During his Spring Statement Mr Sunak announced a number of changes to the tax system including cuts to VAT an energy efficiency home improvements, a cut to fuel duty and a long term plan to cut income tax by one percent. For many businesses though the measures have not gone far enough, with a hike in National Insurance still going ahead in April as well as a return to full VAT for the hospitality industry. The British Chambers of Commerce (BCC) said the statement “falls short” with measures such as the fuel duty cut only “a drop in the ocean” after the Chancellor’s announcement on Wednesday, March 24.

The Confederation of British Industry meanwhile called for “concrete plans” to boost areas such as energy and electric vehicles.

Mr Sunak has published a tax plan setting out reforms to the UK’s tax system, with ambitions to help spur business investment.

According to the document British companies invest just 10 percent of GDP each year compared with 14 percent in competitor countries.

While the Government has committed to investing £600 billion over the next five years, it wants to see businesses invest more- blaming a tax system which doesn’t reward investment.

The Treasury has already taken steps in this direction with the super-deduction introduced in 2021 which allows companies to cut their tax bills by up to 25p for every pound they invest in qualifying plant and machinery assets.

Speaking in the Commons yesterday Mr Sunak complained that “something is not working” though, with UK businesses spending less than half the OECD average on R&D as a percentage of GDP.

He also cited them as an area for reform, promising to make them more effective and better value.

Jon Richardson, Tax Leader for Policy, Reputation, Regulation and Risk at PricewaterhouseCoopers (PwC) UK, commented: “The UK R&D tax credit regime and tax allowances for capital investment are not generous by international standards so there is a need to do something, otherwise the UK will not be competitive from April 2023 when the super deduction ends and the corporation tax rate increases to 25 percent.”

In its consultation the Treasury is likely to hear calls for more generous incentives to investment that just R&D tax credits though.

Kitty Ussher, Chief Economist at the Institute of Directors, said: “The top contenders for change, which we’ll be consulting our members on, are likely to be a permanently higher annual investment allowance, which is particularly useful for smaller firms, and also more generous writing down allowances over time for all firms.

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“We’ll also be exploring whether the definition of ‘qualifying investment’ can be widened to be of greater relevance to service businesses.

“In addition, it is crucially important that the tax system is used to incentivise workplace training in skills shortage areas, where there is a clear market failure, particularly for smaller firms.”

Skills training has also been identified in Mr Sunak’s tax plan, pointing to the fact UK companies spend less than half the European average on training their employees.

The document questions whether the current tax system is doing enough to incentivise investment in training with plans to review measures such as the Apprenticeship Levy.

According to a 2021 survey of 150 employers by PwC, 41 percent said the Levy had no impact on their investment in training and skills while 16 percent said it had actually hindered it.