Our core view is that the UK needs a more transparent tax system aligned to rational economic incentives, which business can navigate without controversy. The Budget didn’t really bring us anywhere closer to this. However there were a wide range of tax announcements which add to the complexity of the tax system for business and shift the tax burden amongst different classes of taxpayers. For personal taxpayers there was a giveaway in raising personal allowances.
For more details on changes impacting you, follow the links below. These will be updated regularly following the Budget announcement:
Digital Services Tax
In perhaps the most headline catching of the tax proposals, the Chancellor announced a consultation for a digital services tax aimed at the so called FAANG’s (Facebook, Amazon, Apple, Netflix, Google). This will not be introduced until 2020 but aims to be a new tax on digital business. This is welcome in so far as it helps to remove a competitive disadvantage from UK business.
With a predicted shortfall of £1.2 billion in taxes a year by 2022/23 as result of non-compliance of IR35 Regulations, it was inevitable that the changes, similar to those announced in the public services last year, would be extended to the private sector. However, this also has been delayed to 2020 which is welcome news, and will allow the private sector to prepare and to consult with the government over implementation.
Entrepreneurs Relief was retained, with a few tweaks to extend the qualifying time period from one to two years and some restrictions effectively removing access to the relief for some smaller shareholders.
On the side of additional reliefs for business there were proposals for a Structures and Buildings Allowance giving relief for construction costs over 50 years; an increase to the annual investment allowance for 2 years should provide tax relief in the year of expenditure to SMEs for qualifying capital expenditure of up to £1m (accelerating tax relief and providing a year one tax saving of up to £190k); and there are some broadly welcome technical changes to intangibles tax.
On the side of additional restrictions there were proposals to bring capital losses into the corporate loss restriction rules; a reduction in tax depreciation rates in some cases from 8% to 6%; and slightly surprisingly perhaps, restrictions proposed on R&D credits which can be claimed through the SME scheme. This was presented as an anti-avoidance change but may have a wider effect. There is to be a consultation so the opportunity to frame the final form of the provision will be available to taxpayers.
Landlords - as is tradition in recent Budgets - were targeted, although the impact of the changes are likely to be marginal for many. The proposed change is to restrict Principle Private Residence Exemption where the property is both rented and the landlords Principal Private Residence.
As always we await the detail to see exactly the impact of the proposals on individual taxpayers.