There wasn’t a lot to get small business owners excited in today’s Budget, says Nigel Harris.
As usual, we had some chipping away around the edges of the tax system, most of which was balanced by some nasty-looking expansion of anti-avoidance provisions. Those looking for a raft of vote catching pre-election giveaways will have been disappointed. For most SMEs it’s a case of business as usual.
Annual Investment Allowance
Businesses of all sizes will be relieved that the higher allowance has been extended to the end of 2015, rather than returning to just £25,000 in on 1 January 2015. The doubling of the allowance to £500,000 from 1 April 2014 (6 April 2014 for unincorporated businesses) was on the wish list but unexpected. It may not be relevant to most small businesses, but it is a huge boost to SME printers, manufacturers and others who use expensive machinery.
Extending rates relief for small businesses
If you operate from business premises your rates may well be more than your rent. The £2.8bn support for small business ratepayers for five years from April 2014 is expected to benefit 1.8m businesses.
The £2,000 employment allowance from April 2014 (announced last year) is going to be particularly valuable to smaller employers, and is expected to take the 450,000 smallest employers completely out of employer’s NICs.
Increase in rate of payable R&D tax credits from 11% to 14.5% for loss-making SMEs for expenditure incurred from 1 April 2014 is welcome. It will encourage companies in the early years to invest in R&D, which has to be good in the long-term.
The government is putting an extra £85m a year over the next two years into the Apprenticeship Grants for Employers (AGE) scheme. This has been very helpful in enabling small businesses to afford to take on an apprentice, and in doing so improves the quality of the workforce and the availability of trained workers.
The extension of ‘Help To Buy’ to 2020 and the creation of a £500m Builders Finance Fund should stimulate house building and create more opportunities for developers and provide work in the construction industry. On the downside, the government will be consulting later this year on changes to the Construction Industry Scheme (CIS), including mandatory online filing for contractors, which is perhaps inevitable but nonetheless unwelcome.
On the negative side, another increase in company car benefit rates will make employees think carefully about having employer-provided cars, or at least about their choice of car. For example, the car benefit on a 145g/Km car was 20% of the list price in 2012-13 and will have risen to 28% from April 2017. Manufacturers have gone some way in driving down CO2 emission levels in new cars, but the government is persisting with its message that the provision of company cars is to be discouraged.
Benefits and expenses reporting
P11D reporting remains a burden on small businesses. The good news is that, in response to the Office of Tax Simplification’s review of employee benefits and expenses, the government has announced that it will consult on four simplifications including abolishing the £8,500 threshold, voluntary payrolling of benefits, a trivial benefits exemption and a general exemption from the need to report non-taxable expenses.
This was meant to be high on the government’s agenda. The headline simplification in the Budget was the proposal to simplify Class 2 NICs for the self employed by collecting them through self assessment from April 2016. Class 2 currently costs only £2.70 a week, so while this is a move in the right direction the impact is relatively small.
SEIS was introduced for a limited period (6 April 2012 to 5 April 2017) but following its success has been made permanent. This is a welcome announcement. Although the capital raising limit is relatively modest at £150,000, many small companies have used SEIS very successfully.
The annual increase in VAT registration threshold to £81,000 is just about in line with inflation.
Freezing the duty rate on cider, and reducing beer duty, will be particularly welcomed by small scale brewers and craft brewers trying to make a profit in a capital-intensive and increasingly crowded marketplace (although the big brewing companies will of course benefit even more, since it applies to all producers irrespective of size).
The tax-free childcare scheme, announced in 2013 as worth 20% on childcare costs of up to £6,000 per annum, will be improved to give 20% relief on costs of up to £10,000. This benefits low earning business owners who may need childcare to enable them to devote more time to their business, and also increases the availability of parents looking for part-time work, who are often just the sort of people growing businesses need (and can afford).
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I'm a partner with Burton Sweet, chartered accountants & business advisers, and run the Shepton Mallet office down in beautiful Somerset. Despite the name, Shepton Mallet is actually the home of Glastonbury Festival! I trained in audit and corporate tax with Grant Thornton and came to my current position in 1991 via small local practices...