Autumn Statement On 23rd November 2016 The Chancellor of the Exchequer, Philip Hammond delivered his plans to keep “Britain open for business”.
Whilst his announcement that the government will be scrapping the Autumn Statement with the introduction of a Spring Statement from 2018 generated some surprise, the list of policies outlined were less of a surprise to the UK’s business economy.
However, some of the proposals, including a £23bn National Productivity Fund and a £400m injection for VC funds, came as a welcome surprise to start ups and small business owners.
Here are some the key business policies announced:
1. Corporation Tax decrease – The chancellor confirmed that Corporation Tax (which currently sits at 20%) will fall to 17% by the end of this parliament, as per previous announcements from government.
2. National Living Wage increase – National Living Wage will increase to £7.50 an hour from April 2017, as previously announced.
3. Corporation Tax deduction for contributions to grassroots sport – As announced at Autumn Statement 2015 and following consultation, in Finance Bill 2017 the government will expand the circumstances in which companies can get Corporation Tax deductions for contributions to grassroots sports from 1 April 2017.
4. New 16.5% VAT flat rate for businesses with limited costs – Currently businesses determine which flat rate percentage to use by reference to their trade sector. From 1 April 2017, FRS businesses must also determine whether they meet the definition of a limited cost trader, which will be included in new legislation.
Businesses using the FRS will be expected to ensure that, for each accounting period, they use the appropriate flat rate percentage.
5. Personal allowance and higher rate threshold – The government will meet its commitment to raise the income tax personal allowance to £12,500 and the higher rate threshold to £50,000, by the end of this Parliament, thereafter it will be linked the consumer price index. Next year, the personal allowance will rise to £11,500 and the higher rate threshold to £45,000
6. Salary sacrifice – following consultation, the tax and employer National Insurance advantages of salary sacrifice schemes will be removed from April 2017, except for arrangements relating to pensions (including advice), childcare, Cycle to Work and ultra-low emission cars.
Arrangements in place before April 2017 will be protected until April 2018, and arrangements for cars, accommodation and school fees will be protected until April 2021.
7. £400m injection to help start ups become scale ups – the government has committed via the British Business Bank, to invest in small businesses with the potential for growth. The intent being to encourage more start-ups to scale rather than exiting into a large firm.
8. Supporting management skills for businesses – By providing £13m to help businesses improve their management skills, the government is going to implement Sir Charlie Mayfields review of business productivity.
9. National Productivity Investment Fund – The government will be launching a £23bn National Productivity Investment Fund (NPIF) to provide major additional spending to specific areas to boost productivity: transport, digital communications, research and development (R&D), and housing.
10. The National Productivity Investment Fund includes ‘major’ investment into UK transport infrastructure – As part of this fund the government will be providing £1.1bn funding to upgrade local roads and public transport, £27m to develop an expressway connecting Oxford and Cambridge and £220m funding to address road safety.
There will be a benefit of a two year 100% first year allowance for companies that install electric vehicle charge points. This allows companies to deduct the cost of the charge-point from their pre-tax profits in that year.
11. £2bn additional investment per year in Research & Development – The government is geared to invest £2bn more per year 2020 – 2021 in innovative research in order to help the UK “remain an attractive place to do business”. This funding will go towards R&D of science and technology such as robotics and artificial intelligence (AI).
12.£1bn investment in full-fibre broadband and 5G trials – This will be used to roll-out more full-fibre broadband by 2020-2021 and will also trial 5G mobile communications. Additionally, from April 2017, the government will provide 100% business rates relief for new full-fibre infrastructure for a five year period.
13. Doubling UK export finance capacity – To make it easier for British businesses to export, the government will provide additional support through UK Export finance (UKEF) to ensure that no viable UK export should fail for lack of finance or insurance from the private sector.
14. Fuel duty – in 2017, fuel duty will remain frozen for a seventh consecutive year. This current fuel duty freeze is the longest for 40 years.
15. Support to Local Enterprise Partnerships (LEPs) – The government will award £1.8bn to Local Enterprise Partnerships (LEPs) across England through a third round of Growth Deals. £556m of this will go to the North of England, £392m to LEPs in the Midlands, £151m to the East of England, £492m to London and the South East, and £191m to the South West. Awards to individual LEPs will be announced in the coming months.
This is a brief summary of some of the key points of this year’s autumn statement announcement however, it should not form the sole basis of business or investment decisions without consideration of the specific circumstances of the individual and the business.
Understanding the specifics of these changes is a conversation worth having with a trusted advisor to maximise the efficiency of your business and financial planning for the years ahead.
A good accountant will be happy to explain the pros and cons of government 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 government policies.
We make it our policy to work with our clients to ensure best practice use of business structures to ensure they are operating in most financially efficient way, now and in the future. By ensuring our clients are confident and informed about their financial business structure, we know this enables them to concentrate on building their business and growing their finances.
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