Doubling of investment allowance for SMEs ‘does not go far enough’, say critics

Economists have been urging the Government to create a sustainable economic recovery led by an increase in business investment rather than housing and consumer spending.

But the Association of Taxation Technicians (ATT) said the measure announced yesterday does not go far enough.

George Osborne said that “99.8 per cent of businesses” were eligible for 100 per cent of the investment allowance, which will cost the government £2bn to implement, the second most expensive measure of the Budget.

The ATT said the move, which will apply to all qualifying investment in plant and machinery made between April 2014 and December 31, 2015, would have a limited impact on most SMEs.

Yvette Nunn, president of the ATT, said: “When the current temporary limit of £250,000 was introduced from January 2013, it brought with it some of the most complicated arithmetical calculations in the whole tax code. For the vast majority of SMEs, this temporary doubling will be irrelevant. What concerns them far more is what will happen when we come to the end of the temporary enhanced limit.”

Terry Jones, tax partner at BDO in Yorkshire, welcomed the move but said it should have been made permanent. “The increase in the Annual Investment Allowance (AIA) from £250,000 to £500,000 will certainly be welcomed by those businesses wanting to expand to meet growing export demand and it means that they can now get up to £100,000 tax back on investment in plant and machinery,” he said.

“However, this is only a temporary measure and we would have liked to have seen this set permanently at this level.”

Meanwhile, NFU Mutual said the measure would help rural businesses.

Sean McCann, personal finance specialist, said: “(It) is great news for rural businesses. It should encourage investment in new plant and machinery, boosting incomes and helping create jobs in the rural economy.”