The first budget of the new majority Conservative government was full of detail as ever some positive and some less so.
The first significant issue was in respect of Capital Gains Tax (CGT) where the change in the Entrepreneurs Relief lifetime allowance from £10 million to £1 million will impact on some deals in progress and reduce the incentives going forward. However, it must be borne in mind that this relief was from a 20% rate to a 10% rate, so it is more important that the headline CGT rates are unchanged.
There were changes in PAYE where the Employment Allowance was increased from £3,000 to £4,000 helping small employers. However, there was confirmation that HMR&C intend to make CIS repayments more difficult as they believe there is some abuse in this area. They strengthened this by protecting HMR&C rights in insolvency in respect of CIS amongst other taxes.
In terms of income and corporate taxes the main news is that the cut to a 17% corporation tax promised to compensate for increased dividend taxes was cancelled. This, therefore, confirms an increase in tax for all owners of small limited companies from the 2017 budget going forward. For larger technology companies there is the new Digital Services Tax from April 2020 for those with income over £25 million from online marketplaces or social media. There was a welcome change to the Tapered Annual Allowance for pension contributions where this moved the starting point from an income of £150,000 to £240,000. As the chancellor suggested this benefits senior NHS employees but there are clearly others who may be able to take advantage of this. Finally the increase of the NI limit to £9,500 means a monthly payroll of £792 will secure a qualifying year for NI purposes.
In terms of VAT the main announcement was the confirmation of the Domestic Reverse Charge for the construction industry from 1/10/2020. This was to have been introduced on 1/10/2019 but was delayed as HMR&C systems and contractors were not ready. This will have a dramatic impact on cash flow for some businesses and is likely to cause some businesses to fail.
Some other smaller announcements of note were as follows:
- Electric vehicle excise duties from April 2020 were reduced.
- The homeworking allowance was increased from £4 to £6 per week, still nothing like the actual costs incurred by home working.
- Stamp Duty Land Tax of an additional 2% for overseas buyers from April 2021 may cause some market fluctuations.
- Checks on taxi drivers licences to ensure they are registered for tax!
- 0% VAT on E-Publications from December.
- The IR35 changes scheduled for April 2020 were confirmed as a “smooth and successful implementation”. Anyone affected by this and seeing their work cancelled or moved abroad may take a different view.
The final point I would make is that the chancellor announced a very welcome review of the quality of tax advice given and whether more regulation was required in this area.
As ever the above is a summary of announcements not yet legislated for, so no action should be taken without first seeking clarification.