George Osborne delivered his budget. As his last before the May general election, it gave him the chance to break the current political stalemate and gain more ground over the other political parties; but his hands were already tied by his pledge that there would be “no giveaways, no gimmicks.”
This pledge came despite recent calls from business support groups for the Annual Investment Allowance to become a permanent fixture so that businesses could invest with confidence. “Businesses have grown tired of constant chopping and changing in the UK tax system. They need long-term certainty, rather than short-term incentives, to help support investment decisions,” says John Longworth, director general of the British Chambers of Commerce. “A long-term investment allowance would give businesses of all sizes much-needed certainty. Our proposals would also allow for premises improvements to be included in the scheme, which are crucial to firms looking to expand their workforce or enhance their efficiency.”
This was also echoed by John Cridland, Director General of the Confederation of British Industry. He argues that the AIA should be increased: “A permanent AIA set at £250,000 will get more of our mid-sized businesses investing in their factories and production lines, with the UK currently comparing poorly with many key European neighbours, where smaller firms account for half of total business investment.”
With this in mind, we look at whether the Chancellor did listen, and deliver a budget for business. The main headlines were:
Corporation tax: Confirmation that the corporation main rate and small business rate will be aligned at 20% from April 2015.
Film Tax: This will be increased to 25%, and a new orchestra tax relief of 25% will be introduced from April 2016.
Diverted Profits Tax: This new tax is designed to prevent businesses diverting profits overseas to avoid tax and will take effect from April 2015.
Business Rates: A major review of the business rates system is to be completed by April 2016. Pilot schemes are also to be established which allow participating authorities to keep 100% of any additional business rate revenue above forecast revenues from April 2015.
Enterprise: Eight new enterprise zones have been announced.
R&D tax relief: As previously announced, the above-the-line R&D tax relief will increase to 11% for the main scheme and 230% for the SME scheme.
Growth Loans: The British Business Bank will launch a pilot ‘Help to Grow’ loan programme for businesses seeking between £500,000 and £2 million.
National Insurance: Employers’ NICs will be abolished for employees under 21 from April 2015 and abolished for apprentices under the age of 25 from April 2016.
Simplification of tax: Class 2 contributions will be abolished for the self-employed during the next parliament. The annual self-assessment return will also be abolished completely in 2016 and replaced with a digital tax account. This digital tax account will also calculate and collect tax and National Insurance Contributions.
Personal Tax Free Allowance: This will be increased to £10,800 in 2016/17 and £11,000 in 2017/18. The basic rate limit for 2016 will be £31,900 and the higher rate limit will be £42,700.
Seed Enterprise Scheme: The requirement that 70% of investment money must have been spent before EIS or Venture Capital can be raised is to be abolished.
VAT: The registration threshold increases to £82,000 from 1st April 2015 and the de-registration threshold will increase to £80,000.
There were many business issues discussed in the budget, but what stood out clearly was that it appears Osborne is finally recognising the importance of the self-employed workforce to the UK’s economy. The removal of class 2 National Insurance contributions is a step in the right direction.
James Pattison, CEO of Startup Direct, said: “The simplification of the tax system will be music to the ears of stressed business owners and sole traders, many of whom may now feel more able to handle their own tax affairs and save accountant’s fees.”
What are your thoughts on the latest budget announcement? How do you think it will affect you in the next year? Let us know in the comments below.