Business Services • Business Tax
Basis period reform is a significant change to the way the trading profits of sole traders, partners...
By RJP LLP on 16 May, 2024
Budget stuff • Business Services • Business Tax • HMRC • Personal tax • Small Business
Was this the dinkiest budget ever? Short in length and even shorter on policy
By RJP LLP on 13 March 2018
Philip Hammond certainly had a spring in his step when he delivered his first ever #SpringStatement today. That could be to divert attention from the fact that there was very little new announced in the way of tax policies. In spite of hints given during the Autumn Budget 2017, there were no announcements about reforms to inheritance tax or trusts.
However, thirteen different consultation documents were released, including ones on corporate tax rates and the digital economy (aimed at multinationals and tech companies), cash and digital payments in the new economy (to investigate possible money laundering of cashless payments) and a VAT policy review. There will also be an investigation into how to help the least productive businesses catch up with the most productive and how to eliminate late payments to small businesses and help them improve cashflow.
Overall, perhaps the most revolutionary thing about it all was its length – just 15 minutes - whereas previous equivalent Autumn Statements given by other Chancellors have been up to 1 hour long!
During his time on air, Hammond gave us some reassuring statistics, declaring that the UK economy has been growing more strongly since 2010 than a lot of other European countries including Germany, and he expects the inflation rate to reduce back to a much healthier 2% before long. He also said the economy was on track and exactly where he had anticipated it should be, following the Autumn Budget in November 2017.
In terms of developments that will be of interest from a tax and business perspective, these were the main ones.
Opening of a new VAT consultation
In the Autumn Budget 2017, the Chancellor acknowledged that the UK has by far the highest VAT registration threshold in the OECD at £85,000 and was concerned about the rate. Although he stressed that the high threshold has the benefit of keeping the majority of UK businesses out of VAT altogether, he announced an intention to explore the issue further. Today a new consultation was launched to identify 1) whether the threshold might currently affect business growth; 2) examine in detail the burdens created by the VAT regime at the point of registration and why a business might manage turnover to avoid registering; 3) investigate how best to charge VAT on online sales; and 4) consider suitable future policy solutions, based on international and domestic examples. The new VAT consultation will be open until June 2018 and in the meantime, the registration threshold has been frozen at £85,000, for 2 years from April 2018.
£80m investment to support apprenticeship levy
Getting young people into training and work is a huge priority and tens of millions has been pledged to encourage small businesses to take on apprentices. The government has ambitious targets to achieve their ‘three million apprenticeship starts by 2020’ but in recognition of the practical difficulties this will create for business owners, up to £80m in new funding has been to support SMEs who engage an apprentice.
The exact details of how this extra funding will be used is not yet available, we will be reporting on how this will benefit business owners in the future. In addition to the £80m, a further £50m is being made available for employers to take on the first round of graduates from the new T Levels being implemented from next month.
Increases to wages and the personal allowance from April 2018
The National Living Wage will rise from April 2018 to £7.83, giving a full-time employee an extra £600 a year. National minimum wage rates for under 25s and apprentices will also increase and over 2 million people are expected to benefit from these changes, which represent the highest wage increases for young people in over 10 years.
In addition, the tax-free personal allowance will rise for every taxpayer from April 2018 to £11,850. This means that in 2018 to 2019, a typical taxpayer will pay £1,075 less income tax than in 2010 to 2011.
Review of small business rate revaulations
The increases to small business rates is a huge current issue for many local business owners and a big factor behind our empty high street properties. Today, Philip Hammond brought forward the next business rates revaluation by a year to 2021, after which three-yearly reviews will take effect. The aim in reducing the review cycle from five to three years is to help businesses by “making bills more accurately reflect the current rental value of properties”.
Finally, at the end of his speech, the Chancellor hinted that provided things were still on track by the time of the Autumn Budget, he will be in the market to announce some more significant giveaways in the form of public spending initiatives. Perhaps there will also be some further tax breaks available for business owners too? Only time will tell.
