Budget 2021 | A focus on alcohol unusual but better to make changes in one swoop

Alex Henderson, senior tax partner at PwC, said:

“While the speech contained the expected dram or two on skills, levelling up and Net Zero, they were somewhat diluted by the emphasis on  alcohol duties.  After all the country has been through, a Chancellor may be forgiven for wanting to introduce some cheer.  However, the amount of time spent in the speech seemed disproportionate. 

Perhaps the time spent on alcohol duties is explainable when placed in context since as well as support for the drinking woman or man in the street the Chancellor signalled at least four important things:

He is prepared to modernise the tax system.

He will cut tax taxes and duties judiciously.

He wants to simplify taxes. 

He wants to use the freedom of being outside the EU to shape the tax system in support of Government policy.

These are important signals which will set the tone for the remainder of the Chancellor’s tenure of the office.

The cuts to fuel duty and air passenger duty for domestic travel were based on similar themes of targeting changes in a logical manner however they seemed inconsistent with the Government's Net Zero goals and this tension will need to be resolved in future Budgets.

For business, the speech was less ‘open for business’  and more ‘keep business in the UK’. One of the most significant announcements was the restriction of R&D relief to innovation developed in the UK.  While it might incentivise multinationals to do more R&D on our shores, the signal it sends on UK international connectivity should not be underestimated.

Ends

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