CHANCELLOR’S OFTEN attempt to redistribute wealth from one group in society to another. Well, this was the implicit rationale behind many of the corporate tax measures announced in yesterday’s Budget.
The business tax roadmap, published yesterday, provided detail of how current and future business taxes would impact over the remainder of this parliament.
Large companies, not necessarily all multinationals, saw an eventual reduction in the headline rate of corporation tax to 17% by 2020.
We also saw a concession to payments of corporation tax on account, for the 2,000 or so very largest companies with profits over £20m, is to be deferred.
The chancellor also announced the implementation of BEPS–related actions in the restrictions on royalty payment deductions, and an effective interest relief restriction, to 30% of net interest expense, albeit with some exceptions and concessions. These moves were expected.
There were changes on loss relief. Some will benefit from more flexible set off but others will see restrictions to 50% of losses, for companies with profits in excess of £5m.
Hidden in the roadmap was also a reference to a review of the substantial shareholdings exemption – a valuable relief which shouldn’t be under threat, but you never know.
So where is all this ‘new cash’ going?
Much is directed to small and micro businesses, which benefit from the reduction in the main rate of corporation tax too in due course.
Permanently doubling the small business rate relief costs a whopping £1.5bn and with other changes to business rates, around 600,000 firms will benefit.
Another change was around commercial stamp duty, although there’s a catch. Duty was cut in respect of purchases up to £150,000 to zero, with a 2% charge on the next £100,000 of value. But the charge has been increased over this threshold to a higher 5% charge.
These changes should help smaller businesses significantly, yet the concern is that as both of these reductions apply to landlords (if the landlord pays the business rates), there’s a risk these ‘benefits’ aren’t passed on through reduced rents.
And what about the ‘sofapreneurs’?
A new £1,000 a year allowance for trading income generated by micro entrepreneurs, and a further £1,000 a year allowance for property income, will take away much complexity for those selling or renting via digital platforms, such as Airbnb.
So overall there is a shift from big to small, a signal to those who want to start out in business to get up and try.
Jonathan Riley is head of tax at Grant Thornton
Companies must report on their complex financial structures including offshore accounts and notify HMRC
An examination by the Public Accounts Committee (PAC) has revealed serious concerns relating to HMRC’s plans
Andrew Tyrie suggests there will not be enough time to implement Making Tax Digital (MTD) by April 2018
The ACCA has announced a partnership with UK research and development tax reclaim specialist RD Tax Solutions