600,000 small businesses will pay no business rates at all from next year, as the threshold for small business rate relief increases from £6,000 to £15,000.
This will come as a welcome relief for some – e.g. smaller high street retailers who’ve been struggling to survive against online competition.
BUT, the plan is to make bigger businesses pay for this, attacking practices commonly used by them to reduce taxable profits (and thereby pay less corporation tax) such as:
- Offsetting debt interest payments against profits. (This is to be capped to 30% of earnings from April 2017); and
- Carrying forward past losses to offset against profits. (The set off of carried-forward losses will be restricted to 50% of a company’s profits that exceed £5 million from 1 April 2017).
Free ride? ~ There’s no increase in fuel duty (the Green’s won’t be happy but lots of businesses will). The main rate of corporation tax for non-ring fenced profits is to be cut to 17% for the FY commencing 1 April 2020.
There’s also talk of reforming the tax treatment of corporation tax losses arising from 1 April 2017 (allowing these to be carried forward and set against profits from other income streams within the same company, or against the profits of other group companies).
There’s more talk of “pay-as-you-go” tax bills ~ and more about taxation going digital. There are plans (again, aren’t there ever?) to crack down on tax avoidance by, e.g.: looking at whether promoters of tax avoidance schemes could be directly on the hook; tightening up off- shore rules; and tackling avoidance in the “hidden economy” (and, in case you were wondering, that’s not some Narnia-like alternative universe, it’s “income earned from the sale of goods or services which haven’t been declared for tax purposes”, i.e. cash-in-hand-land).
At a personal level:
- There’s another planned increase in the personal allowance. The plan is to increase it to £11,500 in April 2017, with a target of £12,500 by 2020.
- The 40p tax threshold will increase to £45k from April 2017.
- The top rate of Capitals Gains Tax will be cut from 28% to 20% from April 2016 and the basic rate of CGT will reduce from 18% to 10%, both with effect for disposals on or after 6 April 2016.
- Entrepreneurs’ relief is to be extended to longer term investors in unlisted companies.
- There’ll be efforts to stop individuals disguising their income as loans.
- There’ll also be a personal savings allowance (PSA) of £1,000 for basic rate taxpayers and £500 for higher rate taxpayers from 6 April 2016 AND a new Lifetime ISA (to save for a first home or for retirement) for adults under 40.
In the employment/HR arena:
- Government is unhappy with the current mess re termination payments. It plans to tighten the exemption so there’s less scope for employers/ees to argue that parts of a termination payment (such as notices and bonuses) aren’t taxable. From April 2018, employer National Insurance Contributions (NICs) will be due on those payments above £30,000 that are subject to income tax, BUT, the first £30,000 of a termination payment will remain exempt from income tax and the full payment will be outside the scope of employee
- Re share schemes: The technical changes announced in the 2015 Autumn Statement and Spending Review have been confirmed and there are additional measures too.
- The apprenticeship levy is still on and set to be introduced from April 2017. Employers will receive a government payment (equal to 10% of their monthly apprenticeship levy contributions) to spend on apprenticeship training.
- Legislation will clarify the application of the “fair bargain principle” in respect of those benefits in kind to which the principle applies. There’ll also be changes to company car tax rates and van benefits.
- Tax-free childcare will launch in early 2017 but existing schemes will remain open until April 2018 and there’ll be a consultation in May 2016 on extending Shared Parental Leave and Pay to working grandparents.
- There are rumblings about limiting the benefits that attract tax and NICs advantages when provided as part of a salary sacrifice arrangement.
- The removal of tax relief on home-to-work travel and subsistence (T&S) re intermediaries, which we’ve spoken so much about, will go ahead as planned (but, the rules on general – i.e. no intermediary – T&S will stay the same).
- From 6 April 2017, public sector employers contracting with personal service companies (PSCs) for the supply of workers will have to consider the nature of the engagement and, where applicable, deduct employee tax and NICs from the payments they make to the PSC. The public sector body will also be responsible for the employer’s NIC in place of the PSC. (IR35 and the Intermediaries legislation will continue to apply in the private sector).
- Class 2 NICs will be abolished with effect from 6 April 2018. Details of how the self- employed will access contributory benefits when this happens will be revealed by the Government in due course.
- From April 2017, employers will be denied the NICs employment allowance for a period of one year if they’re subject to a civil penalty for employing illegal workers.
In terms of commercial property, two of the biggest items are the changes to business rates (see above) and the stamp duty land tax (SDLT) changes. In respect of the latter, with effect from 17 March 2016 (subject to transitional rules), the SDLT structure for sales of and grants of leases in, non-residential and mixed property has changed, with increased charges for higher value transactions.
The SDLT changes have a plus-side too: we recalculated anticipated SDLT on 3 ongoing commercial property transactions yesterday and the result was an overall £11,500 saving compared to the pre-budget calculation.
The Powerhouse gets another boost, with HS3 between Manchester and Leeds and a focus on Northern schools. So, as usual, what’s in store from Budget 2016 depends on who you are and what you do.
The only thing certain across the board, is that if you prefer your soft drinks with plenty of added sugar, now’s the time to buy!
By Simon Whitehead, Partner at HRC Law
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