The Budget contained few tax surprises, but the proposals are a serious attempt to ward off recession and mitigate the effects of coronavirus through increased spending.
Proposals include full Statutory Sick Pay reimbursement for small employers, a relaxation of the benefits system to help the self-employed, and a government loan guarantee scheme to help banks support small business.
Eligible retail, leisure or hospitality businesses with a rateable value below £51,000 will pay no business rates for the next financial year.
The spending will largely be met via increased borrowing, not higher taxes.
If you would like further advice about any of the Budget proposals, please get in touch with your usual Corrigan contact.
Main tax proposals
Probably the standout tax proposal is one which will only affect a handful of companies. A digital services tax of 2% will be charged on large companies, not resident in the UK, on the revenues derived from users here. This had been proposed in the past but had not been expected to happen because the US have made their disapproval very clear. And we do need to negotiate a trade agreement with them imminently.
The charge will apply to businesses that provide a social media platform, search engine or an online marketplace. Step forward Facebook, Google, Amazon and eBay.
The charge is expected to raise £275m next year.
The main proposals for business tax were as follows:
Capital Gains Tax
The lifetime allowance for capital gains tax entrepreneurs’ relief is reduced from £10m to £1m – there had been suggestions that ER would be abolished altogether.
Research and development
The R&D expenditure credit for large companies is increased from 12% to 13%
The PAYE employers’ allowance is increased from £3,000 to £4,000
The Buildings and Structures Allowance – which provides capital allowances on commercial property costs that would not previously have qualified for any tax relief – is increased to 3% per annum from 2%. This may still sound pretty paltry but it is actually a useful allowance – the qualifying expenditure can be substantial.
The 100% capital allowances for zero emission cars is extended until April 2025
As expected, the main rate will remain at 19% and the previously announced reduction to 17% will not happen.
The proposals of the independent review into the tax charge on company owners who entered into tax avoidance schemes based on employee loans – in many cases misled by promotors – will be implemented.
Personal tax proposals include the following.
The annual story that higher rate pension tax relief was going to be attacked always sounded at odds with previous commitments to help high earning medics who were being taxed on their contributions when working extra shifts.
Instead, the system is left unchanged except that the earnings threshold at which relief is restricted is raised from £110,000 to £200,000.
The minimum tapered annual allowance will reduce from £10,000 to £4,000.
Capital Gains Tax
The annual exempt amount will be £12,300. Rumours that this would be substantially reduced proved unfounded.
Benefits in kind for vans and private fuel
These will be increased in line with CPI. The scale benefit and private fuel charge for vans will be £3,490 and £666 respectively. The car fuel multiplier will be £24,500.
Top slicing for life assurance gains
The rules for calculating top slicing relief (broadly, to avoid charging income tax on a gain accumulated over several years as if it arose in a single year, pushing the investor into a higher tax bracket) will be changed – a technical adjustment designed to give a fairer result.
Enhanced capital allowances for enterprise zones
These will be retained until at least 2021.