Chancellor Philip Hammond today (22 November) announced his first Autumn Budget in which he focused on Britain’s long-term economic future after revealing significant downgrades to the growth forecasts for the UK economy by 2022.
He said he was investing to “build an economy fit for the future” as he announced over £20bn of new investment in UK scale-up businesses, a new £1.7bn Transforming Cities Fund, and a £400m electric car charging infrastructure fund.
He pledged to allocate funds to ease the UK’s housing crisis and scrapped stamp duty for all first time buyers on purchases up to £300,000.
Mitchell Charlesworth have provided initial commentary below with a further in-depth analysis to follow shortly (click for further information):
Mileage rates for landlords
Legislation will be introduced to give property businesses the option to use a fixed rate deduction for every mile travelled by car, motorcycle etc for business journeys. This will be as an alternative to claims for capital allowances and deductions for actual expenses incurred such as fuel. This brings the method into line with trading businesses.
Venture capital schemes: risk to capital condition
Legislation will be introduced to ensure that venture capital schemes such as the enterprise investment scheme (EIS) and Seed EIS are targeted at growth investments. Relief under the schemes will be focused on companies where there is a real risk to the capital being invested, and will exclude companies and arrangements intended to provide capital preservation. This measure has been widely anticipated and may have an impact on asset backed EIS companies such as the operation of pubs and restaurants although further detailed consideration of the new rules will be required. The new condition will apply to all investments made on or after 6 April 2018.
Venture capital schemes: increased limits for investments in knowledge-intensive companies
The government will legislate to double the limit on the amount an individual may invest under the EIS in a tax year to £2 million from the current £1 million limit provided any amount over £1 million is invested in one or more knowledge intensive companies. In addition the annual investment limit for such companies will be raised to £10 million from the current £5 million.
Off-payroll working reform: extension to the private sector
The Government will consult in 2018 on how to tackle perceived non compliance with the IR35 legislation in the private sector. HMRC are hinting that a next possible step would be to extend the recent public sector reforms to the private sector.
Corporation tax: Corporate capital gains indexation allowance
Legislation will be introduced to freeze indexation allowance on corporate capital gains for disposals on and after 1 January 2018. The allowance for subsequent disposals will be frozen at the amount that would be due based on the retail price index for December 2017.
Stamp duty land tax (SDLT) relief for first time buyers
Legislation will be introduced for a new relief from SDLT that will permanently raise the price at which a property becomes liable for SDLT to £300,000 for first time buyers. Various ancillary measures have also been introduced to improve the operation of the higher rates of SDLT in respect of the acquisition of second properties by granting relief from tax in certain cases.
VAT threshold remaining at £85,000
Following the recent report from the Office of Tax Simplification there have been concerns that the VAT registration threshold was going to be dropped in the Budget (potentially to £20,000 which is the average threshold in the EU). As a result the plan to keep the VAT registration threshold at £85,000 will be very welcome to small businesses although the 2 year freeze will inevitably capture a number of businesses who have been hovering under the VAT registration threshold.
VAT: extension to joint and several liability for online marketplaces
Online marketplaces are already jointly and severally liable for the VAT owed by an overseas seller if they fail to meet their UK requirements. However, in a further attempt to tackle this issue, the joint and several liability is being extended so that the online marketplace is jointly and severally liable for any future VAT that a UK business selling goods via the online marketplace fails to account for after HMRC has issued a notice to the online marketplace (ensuring that all sellers are in scope) and any VAT that a non-UK business selling goods via the online marketplace fails to account for, where the business was not registered for VAT in the UK and that online marketplace knew or should have known that that business should be registered for VAT in the UK. Online marketplaces will also be required to ensure that the VAT numbers displayed by third party sellers on their websites are valid. They will also be required to display a valid VAT number when they are provided with one by a third party seller operating on their platform. There will be penalties for non compliance.
VAT refunds for Scottish fire and police services
Finally, the extension of the VAT refunds to include the Scottish Fire and Rescue Service and the Scottish Police is a welcome move for them and sees them treated in the same way as other equivalent services in the UK. However this area still needs significant work as there are a number of bodies undertaking the same roles as local authorities, especially in the health and welfare sector, that are not benefitting from VAT refunds and therefore suffering the burden of VAT.
R&D tax credit rate to be increased to 12%
The government will legislate in Finance Bill 2017-18 to increase the rate of the R&D expenditure credit (‘RDEC’) from 11% to 12%, in order to further incentivise business investment in R&D. This will further encourage innovative businesses to continue research and development activities in the UK and help to put the economy at a competitive edge and continue growth. This will affect companies who fall into the RDEC regime (previously the large company scheme), generally being companies with more than 500 staff and a turnover of over €100m or a balance sheet total over €86m. It will also affect SMEs who are acting in capacity of a subcontractor for large companies, and companies who receive grant funding for their projects who also fall into the RDEC scheme. The change will mean that the effective rate for the payable credit will rise to just over 9.7% of qualifying expenditure (previously 8.8%) for loss making companies, and will provide a tax credit of 12% (previously 11%) for profitable companies.
This change will have effect on and after 1 January 2018.
A snapshot of the other Budget points:
Personal allowance to rise to £11,850 from April 2018 and the threshold for higher rate tax will increase to £46,350
National Living Wage to increase by 4.4% to £7.83 per hour
Vehicle Excise Duty increase for most polluting diesel cars from April 2018
New £1.7bn transforming cities fund for local transport investment
Increased duty on low-quality alcoholic drinks but duties on beers, wines, spirits and some ciders will be frozen
Cancellation of the fuel duty rise that was scheduled for April 2018
NHS to receive an extra £10bn in capital investment over the course of Parliament
£44bn of capital funding and loans to support housebuilding over the next five years with 300,000 new homes built per year
£400m investment for electric car charging infrastructure