut will be applicable to leased equipment is welcome news for businesses, and will be a big catalyst for business investment, allowing more SMEs to invest in growth while benefiting from the Annual Investment Allowance.”

“The Chancellor’s transition of the Recovery Loan Scheme to a Growth Guarantee Scheme today saw £200m invested, supporting 11,000 SMEs. Undoubtedly this announcement will be welcome news for businesses looking to expand, invest in new product lines and manage their cashflow with greater headroom. There is, however, another side to this. In a recent poll of our community we found that 62% feel that cashflow is still the biggest threat to businesses right now. So while the continuation of loan support schemes will provide businesses with the access to capital they need, overheads are still high and until inflation and interest rates fall, businesses still need immediate relief from their overheads, something the Chancellor did not address today.”

Mike Randall, CEO of Simply Asset Finance commented: “The government Recovery Loan Scheme (RLS) has served, and continues to serve, an important purpose for small firms. With today’s announcement of its successor, the Growth Guarantee Scheme, the Chancellor has listened to calls from the industry and given SMEs across the country more certainty to plan their future growth.

“The extension of the full expensing tax scheme to leased assets will also be a very welcome development for small businesses, giving business leaders a much-needed boost when investing in new equipment for their growth – particularly as investment in green assets becomes a greater priority in coming years.”

“Increasing the VAT threshold for businesses from £85,000 to £90,000 is also a positive development from the Chancellor, enabling those who have previously sat below the threshold, and held off from further growth. Moving forward however, to avoid a similar situation in the future, we encourage the Chancellor to regularly review the VAT threshold to avoid similarly stifling business growth, as well as considering how to reduce the initial impact of entering the threshold as cost pressures remain high.”

Caroline Sandall-Mansergh, Consultancy and Channels Development Manager at Alphabet GB, said: “We are supportive of the 12-month extension to the historic freeze on fuel duty, providing a degree of assurance for drivers across the UK for the next year. However, at a time when so many are faced with uncertainty around costs rising beyond their control, we expect that drivers will be looking for transparency not only for the future strategy for fuel duty, but more widely on the broader taxation landscape for vehicles and fuel. This is particularly true for individuals who are reliant on vehicles and want to make the necessary plans for the long-term.

“The Spring Budget statement has also hinted at a much-needed review of the full expensing policy, by potentially expanding this to leased assets. Alongside many others in the industry, we recognise this change as crucial to ensure the new scope for full expensing is fit-for-purpose for the fleet of today. Many companies are turning to leasing vs. outright ownership of vehicles as a more cost-effective route for investment, and as a result, these businesses will see significant benefit in tax exemption through full expensing. We hope the government will provide further clarity on timelines, and that it will continue to work with leaders within the leasing sector to ensure the reformed full expensing policy meets the investment needs of the modern business.

“Though we look forward to seeing more details around the further investment into zero-emission vehicles, we were hopeful that the government would take further action on supporting a low-emission future as we near net-zero deadlines. For instance, the 15% VAT disparity between home and public charging remains unaddressed, making EVs a more considerable investment for those without at-home charging as an option. We are also yet to see the BIK tables for 2028/29, and eagerly await an update from the government to ensure we can factor these into our planning as early as possible.”

Philip Nothard, Insight Director, Cox Automotive, said: “The budget will come as a disappointment to both current and would-be EV drivers and automotive generally. We had hoped that the government would address the VAT discrepancy between domestic and public charging. Steps taken in that regard would have been both affordable and logical.

“Having said that, measures that put money back in the pocket of the average consumer, as the fuel duty freeze and national insurance cut do, clearly help our sector. This was a budget designed to win votes in an election year, but one with zero incentives to further push zero-emission motoring.”

Liz Ritchie, Head of Tax at Mazars said: “Full expensing, which gave businesses a much-needed boost by becoming a permanent scheme, has now expanded to include leased assets. This announcement will be welcomed by many businesses and corporate groups, allowing for flexibility when purchasing assets and making strategically sustainable investments.

“Without a doubt, now is a tough time for businesses who are grappling high costs, staff shortages and waning consumer spending. The Chancellor has given businesses flexibility and certainty over investment plans at a time of rapidly changing technology, giving businesses a tax incentive to stay ahead of the curve.”

Victoria Price, Managing Director at Alvarez & Marsal Tax said: “Introducing full expensing on leased assets will be welcomed by many businesses as it was seen as an anomaly when the announcement was first made. Many businesses simply can’t afford the outlay of expensive equipment up front. Leasing is a cost-effective way for UK businesses to acquire assets. This will also allow flexibility to ensure that UK businesses can keep upgrading to cutting edge technology and green technology without having to buy assets outright so could pave the way to keep us on the front foot in that regard also.”