'Corporation tax rise casts an ominous shadow' - channel reacts to this year's Budget

Figures from across the channel, including QBS Software, QUANTIQ and Marathon, reveal their opinions to CRN about today's Budget

Economic recovery through supporting businesses was the main takeaway from this year's Budget announcement.

Chancellor of the Exchequer Rishi Sunak today revealed the details of his Budget. VAT, National Insurance, income tax and capital gains tax remain unchanged. Rates will be kept at 19 per cent for businesses with profits of less than £50,000.

However, corporation tax is set to rise from 19 to 25 per cent for the most profitable companies in Britain from April 2023.

Dave Stevinson, CEO of distie QBS Software, called this proposed jump in corporation tax "ominous".

"Most of what the Chancellor spoke about has already been leaked in the press the previous days, so there weren't too many surprises," he told CRN.

"What I would say is that there is a very dark and ominous shadow looming on future corporate tax rises, which may come in the form of a special budget or in the Autumn Budget.

"I'm not going to go as far to say it's punitive but it does tend to penalise larger and successful businesses. I'm cognizant that somebody needs to pay for this huge amount of expense, so why not larger businesses and larger earners? It makes sense, but it's always a bit disgruntling being the one who'll have to pay for it."

Stuart Fenton, CEO of Microsoft partner QUANTIQ, called it a "sensible" Budget from Sunak that avoided "worrisome rumours" that preceded the Chancellor's speech and said that the corporation tax hike makes sense.

He also praised the introduction of the new two-year super-deduction initiative, which will cut companies' tax bill by 25p for every pound it invests in new equipment, resulting in a reduction of taxable profits by 130 per cent of the cost.

"I felt he could have gone further to raise taxes than he did. The corporation tax move made sense, as did the investment Super Deduction which encourages companies to invest and grow," Fenton explained.

"Many business owners would be relieved on the capital gains tax freeze. I still believe a change is afoot with that tax, and a more modest move now would be better than a massive one later.

"For QUANTIQ, the super deduction will be used as part of our investment plans, perhaps accelerating plans already in place."

Chris Gabriel, CTO of Sapphire Systems, also speculated about whether the super-deduction could be the "kickstart" in investment that IoT businesses need.

"IoT and connected business investments have for many business been stuck between two stools - great idea but a huge problematic decision of when is it the right time to invest to turn them into a reality. And, any investment to transform comes with that timing risk of doing it too soon or leaving it too late," he wrote on Linked In.

"Moving from a passive to intelligent industry model is a huge leap of cost and risk, so sometimes there has to be a big enough nudge to make it worth stepping over fear of change and sticking with today to walk into golden sunlit uplands of tomorrow. So, the question is, did Rishi Sunak create a big enough nudge today to accelerate a new age of connected IoT enabled business models and infrastructure investments that will define all of our tomorrows? I have a sneaking suspicion he did."

Iain Maclean, CEO of MSP Marathon, added that the corporation tax rise was "fair" as it gives companies time to react to the rise as well as invest in their businesses.

"We understand that there's a need for the corporation tax to rise, and I think the government has done it in a very fair way by saying it's going to be in 2023," he told CRN.

"That allows for us to plan and also have another 18 months of using our money wisely, so we can still invest over the next 18 months, which is obviously what they're trying to achieve."

Cas Paton, founder and boss of etailer OnBuy.com said that the budget marks the start of the modern "roaring twenties".

"The announcement of the super-deduction initiative by the Chancellor this afternoon is a welcomed step forward to support the future of British entrepreneurship," stated Paton.

"In association with the restructuring of corporation tax and £5bn allocated to restart grants, it is clear that the Chancellor has prioritised growth in this year's budget. The newly announced package encourages reinvestment, will help smaller organisations to recover and thrive, and will aid the development of new homegrown British industries. These are all absolute necessities to recover from the impacts of COVID-19 and as we enter our first year outside of the EU.

"With capital gains tax remaining stable, I am confident that this moment marks the start of the modern-day roaring twenties. With the enhanced levels of financial and training support pledged by the government, I foresee a boom in the number of small businesses launching over the next year, and fast-growing firms like OnBuy accelerating even more quickly. The knock-on effect of this boom has the potential to be massive; increased employment, an uplift in spending and a high energy performing economy to support the next generation of talent."

Rob Billington, channel manager of EMEA at security software vendor Netwrix welcomed news of a "fast-track" visa scheme to help start-up and rapidly growing tech firms source talent from overseas.

"I think this is a really exciting and much-needed development. Brexit will have left many companies concerned about the skills shortage in our industry from both a development and implementation point of view and also of course for specific areas such as security analysts where there is already a noticeable shortage of key staff," he stated.

"It is therefore critical that programmes like this are launched with clarity and speed to ensure that we can take a global approach to attract the brightest and best to come to the UK and work in the tech industry. I am sure that this will be welcomed warmly by British firms and create optimism for growth and the much needed bounce-back that we hope to see."

The Help to Grow scheme

Sunak announced earlier this week the Help to Grow scheme, which will see the Treasury provide a £520m package to help small businesses with their software support and training and to shift to a cloud-led strategy. 130,000 businesses are expected to be eligible for the scheme.

They will be able to claim up to £5,000 each to secure a 50 per cent discount on productivity-enhancing software. SA new online platform will also be available to them, providing free advice on technology, such as cloud storage, that will help them save time and cut costs.

"Our brilliant SMEs are the backbone of our economy, creating jobs and generating prosperity - so it's vital they can access the tools they need to succeed," said Sunak of the scheme.

"Help to Grow will ensure they are embracing the latest technology and management training, fuelling our Plan for Jobs by boosting productivity in all corners of the UK."

Fenton said that he wished there had been such a scheme available when he was setting up QUANTIQ.

"The Help to Grow scheme is very important to very small businesses and I wish it were there when I was starting out as an encouragement to make sound business decisions, such as leveraging the cloud," he elaborated.