Much of the budget was aimed at addressing the concerns of SMEs on the High Street with a promise to cut business rates by a third for those retailers in England with a rateable value of £51,000 or less. This offers an annual saving of “up to £8,000 for up to 90% of all independent shops, pubs, restaurants and cafes”, which should please the FSB (Federation of Small Businesses), which had asked that any relief be applied to “hospitality and service businesses, not just retailers”.
However, the Chancellor also stressed that the High Street had changed forever and that therefore there would be £675m of co-funding to create a “Future High Streets Fund” to support councils to draw up plans for the transformation of their High Streets, such as perhaps including converting empty shops into homes to increase town centre footfall.
SMEs and especially those in rural areas will also welcome the confirmation of a 30% growth in infrastructure spending (both on roads and IT) amounting to £30 billion, which included the £420 million already announced for pothole repairs.
Although the BCC (British Chambers of Commerce) wanted to abolish the apprenticeship scheme, SMEs did at least get some relief on their contributions which was reduced from 10% to 5%.
In a bid to stimulate stalled business investment in capital such as in plant & machinery, the Annual Investment Allowance is to be increased from £200,000 to £1m for two years from 1 January 2019.
The Chancellor announced that the UK would introduce its own tax on large digital companies, the likes of Amazon, with a global revenue of at least £500 Million a year. He stressed that it would not be a tax on sales but on the in-country earnings of these companies expected to be at a rate of 2% and applied from April 2020.
The question is whether it will actually be introduced given that there will first be consultations and, given the time frame, how much help it will be to those SMEs already struggling because of the online competition?
Fuel duty rates were frozen for the 9th successive year, which will be welcomed by the Freight industry as well as others that rely heavily on vehicle use.
Entrepreneurs’ Relief was also tweaked with a number of measures including an increase in the minimum period throughout which the qualifying conditions for relief must be met to be extended from 12 months to 24 months.
While subject to further consultation before it is introduced on 1 April 2020, the maximum recoverable R&D tax credit in any tax year is to be restricted to three times the company’s total PAYE and NIC liabilities.
From April 2019, the PAYE tax-free personal allowance threshold increases quite significantly from £11,850 to £12,500 and the 40% higher rate tax threshold from £46,350 to £50,000.
The VAT registration threshold was frozen for the next two years at £85,000.
The budget also covered insolvency & tax avoidance by directors
And, slipped in with virtually no reaction from anyone so far is a change to the status of HMRC, which will now become a preferred creditor in insolvencies. Given that I have already reported on HMRC’s use of increasingly aggressive tactics including an increase in asset seizure from small businesses it will be interesting to see what difference this makes to HMRC tactics. This would overturn the 2002 Enterprise Act which removed HMRC as a preferred creditor but we have yet to see the detail.
Directors and others involved in tax avoidance, evasion or ‘phoenixism’ are to be made jointly and separately liable for company tax liabilities where there is a risk that the company may deliberately enter insolvency
And some fallout from Carillion
In the wake of the Carillion and other high profile business failures involving PFIs (Private Finance Initiatives) there will be no more such arrangements. PFIs will be abolished.
Finally, the national living wage is to increase by 4.9%, from £7.83 to £8.21, something that will bring little comfort to SMEs.
Of course, all of the above comes with the large caveat, that depending on the outcome of the Brexit negotiations there may have to be a second budget in the spring.