As Scotland’s businesses face ongoing economic uncertainty, the lack of long-term tax clarity could hinder strategic planning and investment, according to tax expert Kimberley Thomson.

Ms Thomson, who is head of tax at Henderson Loggie, believes that a defined tax strategy is essential to support growth, innovation, and global competitiveness, and is urging the government to address the issue in its fiscal agenda.

Over the past 18 months, Scotland’s businesses have faced multiple budgets and one complete U-turn on key UK fiscal policies.

Ms Thomson said: “When tax policies are unpredictable, businesses struggle to forecast future tax costs, making it difficult to accurately project profit margins.

“A clear tax roadmap is essential, especially for smaller businesses which often lack in-house tax teams and require time to understand and adapt to potential changes.

“Changes to R&D tax legislation and HMRC’s recent approach to enquiries have made SMEs hesitant to claim under the scheme, partly because they are not sure of the rules and because they are concerned about the time and money it will take to defend a smaller claim.

“Ongoing speculation about aligning Capital Gains Tax rates with income tax rates, along with the potential withdrawal of Business Asset Disposal Relief and changes to inheritance tax reliefs is adding to the uncertainty. This unpredictability can disrupt succession planning and can lead to either a premature exit or lead to cautious, risk-averse behaviour among business owners.”

In 2023, the UK government introduced changes to support companies with substantial R&D spending relative to their total expenditure. However, critical legislative provisions were accidentally omitted from the Finance Bill 2023, leaving the rules incomplete and causing widespread confusion. Companies were uncertain about their eligibility for the enhanced relief, as the policy’s intent was clear, but the necessary guidelines and legislation were missing.

The government’s response in 2024 involved introducing the missing provisions retroactively, allowing companies to apply the rules as if they had been in place from the original start date. While this correction provided some relief, the initial delay resulted in increased administrative burdens, and potential financial strain for businesses. Many companies postponed their claims until the situation was resolved, leading to disruptions in financial planning and cash flow.

Ms Thomson added: “R&D is a good example of how to complicate the system further while trying to simplify the relief to a merged scheme.

“A structured tax roadmap for R&D or creative relief in general would have provided businesses and Treasury with the necessary timeline to prepare and might have prevented such oversights.

“Clear communication and comprehensive planning from the government are essential to ensure that businesses can navigate tax changes effectively, without facing unnecessary challenges and costs.

“A reliable, stable tax regime enables better investment decisions, attracts new investments, and supports tax-efficient succession planning, ultimately benefiting both businesses and the broader economy.”