Today the Chancellor announced that the “Era of austerity is finally coming to an end”. History will be the judge of that statement but for business, this Budget had several interesting and important announcements. Below we have summarised the ones most relevant to entrepreneurs and business owners.
1.Entrepreneurs Relief – the period for which the 5% minimum shareholding requirement must be met has been increased from 1 to 2 years, for share disposals after 6th April 2019. Also for disposals from today, the minimum shareholding of 5% will apply not only to the amount of share capital held and the voting rights but also to the entitlement to distributable profits and net assets of the company.
2.Corporation Tax Rate – the Chancellor confirmed that the corporation tax rate will remain at 19% for the year to 31 March 2020 and will then fall to 17% thereafter.
3.Capital Allowances for buildings- a new allowance will be available for expenditure incurred on contracts for physical construction works on new non residential structures and buildings entered into on or after today. The rate of allowances will be 2% on a straight line basis. This allowance will be paid for by reducing the allowance on the plant and machinery special rate pool from 8% to 6%.
4.Annual Investment Allowances – there will be a two year increase in the annual investment allowance from £200,000 to £1,000,000 from 1 January 2019.
5.R&D Tax Relief for SME’s – there will be a restriction on the amount of payable R&D tax credits for SMEs, which will cap the amount payable to 3 times the company’s PAYE & NIC liability for the year. This will take effect from 1 April 2020 and is aimed at tackling fraudulent claims.
6.Intangible fixed asset regime – two changes for the price of one here. Firstly the government will introduce tax relief for the purchase of goodwill in the acquisition of businesses with eligible intellectual property (which partly reverses the denial of relief for goodwill introduced in July 2015). Secondly, there will be a reform to the de-grouping rules for intangibles so that they will be better aligned to the de-grouping rules for capital gains purposes. This should make the demerger of groups with several trades easier to achieve.
7.HMRC to become a preferred creditor – From 6th April 2020, HMRC will be a preferred creditor in respect of taxes collected by businesses on behalf of other tax payers, including PAYE, employees national insurance and VAT. HMRC will remain an un-preferred creditor in respect of taxes owed by the insolvent business such as corporation tax and employers national insurance.
8.Corporate Capital Loss Restriction – from 1 April 2020, companies will only be able to relieve 50% of their capital gains with brought forward capital losses. There will be a £5m de-minimis level that will apply in respect of all brought forward losses (capital and income) before the restriction will apply.
9.VAT Grouping extension – during 2019, certain non corporate entities (e.g. partnerships or individuals) will be permitted to join VAT groups with body corporate subsidiaries if they control all the members in the VAT group.
10.Off payroll working in the private sector – from April 2020 there will be changes to the IR35 rules that deal with ‘off payroll workers’ (similar to the changes introduced last year to the public sector), which will put the responsibility for operating PAYE/NIC on the paying organisation rather than on the worker or their company.
11.Employment allowance changes – from April 2020 the Employment Allowance of £3,000 will be restricted to employers with an employer NIC liability of less than £100,000 in the previous tax year.
There were several other measures of note such as; the increased personal allowance to £12,500 and the higher rate threshold to £50,000; the introduction of a new Digital Services Tax (which will be of limited interest to NI companies as the group global revenue threshold is to be set at £500m!); the increase in the SDLT exemption for first time buyers of shared ownership property to £500k; and a reduction on the capital gains private residence relief final period of ownership exemption to 9 months.
The Chancellor did caveat his statement that in the event of a ‘no deal’ Brexit, he may have to come back to Parliament with a further Budget in the Spring. Whether he does or not or indeed whether it is Mr Hammond who delivers such a Budget statement, we can only wait and see how events turn out over the forthcoming months.