Tax cuts for our “nation of shopkeepers” and tough talk on tax avoidance; therein lies the essence of George Osborne’s much-heralded business tax roadmap.
The roadmap’s stated aim is to give businesses clarity on the government’s tax plans through to 2020 so businesses can “invest with confidence”. And for small businesses there were a few welcome gifts.
Osborne’s war on corporation tax continued. The chancellor labelled the tax “one of the most distortive and unproductive taxes there is”, and announced that it will be cut down to 17% by April 2020 from the current 20%. Capital gains tax was also slashed from 28% to 20% for top rate taxpayers, and from 18% to 10% for basic rate taxpayers.
The business tax roadmap features the government’s plan to permanently double Small Business Rate Relief (SBRR) from 50% to 100% for businesses with a property with a rateable value of £12,000 and below. Businesses with a property with a rateable value between £12,000 and £15,000 will receive tapered relief. There will also be an increase in the threshold for the standard business rates multiplier to a rateable value of £51,000, taking 250,000 smaller properties out of the higher rate.
Or as the chancellor said in one of the speech’s most animated moments: “A typical corner shop in Barnstaple will pay no business rates. A typical hairdressers in Leeds will pay no business rates. A typical newsagents in Nuneaton will pay no business rates.”
Class 2 National Insurance contributions (NICs) will be consigned to the history books from April 2018. “This will reduce the NICs paid by 3.4 million self-employed individuals by an average of £134 a year”, reads the roadmap document, “and will end an outdated and complex feature of the NICs system.”
In his speech the chancellor called the measures “a simpler tax system and a tax cut of over £130 for each of Britain’s 3 million strong army of the self-employed.”
The chancellor affirmed his commitment to “deliver a low tax regime that will attract the multinational businesses we want to see in Britain”. But offered this tax bonanza with the caveat: Taxes will be low, but must be paid.
Osborne announced that from April interest deductibility for the largest companies will be restricted at 30% of UK earnings. He also proclaimed hybrid mismatch rules to battle complex structures that allow companies to claim the same expenses in different countries and the beefing up of the withholding tax on the royalty payments that allow some firms to shift money to tax havens.
“Today’s Budget announcement was very small business friendly,” said Guy Ellison, Investec’s head of UK equities. “Osborne has continued to close tax loopholes for international companies paying little or no taxation in the UK, and limiting interest deductibility for certain highly leveraged companies.”
Chris Sanger, EY’s head of tax policy quipped, “This is a sweet and sour Budget, with big businesses paying for the cuts for small ones. There is the sweet taste of stimulus for small businesses, whether positively through business rates or neutrally in exceptions to tax relief restriction.”