This week Chancellor Philip Hammond set out changes to the government’s taxation income and expenditure in his Budget, many of which will have an impact on the way the UK’s small businesses operate in the future.
The Chancellor’s Budget this year seems to be something of a mixed bag. The big-ticket items are fairly widely-expected – the public-sector IR35 and the Digital Service Tax have been heavily rumoured, and no doubt will continue to be quite controversial. But we also have a range of other little bits and pieces: some helpful, some less so.
For personal tax the obvious thing is the increased personal allowance and higher-rate threshold, but the slightly worrying news is on CGT PPR. This is yet to be consulted on but based on the announcement would seem to make lettings relief almost useless and this could have a nasty impact on a lot of small landlords.
There are some investment incentives on the business side. AIA going up to £1 million is interesting: this won’t affect many businesses, but I suspect that the medium-sized ones who do benefit from it will be very happy. The Structures and Buildings Allowance (SBA) is clearly a re-badged Industrial Buildings Allowance (IBA). It only applies to new buildings but getting tax relief for commercial property fills a conceptual hole in the capital allowances regime and so must be welcome.
On the other hand, the SBA is only at 2%, not the 4% that IBAs were at, and the reduction in special-rate pool allowances is very disappointing. Although we are in theory not getting tax relief for a lot of investment, the present value of these 2% and 6% allowances is pretty low. Still, a deferred tax credit looks nice even if it doesn’t help much with cashflow.
Then we have some other tinkering with anti-avoidance and tightening up of rules. Reintroducing a PAYE cap on SME R&D tax credits is going to be a bit of a blow for staff-light start-ups, for example, although denying Employment Allowance is unlikely to annoy larger companies much. A general theme is to allow more reliefs to smaller businesses, which seems to be becoming more common as a policy these days.
All in all, I get the impression that no-one at HMRC or the Treasury wants to introduce major new tax measures, and so a number of smaller ideas that have been bubbling away in the background are being wheeled out to have their day. The increased complexity this will lead to is regrettable, but I suppose it could have been worse: at least pensions tax relief hasn’t been broken the way that mortgage interest was.
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