Sussex-based Spofforths, Chartered Accounts and Business Advisers, say that the Chancellor’s Budget announcement on 16 March 2016 comes with mixed fortunes for Business. Here the firm provides an overview of the impact the Budget will have on businesses:- 

The current Corporation Tax rate is 20% across the board for all companies. It was previously announced that this will reduce to 18%. In the Budget a further reduction has been announced so that the rate will reduce to 17% from 2020, which will mean that the UK will have the lowest rate in the G20. 

Disappointing to hear yet again the Chancellor has linked Tax Avoidance with Tax Evasion which is clearly incorrect – Avoidance is legitimate arrangement of your tax affairs whereas Tax Evasion is illegal! 

Further measures are being introduced to try and stop people reducing their tax liabilities including the following changes: 

  • VAT – overseas sellers: From April 2016, HMRC will be able to require non-compliant overseas traders to appoint a UK tax representative to ensure compliance and will be able to inform online markets of traders who have not complied to try and create a level playing field for all. 
  • Disguised Remuneration: Anti-avoidance legislation has been introduced over recent years to try and impose tax on structures which loan funds to employees. Further legislation is to be introduced to strengthen HMRC’s ability to tax these arrangements. 
  • Multi-National Businesses: Significant measures are being introduced targeting multi-national businesses to again try to ensure that they pay a “fair” amount of UK tax on profits made in the UK. 

Some welcome amendments are to be introduced for companies making losses. Currently, many losses can only be carried forward and offset against future profits from the same trade or activity. The Government have recognised that this is outdated and for losses made after April 2017, those losses will able to be carried forward and offset against any profits made subsequently either in the company itself or by other members of the same group. 

For Companies with profits of more than £5M, any carried forward losses will be restricted so that the maximum offset in an accounting year will be restricted to 50% of the taxable profits. The effect being that in large profitable companies with large losses, they will still pay some tax despite the loss position. 

Forclose companies, from 6 April 2016, the tax rate on loans made by close companies to participators will increase from 25% to 32.5% and it will be pinned to the higher rate of Income Tax on dividends.   

Currently any non-contractual payment made on termination of an employment is exempt from National Insurance (and the first £30,000 is tax-free). From April 2018, employers will have to pay National Insurance on the excess over £30,000 but fortunately the income tax exemption will remain. This is therefore an additional cost for employers, but will not increase the tax cost for the employee. 

The new higher rate SDLT on residential properties will apply from 1 April 2016 to large volume residential property investors and no relief will be available. 

George Osborne has cut business rates for small business – Currently exemption applies for properties with a rateable value of less than £6,000. This has been doubled to £12,000 from April 2017 which should take 600,000 businesses out of having to pay any Business Rates. A very welcome increase for small business!