The benefit of now having the Budget moved to the autumn means we can all plan for the big changes that are on the horizon. Given the Parliamentary cycle, some of the changes were actually announced back in 2016. So what are the big changes coming through, including those that might have escaped the headlines? How will these changes affect your business, or you and your family into 2018 and beyond?
The key changes are:
Stamp Duty Land Tax
The big news was of course in respect of housing, with the Stamp Duty Land Tax exemption of £300,000 for first time buyers being the headline announcement. However, whilst 300,000 more houses per annum is what experts believe we need, what actual impact will the new SDLT relief have? There has been much analysis that suggests that all that happens is the price for properties in this band increases because of the SDLT saving.
Help for SME builders
We need to see the finer detail of how the proposed help for SME builders will work. One of the biggest issues builders often have is difficulty in obtaining finance. The change to tax on liquidations in 2015 hit this sector hard, as it created uncertainty as to the tax treatment on exit for investors. One of the biggest helps here would be for HMRC to give real guidance on how this rule affects this sector.
Supporting the knowledge based and tech business sector
The Chancellor made a big play on supporting the knowledge based and tech business sector. The speech itself gave little detail as to how this would filter down – there was much talk of plans and consultations, and public-private partnerships, but little concrete detail. The increase in Enterprise Investment Scheme (‘EIS’ ) investment to £2m per person may be helpful, albeit only at the top end of investors.
National minimum wage
Businesses will have already planned for the increase in national minimum wage this spring, and this has been confirmed.
Change to the calculation of business rate increases
The welcome change to the calculation of business rate increases (to the lower Consumer Price Index rather than Retail Price Index) is good news. However, the increase in business rates will now happen every three years, rather than five.
Increase in Enterprise Investment Scheme limits for tech companies
The increase in EIS limits for tech companies is welcome; but there are restrictions on EIS where they are lower risk. The definition of risk is to be what is considered ‘reasonable’. This can only add to complexity.
Venture capital trusts, enterprise investment schemes and seed enterprise investment schemes will be required to focus more on companies where there is a real investment risk. The maximum an individual may invest under the EIS in a tax year will double to £2 million, where an amount of over £1 million is invested in one or more knowledge-intensive companies.
The annual investment limit for knowledge-intensive companies receiving investments under the EIS and from VCTs will double to £10m, but the lifetime limit will remain at £20m. Knowledge intensive companies will be allowed to use the date when their annual turnover first exceeds £200,000 of the date of first commercial sale. The changes will have an effect from April 2018, subject to state aid rules.
How to deal with off-payroll working
Further down the line, there will be a consultation on how to deal with ‘off-payroll working’ and how this will be extended to the private sector. This has been a big issue for the public sector, who are already dealing with these changes.
Taxation of employee business expenses
There will be several changes to the taxation of employee expenses. The government will consult on extending the scope of tax relief currently available to employees and the self-employed for work-related training costs. From April 2019, employers will not have to check receipts when reimbursing employees for subsistence using scale rates. HMRC will also improve the guidance on employee expenses, particularly on travel and subsistence and the process for claiming tax relief on non-reimbursed employment expenses.
The pension lifetime allowance will be increased from £1m to £1.03m from April 2018, with no change to the annual allowance.
Online marketplaces will become jointly and severally liable for any unpaid VAT from UK as well as overseas traders.
A consultation document will be published this year on how to make the taxation of trusts simpler, fairer and more transparent.
Research and Development
The rate of the tax credit for R & D expenditure rose from 11% to 12% from 1st January 2018. This is the large company scheme, not the more beneficial SME scheme which gives a greater relief.
Legislation effective from 2018/19 will ensure that partners are taxed in proportion to their accounting profit shares. It will also reform the partnership tax code, to reduce the scope for non-compliant taxpayers to avoid or delay paying tax.
The disincorporation relief introduced in 2013 for five years will not be extended beyond the 31st March 2018 expiry date. This has been hardly used, and will not be missed.
Disguised remuneration avoidance schemes will be countered by the introduction of the close companies’ gateway from April 2017. All employees and self-employed individuals who have received a disguised remuneration loan will be required to provide information to HMRC by 1st October 2019.
Taxation of non-resident companies’ UK property income and gains
Non-UK resident companies’ income from UK property will be chargeable to corporation tax rather than income tax from 6th April 2020. From the same date, gains that arise to non-resident companies on the disposal of UK property will be charged to corporation tax rather than Capital Gains Tax.
Whilst there weren’t many headline measures compared to previous years, it’s always interesting to look at the bigger numbers in the Treasury’s Red Book. Here we see how the Budget will actually impact into 2018 and beyond.
The abolition of indexation allowance (an allowance for inflation on cost for companies when they sell an asset) will save over £0.5bn pa.
The SDLT relief for first time buyers will cost a similar amount. If we say that the average SDLT for a first-time buyer would be say £5,000, this implies over 330,000 first time buyers each year. However, the Red Book thought that the relief would only encourage 3,500 new buyers to enter the market. The question is therefore whether it is cost effective.
The change for business rates increase to CPI from RPI will save businesses £0.5bn pa.
The really interesting one will be the National Productivity Investment Fund which will cost £7bn but only in 2022/23. If it’s that important, perhaps we should have it earlier…
You can contact Laurence Parry at firstname.lastname@example.org
T: 0330 124 1399.