Budget 2017 – On the 22nd November the Chancellor of the exchequer, Philip Hammond, announced the Autumn Budget 2017 and outlined his plan for the future of Britain.
In comments released ahead of the speech, Mr Hammond strikes an upbeat tone, saying he will use the Autumn Budget 2017 to ‘look forwards, embrace change, meet our challenges head on and seize the opportunities for Britain’.
The chancellor pointed out that, ‘this Conservative Government listens to and supports small businesses.’ With that in mind, here is a summary of the key points of the Autumn Budget 2017 for businesses owners of all sizes:
• The annual investment allowance will remain at £200,000 for 2018/19 and 2019/20. The main rate and special rate writing down allowance on plant and machinery will be 18% and 8%, respectively.
• The 100% first-year allowance for businesses purchasing zero-emission goods vehicles or gas refuelling equipment will be extended for a further 3 years.
• For zero-emissions goods vehicles, the scheme will end on 31 March 2021 for corporation tax and 5 April 2021 for income tax.
• For gas refuelling equipment, the scheme will end on 31 March 2021 for both corporation tax and income tax.
• The list of technologies and products covered by the energy saving first-year allowances has been updated. It adds 3 new products, which include evaporative air coolers, saturated steam to electricity conversions and white LED lighting modules to the list. The measure also modifies 9 and removes 2 items from the list.
• The scheme allows 100% of the cost of an investment in qualifying plant and machinery to be written off against the taxable income of the period in which the investment was made
R&D EXPENDITURE CREDIT INCREASE
• From 1 January 2018, the rate of tax relief available to companies that carry out qualifying R&D and claim the research and development expenditure credit (RDEC) will increase from 11% to 12%.
• The RDEC is a standalone and above the line credit that is brought into account as a receipt in calculating profits, which allows companies to claim an enhanced corporation tax deduction or payable credit on their R&D costs.
COMPANY VAN BENEFIT AND FUEL BENEFIT CHARGE INCREASE
• From 6 April 2018, the van benefit charge will increase from £3,230 to £3,350 and the van fuel benefit charge will increase from £610 to £633.
COMPANY CAR FUEL BENEFIT AND COMPANY CAR DIESEL SUPPLEMENT
• Employees provided with fuel for private mileage in a company car will see the value of the multiplier used for calculating the cash equivalent of the fuel benefit increase from £22,600 to £23,400. This measure will apply on and after 6 April 2018
• The diesel supplement used to calculate the company car benefit and company car fuel benefit will increase from 3% to 4% for all diesels cars registered on or after 1 January 1998 that do not meet real driving emissions step two standards.
• The maximum appropriate percentage applied for cars, including any diesel supplement, will remain at 37%.
ANNUAL TAX ON ENVELOPED DWELLINGS INCREASE
• The annual chargeable amounts for the annual tax on enveloped dwellings (ATED) will increase in line with inflation for the 2018/19 chargeable period, which begins on 1 April 2018.
• The increase will see the annual chargeable amount for a property with a value in the range of £500,001 to £1m rise from £3,500 a year to £3,600 a year.
CORPORATION TAX RATE REMAINS
• The main rate of corporation tax will remain at 19% from 1 April 2018.
REMOVAL OF CAPITAL GAINS INDEXATION ALLOWANCE FOR COMPANIES
• For a capital gain made on or after 1 January 2018, the indexation allowance which is applied in order to determine the amount of the chargeable gain will only be calculated up to December 2017.
• This change means that for disposals made after this date, the indexation will no longer be calculated up to the month in which the disposal of the asset occurs
AMENDMENTS TO CORPORATE INTEREST RESTRICTION RULES
• The corporate interest restriction rules for large companies which incur net interest expense and other financing costs above £2m a year will be amended.
• A number of technical changes will be made, with some having effect from 1 April 2017 when the corporate interest relief restriction rules commenced. The remainder will have effect from 1 January 2018.
• Some of these measures include amendments to:
the calculation of group-EBITDA to align the treatment of R&D expenditure credits with the approach taken in the calculation of the tax-EBITDA
the infrastructure rules to ensure insignificant amounts of non-taxable income do not affect their operation
the definition of a group to align it with accounting standards and to ensure asset managers do not cause unrelated businesses to be grouped together.
Double taxation relief and permanent establishment losses
Legislation will be introduced to restrict the amount of credit allowed or deduction given for foreign tax where the company has received relief for losses against non-permanent establishment profits in the foreign jurisdiction.
• The purpose of the policy is to ensure that relief for foreign tax is only given where profits have been taxed both in the UK and the foreign jurisdiction.
• The measure will have effect for accounting periods ended on or after 22 November 2017 with a transitional rule applying for accounting periods that straddle 22 November 2017.
PARTNERSHIP TAXATION: PROPOSALS TO CLARIFY TAX TREATMENT
• To provide more clarity over aspects of the taxation of partnerships, a number of measures have been proposed in consultation.
IR35 REGULATIONS FOR PERSONAL SERVICE COMPANIES
• The purpose of the legislation is to ensure individuals who effectively work as employees, but structure their work through a company, are taxed as employees.
• There is to be a consultation that will explore the possibility of extending the recent public sector reforms to the private sector.
ELECTRIC CARS EMPLOYER TAX EXEMPTION
• Employer-provided electricity at workplace charging points for electric and hybrid cars owned by employees will be exempt from being taxed as a benefit in kind from April 2018
• From 6 April 2018, the government will allow employees on maternity and parental leave to take a pause of up to 12 months from saving into their save-as-you-earn employee share scheme, which is an increase from the current limit of 6 months.
• With effect from April 2019, employers will no longer be required to check receipts when making payments to employees for subsistence using benchmark scale rates.
• Employers will still be required to ensure employees are undertaking qualifying business travel.
BUSINESS RATES MAJOR REFORMS WORTH £9BN
• bringing forward the planned switch in indexation from RPI to CPI to 1 April 2018
• continuing the £1,000 business rate discount for public houses with a rateable value of up to £100,000, subject to state aid limits for businesses with multiple properties, for 1 year from 1 April 2018
• legislating retrospectively to address the so-called ‘staircase tax’ to enable affected businesses to ask the Valuation Office Agency to recalculate valuations so bills are based on previous practice backdated to April 2010
• moving to revaluations every 3 years following the next revaluation, which is currently due in 2022.
INCOME TAX ON ROYALTIES
• Income tax to be applied from April 2019 on digital economy royalties relating to UK sales which are paid to a low-tax jurisdiction.
• The National Productivity Investment Fund will be extended for a further year with total funding increased to £31bn.
• There will be an additional £23bn for investment in R&D.
REGULATORS’ PIONEER FUND
• Plan to unlock £20bn for new investment in UK scale-up businesses, through: new fund in the British Business Bank, seeded with £2.5bn of public money facilitating pension fund access to long-term investments and doubling EIS investment limits for knowledge intensive companies from £1m to £2m.
TAX FREE PERSONAL ALLOWANCE
• The tax-free personal allowance will increase from £11,500 to £11,850 from 6 April 2018.
HIGHER RATE THRESHOLD
• The basic rate threshold will increase from £33,500 to £34,500 as of 6 April 2018. This means for most people the higher rate threshold will increase to £46,350.
• Different thresholds may apply in Scotland.
CAPITAL GAINS TAX
• The capital gains tax (CGT) annual allowance will increase from £11,300 to £11,700 for individuals and from £5,650 to £5,850 for most trustees of a settlement from 6 April 2018.
• The government’s intention to introduce a 30-day payment window for CGT payments due on the disposal of residential property will be deferred until April 2020.
• With effect from 22 November 2017, the transitional provision which excluded sums of carried interest arising after 8 July 2015 and in connection with the disposal of a partnership will be removed, irrespective of any connection with disposals made prior to 22 October 2015. This means asset managers will pay CGT on their full economic gain.
NATIONAL INSURANCE CONTRIBUTIONS
• The implementation of the proposed reforms to the national insurance contributions (NICs) system, to include the abolition of class 2 NICs, will be delayed by a year and will now take effect from April 2019.
• As previously announced, the proposal to increase class 4 NICs from 9% to 10% in April 2018 and then to 11% in 2019 will no longer proceed.
NATIONAL MINIMUM WAGE RATE INREASE TO:
• apprentices: £3.70 per hour
• 16 and 17-year-olds: £4.20 per hour
• 18 to 20-year-olds: £5.90 per hour
• 21 to 24-year-olds: £7.38 per hour.
MILEAGE RATES FOR LANDLORDS
• Landlords running unincorporated property businesses made up of only individuals will be able to use mileage rates to calculate a deduction for motoring expenses from 6 April 2017.
• Previously, landlords could only technically claim a deduction for actual motoring expenses incurred and capital allowances for the cost of the vehicle.
The above is intended only as a brief summary of the key Budget announcements and should not be taken as tax advice.
A good Accountant will be happy to explain the pros and cons of Government tax policy announcements and changes and how they affect you and your business. Here at Keen Dicey Grover our door is always open to talk you through the complexities of tax, allowances and related Government policies.
Our policy is to work closely with our clients to ensure best practice use of business structures to ensure they are operating in the most financially efficient way, now and in the future. By ensuring our clients are confident and informed about their financial business structure, we allow them to concentrate on the key activities of growing their businesses and their finances.
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