SMEs and the 2018 Budget: the UK200Group Verdict
Chancellor of the Exchequer Philip Hammond announced his 2018 Budget to Parliament on Monday 29th October; the wider implications of which are sure to impact upon SMEs across the UK. How do members of the UK200Group think those changes will affect the UK’s owner-managed businesses?
The UK200Group (http://www.uk200group.co.uk/) is the UK’s leading membership association of chartered accountancy and law firms, whose members act as trusted business advisers to over 150,000 SMEs. A number of the UK200Group’s members have given their initial views of the 2018 Budget’s impact on the SME community.
Paul Brown, Tax Partner Whittingham Riddell Accountants (https://www.whittinghamriddell.co.uk/) said;
“From a tax point of view there were a number of interesting changes. The Chancellor has delivered on his manifesto commitment to raisepersonal allowance to £12,500 one year earlier than planned – there were less than subtle hints about this over the course of the speech – the hard work of the British people is paying off (although that hard work still does not appear to be reflected in overall productivity…)
There are also detailed changes to the rules around private residence relief. Contrary to popular opinion if you sell your main residence it is not necessarily entirely tax free. There were though a number of generous reliefs to soften the blow – where for example you let the property or live away from it for a time. Some of these are now to be reduced from April 2020 – in particular “letting relief” which did apply if you lived away and let out your home will now only apply in the case of shared occupancy. Although not aimed squarely at the buy to let market it is another hit for private landlords, albeit only one they will feel when they eventually sell the property.
The annual round of speculation that Entrepreneur’s Relief would be abolished was, as it has been since time immemorial, somewhat off the mark. There are important changes to the relief though – in particular the qualifying period through which the conditions must be met will extend from 12 months to 2 years – presumably if you sell your business after 12 months you are not a “real” entrepreneur? This change kicks in from 6 April 2019.”
Ann Bibby, Tax Partner Ellacotts Accountants (https://www.ellacotts.co.uk/) said;
“Fiscal Phil does rule in the last budget before Brexit. I anticipated that he would be pre-occupied with that. However, it was refreshing to see him supporting business growth - with the increase in business tax reliefs encouraging investment and innovation.
Entrepreneurs’ Relief remains with more robust rules to prevent manipulation, which is encouraging for business owners. The acceleration of changes to personal allowances and Income Tax rates a year earlier than the manifesto date was also a welcome surprise.”
James Abbott, Director Abbott Moore Accountants (https://www.abbottmoore.co.uk/) said;
“The temporary reprieve from widening the public sector off-payroll rules to the private sector until April 2020 was welcome. I hope the Government will take this opportunity to consult, resolve the issues around its own CEST status tool and properly assess the likely economic impact of any changes.
There is far more to this than perceived additional tax take and simply widening existing rules when there are already significant flaws in operating the current system would be madness.”
Jim Meakin, Tax Partner and Head of Tax Armstrong Watson Accountants (https://www.armstrongwatson.co.uk/) said;
“The announcement of a two-year increase in the Annual Investment Allowance (from £200,000 a year to £1m) to provide tax relief to businesses investing in plant and equipment will be very welcome to many businesses.
Research and innovation is increasingly crucial to business survival and the Budget commitment to strengthen the UK’s research and development capability by increasing R&D investment to 2.4% of GDP by 2027 is most welcome. And, whilst in many regions internet capability is a problem and the announced goal of providing a nationwide full fibre network by 2033 is good news, perhaps it is also too far away if businesses are to compete on equal terms with better served regions.
Specifically, in the North of England, we welcome the announcement of a £29bn National Roads Fund, alongside which a programme of investment in strategic roads specifically includes the trans-Pennine A66 route which is crucial to access into and out of our region.
There is also good news for the less fortunate parts of our regions, with the announced initiatives to drive up the volume of new house building through planning reform and the Affordable Homes Programme, providing a welcome potential boost to our housing supply, but a concern that much more yet is needed to meet demands for affordable housing.”
Kevin Lloyd-James, Senior Tax Manager Dains Accountants (https://www.dains.com/) said;
“Anti-avoidance measures remain an important priority with an intention to raise £2bn over the next five years.
Changes to Entrepreneur’s Relief were announced but also in the detail a further amendment with immediate effect is that smaller shareholdings which do not qualify the holder for 5% of the company’s profits and net assets will not qualify for the relief. “
Lorraine Harnby, Tax Manager Straughans Accountants, Part of the Robson Laidler Group (https://www.straughans.co.uk/) said;
“This was the last Budget before Brexit therefore it perhaps came as no surprise to see an emphasis to promote business and trading in the UK. This came in the way of an increase in the Annual Investment Allowance from it’s current level of £200,000 to £1million for the next two years, which not only will come as a welcome tax relief for many businesses but also as a means to encourage spending. Business Rates will be cut for qualifying businesses. And finally ePassport gates will be introduced at some London airports to allow more efficient entry of citizens from outside of the EEA such as the USA and Canada.
The personal allowance will increase to £12,500 and the higher rate band to £50,000 one year ahead of schedule and will take effect from April 2019.
A new Digital Services Tax will be introduced but this will only apply to large online companies such as the likes of Google and Amazon.
It would appear that the majority of revenues will be raised from tackling tax avoidance. There will also be restrictions to certain reliefs such as the availability of Entrepreneur’s Relief, Research and Development Tax Credits and the Principle Private Residence Relief therefore it is more important than ever to take advice from your tax adviser before entering into transactions of this type. There will also be additional measures to tackle self-employed individuals working in the private sector.
The ‘Northern Powerhouse’ was mentioned again with investment of £337 million promised for the Tyne and Wear Metro, £123 million for the South Tees Development Corporation and a new devolution deal for the North. There were also promises of increased funding to the NHS with particular reference to mental health, which will undoubtably come as welcome news to the region although some may say it is not enough.
In other news there will be plans to deal with plastic waste, fuel duty remains frozen for the eighth year in a row and the duty on beer, cider (expect white cider) and spirits is also frozen.”
The UK200Group (http://www.uk200group.co.uk/) is an association of separate and independently owned and managed chartered accountancy firms and law firms. UK200Group does not provide client services and it does not accept responsibility or liability for the acts or omissions of its members. Likewise, the members of UK200Group are separate and independent legal entities, and as such each has no responsibility or liability for the acts or omissions of other members.
The UK200Group aims to present a wide variety of views from its member firms, but itself remains impartial and unbiased in political matters.
UK200Group Limited is a company registered in England & Wales. Company Number 10634903. Registered office; The Hart Shaw Building, Europa Link, Sheffield, S9 1XU.
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