Insights

The Budget will take place on 29^th October, earlier than usual due to the final Brexit negotiations taking place in November.  There are a number of important changes expected that will impact readers.

Here are the most likely, based on our research:

VAT changes to support retailers?

There have been rumours circulating that the VAT registration threshold is going to change. We’re not sure about that, but it is quite possible that an new rate of VAT will be introduced to help traditional high street retailers compete more equally with e-commerce companies.  There are suggestions that the main rate will be reduced to 15% for ‘bricks and mortar’ retailers and e-commerce specialists will have to pay VAT at a higher rate of 22.5%.

A further drop to corporation tax?

Both George Osborne and Philip Hammond have previously declared their desires to see the UK become ‘the best place in the world to launch a business’. Although there is still a lot of uncertainty over Brexit, it is unlikely there will be any change to existing plans to maintain the small companies’ rate of corporation tax at 19%. However, the final proposed tax cut to 17% from 2020 may not ultimately go ahead due to the perceived impact this will have on Treasury revenues.

MTD for VAT – will he or won’t he?

We were expecting MTD (Making Tax Digital) to be introduced for VAT this year and then it was postponed until April 2019. The Chancellor is expected to definitively decide whether MTD for VAT will indeed go ahead as planned in this month’s Budget. If it does go ahead, business owners will need to respond quickly to ensure they can meet the deadlines. Any businesses wanting an exemption from MTD for VAT will need to wait until at least January 2019 to apply.

Restrictions to entrepreneurs’ relief?

The requirements to hold a 5% shareholding to access ER (entrepreneurs’ relief) were relaxed to enable companies issuing additional shares to maintain their eligibility to the lower 10% rate of capital gains tax on gains from selling company shares.  There are now a few rumours circulating that the relief available through ER will be restricted in the Budget. We think this is unlikely due to all the uncertainty over Brexit and the government’s interest in making the UK a desirable location for entrepreneurs, but you never know!

New IR35 rules for private sector?

This change is probably one of the most likely announcements and will affect consultants operating through a limited company with private sector clients. Just like their public sector counterparts, the organisations who engage contractors will be required to comply with the ‘off payroll working rules’ whereby they will have to decide whether they should actually be on the payroll and if so, deduct the appropriate taxes at source. This moves the responsibility for the tax deduction from the contractor to the contracting company, making it easier for HMRC to monitor and pursue.

Plastics taxes to protect sea life

It is very unlikely we will see any real tax cuts coming from this Budget because Brexit is costing the government a lot of money. One additional tax we can probably expect will be a levy to control single use plastics due to the impact of plastics pollution on the environment – especially oceans and sea life. The current 5p for a plastic bag may be increased to 10p and it is possible that further charges will follow, for instance on disposable cups and other items.

What else?

Other policies being mooted include:

• A new ‘good landlord’ tax break, whereby landlords that sell property to existing tenants receive tax relief on the transaction to increase property ownership among first time buyers. This was reported in the Guardian.
• Scrapping the existing grants available for purchasing a new electric car. Currently, consumers can get a £4,500 discount when they buy a ‘plug in’ electric vehicle, but there are suggestions the value will be restricted, making it less worthwhile and the grant ultimately withdrawn. The government denies this so we will just have to wait and see – just like all these policies really.

We will be following the Autumn Budget 2018 on 29^th October and issuing a special Livewire email on that day with all the news and implications for readers.