A mixed bag for business….Businesses investing in plant and machinery will be pleased that the Annual Investment Allowance has been increased from £200k to £1m pa for expenditure incurred from January 2019 for a 2 year period. This potentially gives additional tax savings of almost £220k (or £266k for spending on certain fixtures) over the 2 years by accelerating the allowances available.
Spending on new commercial structures and buildings will qualify for a new 2% annual allowance, for contracts entered into after 29 October. However the rate for long life assets and certain building fixtures has been reduced by 2% to 6% from next April.
The compliance burden for medium and large businesses continues as the “off payroll working” rules which apply in the public sector, will be rolled out to the private sector from April 2020. The onus will now be on businesses to decide whether the rules apply to any individuals who work through their own company. With businesses required to pay employer NICs, as well as deducting income tax and employee NICs from any payments to the worker’s company, the cost of incorrect categorisation is potentially eye watering. This change is significant and is expected to give rise to a number of complications. Unsurprisingly, the full detail of the rules will be subject to further consultation.
Good news for (most) Entrepreneurs
Following speculation that Entrepreneurs’ Relief would be abolished, it is welcome to see the Chancellor acknowledge the importance of this popular relief which is worth up to £1m to business owners, albeit the minimum ownership period has doubled to two years. There was a sting in the tail for certain companies which utilise ‘growth shares’ and other more complex shareholding arrangements. New measures introduced with immediate effect will now restrict this relief where the minimum shareholding of 5% does not also entitle the owner to at least 5% of the distributable profits and net assets.
Growing divide between Scottish and UK income taxpayers?…
Previous commitments by the UK Government to raise the Personal Allowance to £12,500 and Basic Rate Limit to £37,500 are to being implemented one year early. From 6 April, the higher rate tax threshold will rise from £46,350 to £50,000, resulting in an annual income tax reduction of up to £860 per year for those south of the border. With income tax on earnings, pensions and property being a devolved to Scotland, where the higher rate tax threshold is currently far lower at £43,430, we must await the Scottish Budget on 13 December to complete the picture for Scottish taxpayers.
And finally Technology…
The announcement of a targeted relief for the cost of acquiring IP-rich companies being introduced in an effort to stimulate investment in business should be good news for Tech Start Ups. However in contrast, the Technology giants did not escape the Chancellor’s attention and will be forced to pay tax on the sales they generate in the UK from April 2020.
Further detail on the above and all other key tax changes affecting individuals and businesses as announced in the Chancellor's speech yesterday can be found in our Budget Summary which you can download here.
For more information, contact Kevin Meaney, Tax Partner (email@example.com) or your usual AAB contact.